REG - BHP Group Limited - Half-Yearly Report and Accounts
20/02/2024 07:00
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RNS Number : 6909D BHP Group Limited 20 February 2024
BHP | Financial results for the half year ended 31 December 2023
20 February 2024
Financial results for the half year ended 31 December 2023
Strong underlying financial performance underpinned by reliable operations and
disciplined cost control.
We are saddened by the loss of one of our sub-contractors who was fatally
injured at BMA's Saraji mine in January. An investigation is underway into the
circumstances of this tragic incident and we are resolute in our commitment to
prevent fatalities and serious injuries in our workplace.
Today, we announced underlying attributable profit of US$6.6 billion for the
half year. We also announced an interim dividend of 72 US cents per share - a
total of US$3.6 billion, equating to a payout ratio of 56%.
The period also had its challenges, with adjustments relating to Nickel West,
West Musgrave and Samarco offsetting an otherwise solid operational
performance and overall healthy commodity prices.
At our Western Australia Iron Ore operations, we remain the lowest cost major
producer globally and in copper we set new production records at our
operations in South Australia and Chile. In South Australia, our consolidated
copper province has performed strongly and we are pursuing future growth
options. In Canada, we've sanctioned Jansen Stage 2, which will almost double
our planned potash production capacity.
We've seen volatility in global commodity prices and demand in the developed
world has been softer than expected. That said, China demand is healthy
despite weakness in housing and India remains a bright spot. In Australia, the
mining industry is facing near-term headwinds in developing resources and it's
essential that the right industrial relations and fiscal settings are in place
to support the sector's ability to compete and win in global markets.
Long term, the mega-trends playing out in the world around us continue to
underline our confidence in future demand for steel, non-ferrous metals and
fertilisers.
Mike Henry
BHP Chief Executive Officer
Safety Social value
Fatality at BMA Female employee representation(i)
36.2% Up 2.6% pts
HY23 33.6%
A team member from one of BHP Mitsubishi Alliance (BMA)'s sub-contracting We have more than doubled our female employee representation since announcing
partners was fatally injured in an incident at BMA's Saraji mine in January. in 2016 our aspiration to achieve a gender-balanced workforce, and more than
Investigations into the incident are underway. 30% of our people leaders are female.
Financial performance
Underlying attributable profit(ii) Attributable
profit
US$6.6 bn
US$0.9 bn Down 86%
HY23 US$6.6 bn
HY23 US$6.5 bn
Our underlying attributable profit was in line with HY23, as a result of Our attributable profit decreased as a result of an exceptional loss of US$5.6
strong revenue generation and disciplined cost control. All assets are on bn following an impairment of Western Australia Nickel, and an increase to the
track to meet their FY24 production and unit cost guidance. FY24 production provision related to the Samarco dam failure
and unit cost guidance for BMA was revised at the Q2 Operational Review. (https://www.bhp.com/news/media-centre/releases/2024/02/half-year-2024-exceptional-items-update)
.
Capital management
Capital and exploration expenditure(ii) Fully franked interim dividend
US$4.7 bn Up 57% US$0.72 per share
HY23 US$3.0 bn 56% payout ratio
1
BHP | Financial results for the half year ended 31 December 2023
We are investing in growth and increased our capital and exploration spend by We have determined an interim dividend of US$3.6 bn. This follows our strong
57% including at Jansen and Copper South Australia. returns to shareholders in CY23, when we were the highest dividend payer on
the ASX.
Group financial performance
Earnings and margins
Solid operational performance and disciplined cost control, aided by higher
iron ore and copper prices in the period, maintains strong underlying
financials.
Revenue BHP's revenue increased by US$1.5 bn primarily as a result of higher iron ore Underlying attributable profit was in line with the prior period, however we
and copper prices, as well as the contribution of new mines Prominent Hill and reported an exceptional loss, which decreased attributable profit by
US$27.2 bn Up 6% Carrapateena. These were partially offset by New South Wales Energy Coal US$5.6 bn, due to:
(NSWEC), where despite a 43% increase in sales volumes, realised prices
HY23 US$25.7 bn decreased by 65%. · a US$2.5 bn impairment of Western Australia Nickel; and
We continue to experience the impacts of inflation on our underlying cost · a US$3.2 bn charge related to the Samarco dam failure.
base, particularly on labour and parts, as reflected in a global inflation
Attributable profit rate of 6.3% across our operating jurisdictions during CY23. For further details see note 2 - Exceptional items (#_2.__) and note 9 -
Significant events - Samarco dam failure (#_9.__) .
US$0.9 bn Down 86% Unit costs(ii) were however approximately 5.4%(iii) higher across our major
assets during HY24 reflecting our disciplined cost and reliable operational Our adjusted effective tax rate of 31% was above the 30% Australian corporate
HY23 US$6.5 bn performance and the normalisation of commodity linked consumable prices such tax rate. The adjusted effective tax rate for FY24 is still expected to be in
as diesel and acid. the range of 30 to 35%.
This strong operational performance saw Western Australia Iron Ore (WAIO) Our operating costs include US$1.8 bn of revenue or production based
Underlying attributable profit maintain its lead as the lowest cost major iron ore producer globally and royalties. Once these are included, our Group effective tax rate was 40.9%.
overall Group Underlying EBITDA increase by 5%, with an Underlying EBITDA The average comparable rate of ASX50 companies is approximately 30%(iv).
US$6.6 bn margin of 53.3%.
For further details see
HY23 US$6.6 bn For further details see Adjusted effective tax rate (#_Effective_tax_rate) .
Underlying EBITDA waterfall (#_Underlying_EBITDA_waterfall) .
We expect the lagged impact of global inflation to continue into H2,
Profit from operations particularly in relation to labour, and as we negotiate long-term supply
arrangements.
US$4.8 bn Down 56%
We continue to assess the impact of the Australian Federal Government's 'Same
HY23 US$10.8 bn Job Same Pay' industrial relations reforms which will add to our labour costs.
Underlying EBITDA(ii)
US$13.9 bn Up 5%
HY23 US$13.2 bn
Underlying EBITDA margin(ii)
53.3%
HY23 53.5%
Adjusted effective tax rate(ii)
31.0%
HY23 29.5%
FY24e 30 - 35%
Detailed financial information is included in Appendix 1 (#_Appendix_1)
2
BHP | Financial results for the half year ended 31 December 2023
Cash flow and balance sheet
Strong cash flow generation underpinned US$5.1 bn of investments in the
period.
Net operating cash flow Our net operating cash flow increased by 31% as a result of the higher BHP's balance sheet remains strong. During the half, BHP issued US$4.8 bn of
Underlying EBITDA and lower income tax and royalty-related taxation payments, new bonds and retired US$5.7 bn of debt of which US$5 bn related to the OZL
US$8.9bn Up 31% partially offset by an increase in working capital. acquisition facility.
HY23 US$6.8 bn In line with our Capital Allocation Framework (CAF), we generated free cash Our net debt increased by US$1.5 bn to US$12.6 bn from 30 June 2023, largely
flow of US$3.8 bn after investing US$5.1 bn. Our investments in the period reflecting net operating cash flow more than offset by:
included:
· Payment of dividends to BHP shareholders of US$4.0 bn, and to
Capital and exploration expenditure · US$3.4 bn in organic development including US$1.7 bn on improvement non‑controlling interests of US$0.6 bn; and
projects; US$1.3 bn major capital in facing‑commodities; and US$199 m of
US$4.7 bn Up 57% exploration spend; and · Capital and exploration expenditure of US$4.7 bn.
HY23 US$3.0 bn · US$1.4 bn of maintenance and decarbonisation expenditure(v). Our net debt target range of between US$5 and US$15 bn enables us to maintain
a resilient balance sheet during periods of change and external uncertainty
Capital and exploration expenditure is expected to be(vi): while retaining the flexibility to allocate capital within our CAF towards
shareholder returns and growth opportunities.
Free cash flow(ii) · For FY24 and FY25, ~US$10 bn per annum, including US$0.4 bn of
exploration in FY24; and For further details see Net debt waterfall (#_Net_debt_waterfall) .
US$3.8bn Up 9%
· In the medium term, ~US$11 bn per annum on average(vii).
HY23 US$3.5 bn
We have flexibility to adjust capital spend and phasing of projects to
accommodate market dynamics and cash flow generation.
Net debt(ii)
US$12.6 bn
FY23 US$11.2 bn
HY23 US$6.9 bn
Gearing ratio(ii)
21.7%
FY23 18.7%
HY23 12.9%
Detailed financial information is included in Appendix 1 (#_Appendix_1)
3
BHP | Financial results for the half year ended 31 December 2023
Value and returns
Continuing to balance investing in the business and cash returns to
shareholders.
Interim dividend Earnings per share - basic Our operations continued to generate strong Underlying ROCE of 26.4%,
including 62% at WAIO.
72 US cps 18.3 US cps
An interim dividend of US$0.72 per share (US$3.6 bn), equivalent to a 56%
Fully franked HY23 127.5 US cps payout ratio will be paid to shareholders on 28 March 2024.
56% payout ratio This extends our track record of strong returns. Including the determined
dividend, we will have returned ~US$44 bn cash to shareholders since 1 January
2021.
Underlying return on capital employed (ROCE)(ii) Earnings per share - Underlying(ii)
26.4% 129.6 US cps
HY23 29.4% HY23 130.3 US cps
Important dates for shareholders
BHP's Dividend Reinvestment Plan (DRP) will operate in respect of the interim
dividend. Full terms and conditions of the DRP and details about how to
participate can be found at: bhp.com (http://www.bhp.com)
Events in respect of the interim dividend Date
Announcement of currency conversion into RAND 27 February 2024
Last day to trade cum dividend on Johannesburg Stock Exchange Limited (JSE) 5 March 2024
Ex-dividend Date JSE 6 March 2024
Ex-dividend Date Australian Securities Exchange (ASX), London Stock Exchange 7 March 2024
(LSE) and New York Stock Exchange (NYSE)
Record Date 8 March 2024
Announcement of currency conversion into AUD, GBP and NZD 11 March 2024
DRP and Currency Election date 11 March 2024(1)
Payment Date 28 March 2024
DRP Allocation Date(2) 15 April 2024
1 5:00pm AEDT.
2 Allocation dates may vary between registers but all allocations
will be completed on or before 15 April 2024.
Shareholders registered on the South African branch register will not be able
to dematerialise or rematerialise their shareholdings between the dates of 5
March 2024 and 8 March 2024 (inclusive), and transfers between the Australian
register and the South African branch register will not be permitted between
the dates of 27 February 2024 and 8 March 2024 (inclusive). American
Depositary Shares (ADSs) each represent two fully paid ordinary shares and
receive dividends accordingly.
Any eligible shareholder who wishes to participate in the DRP, or to vary a
participation election should do so before 5:00pm (AEDT) on 11 March 2024,
or, in the case of shareholdings on the South African branch register of BHP
Group Limited, in accordance with the instructions of your CSDP or broker. The
DRP Allocation Price will be calculated in each jurisdiction as an average of
the price paid for all shares actually purchased to satisfy DRP elections. The
DRP Allocation Price applicable to each exchange will be made available at:
bhp.com/DRP (https://www.bhp.com/drp/)
4
BHP | Financial results for the half year ended 31 December 2023
Corporate governance
Terry Bowen retired from the Board following the 2023 Annual General Meeting
on 1 November 2023.
The current members of the Board's committees are:
Risk and Audit Nomination and Governance Committee People and Remuneration Sustainability
Committee Committee Committee
Michelle Hinchliffe (Chair) Ken MacKenzie (Chair) Christine O'Reilly (Chair) Gary Goldberg (SID) (Chair)
Xiaoqun Clever-Steg Gary Goldberg (SID)(1) Catherine Tanna Ian Cockerill
Ian Cockerill Michelle Hinchliffe Dion Weisler Catherine Tanna
Christine O'Reilly Christine O'Reilly Dion Weisler
1 Senior Independent Director (SID).
Economic outlook(viii)
As was the case in recent periods, BHP's external operating environment in
CY23 was relatively volatile. Our key commodity prices were slightly higher
overall but with significant variation in performance between individual
commodities. We also continued to manage external cost inflation across the
business.
In the long run, we expect that population growth, rising living standards,
and the infrastructure required for global decarbonisation will drive demand
for steel, non-ferrous metals and fertilisers.
In the near term, the economic outlook for the developed world is expected to
improve modestly after a difficult year for both steel and non-ferrous metals
demand in CY23. China and India are expected to remain relative sources of
stability for commodity demand, as they have been over the last 12 months. The
prices of steel-making raw materials, which are reliant on the physical
fundamentals of trade into Asia, have performed better than the prices of
non-ferrous metals over the last half year. Non-ferrous metals have greater
exposure to weaker demand in the developed world and also to general investor
sentiment, despite low exchange inventories. We anticipate that a more
balanced global economy and evidence that the worst of the general
inflationary wave is behind us, will have a positive impact on our industry in
CY24.
On the cost front, while it is positive to see economy-wide inflation in our
operating regions coming under control, we expect the lagged impacts from the
inflation peak observed in FY23, as well as continued labour market tightness,
to impact our cost base throughout the remainder of FY24. Wage inflation is
especially problematic in the context of historically poor productivity
performance across the resources industry.
Commodity demand
The demand for commodities in the developed world has been soft over the last
12 months due to anti-inflationary policies and the lagged impacts of the
energy crisis. We believe that the lag effect of higher interest rates will
continue to restrain household consumption in the developed world in the first
half of CY24, but we expect that steel, copper and nickel demand will all be
modestly firmer across the Organisation for Economic Cooperation and
Development (OECD) in the coming 12 months. We also forecast another solid
year for commodity demand in China, while India has considerable positive
momentum behind it.
The Chinese economy has been volatile since the zero-COVID policy was eased in
December 2022. CY23 saw a solid recovery in a range of sectors important to
commodity demand including conventional infrastructure, lower GHG emission
technology, manufacturing capital, automotive, shipbuilding and consumer
durables. However, weakness continued in the steel-intensive real estate
sector and in non-steel exports, and overall corporate profitability has been
challenged. Throughout the year authorities have acknowledged that additional
policies will be needed to support China's economic recovery. For the balance
of FY24 and into FY25, the key question remains how effective the policy push
will be. Until we see greater coherence between the policies and their
effective implementation, our outlook will remain cautious and conditional.
5
BHP | Financial results for the half year ended 31 December 2023
The demand picture has been more balanced in India supported by increasing
capital investment, and commodity demand has been accordingly robust. The
Indian economy has shown continued healthy momentum as the country moves
towards a general election, which is expected to be held in the first half of
CY24.
For the review and outlook relating to our individual commodities please refer
to the relevant segment sections from page 7 (#_Segment_and_asset) .
Costs and inflation
At our full year results in August 2023, we noted the lower rate of inflation
on our cost base compared to recent periods. Whilst the spot price of certain
input costs has normalised, the lagged effect of inflation continued to be
felt through the business. Pressures in non-energy raw materials, logistics
and manufacturing supply chains and energy risks have continued to ease, but
labour costs remain a key forward-looking inflationary risk. The direct and
indirect impact of current events in the Red Sea are not expected to alter the
downward trend in global inflation, and at this stage have not had any
material impact on our business.
With economy-wide inflation having noticeably eased in our main operational
regions, additional pressure has also come out of industry-specific supply
chains. We continue to expect some lagged effect of non-labour inflation
(including pricing in contracts that reset periodically based on historical
outcomes) to impact the business in the balance of FY24 and into FY25. The
labour market remains a core inflationary concern, with aggregate wage
outcomes in Australia increasingly disconnected from underlying productivity
performance, which has been historically weak. This concern is amplified by
regulatory reform underway in Australia, which will add to our labour costs
and reduce the international competitiveness of the Australian economy.
Overall, the cost of mining production continues to be higher than it was
prior to the pandemic. This implies that price support is also expected to be
higher than in previous cycles and low-cost operators stand to capture
potentially higher relative margins in certain commodities.
For more detail, please refer to our website.
6
BHP | Financial results for the half year ended 31 December 2023
Segment and asset performance
Detailed financial information on all business segments in the Financial
performance summary (#_Financial_performance_summary1)
Copper
Production Commodity review and outlook(viii)
Despite a 5% increase in prices from HY23 to HY24, copper prices declined
894 kt Up 7% slightly over the CY23 period, with intra-year movement driven by shifting
expectations of China's recovery, and demand risk in the OECD from
HY23 834 kt manufacturing weakness, global inflation and tighter financial conditions.
Extremely low global copper inventories, rising mine costs and the sector's
FY24e 1,720 - 1,910 kt vulnerability to operational disruptions helped to establish a higher floor
for prices than seen in prior downturns in OECD manufacturing.
In the near term, we expect broad-based end-user demand growth in China to
Average realised price continue, albeit at a somewhat slower pace than the 6% YoY rate seen in CY23.
That view includes an assumption of rapidly increasing investment in lower GHG
US$3.66/lb Up 5% technology for energy and transport. We anticipate a modest recovery in OECD
copper demand. A broadly balanced market is the most likely outcome for CY24.
HY23 US$3.49/lb That compares to our view of six months ago that a modest surplus was likely.
The major difference in the two forecasts are reductions in primary supply
announced by copper producers late in CY23. Uncertainty in primary supply
remains a key swing factor. In the medium and longer term, traditional demand
Underlying EBITDA (such as home building, electrical equipment and household appliances) is
expected to remain solid while the decarbonisation mega-trend is expected to
US$3.5 bn Up 23% bolster demand. In terms of meeting that demand, we anticipate that the cost
curve is likely to steepen as challenges to the development of new resources
HY23 US$2.8 bn (such as societal expectations, decarbonisation and water challenges)
progressively increase. We anticipate that the industry is likely to enter the
25% contribution to the Group's Underlying EBITDA final third of this decade with a low inventory buffer, which implies that
should deficits occur in this phase, as we expect they will, elevated pricing
46% Underlying EBITDA margin that is well above the cost curve may well occur during this period. Recent
negative surprises to the primary supply outlook could bring deficits forward.
Segment outlook
Integration of the Copper South Australia province has successfully achieved
Underlying ROCE more than US$50 m of annualised EBITDA synergies six months ahead of schedule,
with each of Olympic Dam, Carrapateena and Prominent Hill delivering strong
10% safety, production and development outcomes. We have also had exploration
success in South Australia, announcing an Exploration Target at Oak Dam in
HY23 11% July and multiple intersects of copper grade above 1% (and areas above 2%)
beneath Olympic Dam (OD Deeps) in January. This operational performance,
coupled with the significant resource base, provide a solid foundation on
which to study further value realisation, including the potential to grow
Capital and exploration annual copper production at Copper South Australia to above 500 ktpa.
expenditure
In Chile, we continue to progress a range of studies to unlock the next phase
US$2.0 bn of value from our significant resource endowment and utilise latent capacity
across our Escondida, Spence and Cerro Colorado operations. These include
HY23 US$1.3 bn studying concentrator options at Escondida and the evaluation of multiple
leaching technologies which could be applied across all three operations. We
FY24e US$4.2 bn expect to provide further information on potential development pathways during
CY24.
In Peru, Antamina has received environmental approval to extend operations
from 2028 until 2036.
7
BHP | Financial results for the half year ended 31 December 2023
Escondida
Copper production Unit cost(1,2) Underlying EBITDA
528 kt Up 3% US$1.51/lb Up 5% US$2.3 bn Up 9%
HY23 511 kt HY23 US$1.44/lb HY23 US$2.2 bn
FY24e 1,080 - 1,180 kt FY24e US$1.40 - US$1.70/lb
FY25 and FY26e 1,200 - 1,300 ktpa FY25 and FY26e US$1.30 - US$1.60/lb
1 Based on average exchange rates of: HY24 USD/CLP 874 (realised);
HY23 USD/CLP 920 (realised); FY24e - FY26e USD/CLP 810 (guidance).
2 Refer to Non-IFRS financial information (#_Units_costs) for
detailed unit cost reconciliation.
Financial performance
Underlying EBITDA increased by 9% primarily as a result of:
· Higher copper prices. which had a favourable US$0.2 bn impact; and
· Increased sales volumes in line with improved concentrator feed grade
and higher concentrator throughput.
These were partially offset by higher operating costs, primarily reflecting
inventory drawdowns to maintain concentrator ore feed and the impacts of
inflation.
Asset outlook
Escondida production guidance for FY24 remains unchanged at between 1,080 and
1,180 kt, increasing to between 1,200 and 1,300 ktpa in FY25 and FY26, after
which production is expected to decline to between 900 and 1,000 ktpa for a
period in line with lower concentrator feed grades.
Escondida is assessing multiple options to offset the impact of lower
concentrator feed grade, which is expected from FY27. These include the
potential for a new concentrator to replace the current Los Colorados facility
and the application of one or more leaching technologies to improve recoveries
and unlock primary sulphide resources. We expect costs associated with the
studies, which are captured as operating costs, to increase to ~US$140 m per
year in both FY24 and FY25, from ~US$60 m in FY23.
Full SaL, a BHP designed leaching technology, is on track for first production
in FY25 and is expected to unlock ~410 kt in copper cathodes over a 10-year
period through improved recoveries and shorter leach cycle times. The capital
expenditure to implement Full SaL is expected to be approximately US$300 m.
Deployment of autonomous haulage is expected to begin in the Escondida Norte
pit in H2 FY24 and ramp up to approximately 50 autonomous trucks over the next
three years. Escondida is evaluating transitioning its fleet of approximately
160 conventional haul trucks to autonomous operations over the next decade.
New royalties came into effect for Escondida from 1 January 2024. These will
not be included in Escondida unit costs.
8
BHP | Financial results for the half year ended 31 December 2023
Pampa Norte
Copper production Spence unit cost(1,2,3) Underlying EBITDA
138 kt Down 6% US$1.98/lb Down 10% US$0.4 bn Up 37%
HY23 147 kt HY23 US$2.19/lb HY23 US$0.3 bn
FY24e 210 - 250 kt(1) FY24e US$2.00 - US$2.30/lb
Medium-term ~250 ktpa
1 Production and unit cost guidance for FY24 is provided for
Spence only. Cerro Colorado produced 11 kt before ceasing production on 9
November 2023.
2 Based on average exchange rates of: HY24 USD/CLP 874 (realised);
HY23 USD/CLP 920 (realised); FY24e USD/CLP 810 (guidance).
3 Refer to Non-IFRS financial information (#_Units_costs) for
detailed unit cost reconciliation.
Financial performance
Underlying EBITDA increased by 37% predominately as a result of:
· Increased sales volumes at Spence driven in part by record
concentrate production following improvement in concentrator throughput and
recoveries;
· Higher copper prices, which had a favourable US$51 m impact; and
· Lower commodity-linked consumable prices.
These were partially offset by costs associated with Cerro Colorado's
transition to temporary closure in December 2023.
Asset outlook
Our application for environmental approval to extend the life of the Spence
leaching facilities to 2039, was lodged in FY23. If approved, this would
involve the implementation of a novel approach to re-processing previously
leached ores followed by a planned medium-term transition to chalcopyrite ore
leaching.
Spence remains on-track to achieve fully autonomous mine haulage operations in
Q4 FY24 following the successful extension of autonomous truck operations to
the cathode ore crushing circuit in January 2024. In total, Spence has
deployed 23 of 33 planned autonomous trucks.
The concentrator plant modifications, which commenced in August 2022, are
expected to be completed in FY24. In the Q2 FY24 Operational Review, we
announced approval of an incremental US$570 m in sustaining capital to
progress remediation of previously identified anomalies in the Spence Tailings
Storage Facility (TSF). These remediation plans have been developed in
consultation with the Engineer of Record, Independent Tailings Review Board
and expert consultants.
Production guidance for Spence for FY24 remains unchanged at between 210 and
250 kt, and is expected to average 250 ktpa over the next five years. This
guidance remains subject to successful remediation of the TSF anomalies.
Cerro Colorado entered temporary care and maintenance in December 2023. Cerro
Colorado's estimated expenditure of US$45 m for H2 FY24 remains unchanged. We
are exploring options to extend the life of Cerro Colorado, including through
the use of novel leaching technologies and desalinated water, which could see
the operation restart after 2030, subject to environmental approvals.
9
BHP | Financial results for the half year ended 31 December 2023
Copper South Australia
Copper production Underlying EBITDA
154 kt Up 48% US$0.6 bn Up 128%
HY23 104 kt HY23 US$0.3 bn
FY24e 310 - 340 kt
Financial performance
Underlying EBITDA increased 128% predominantly as a result of:
· The contribution of US$0.3 bn from Carrapateena and Prominent Hill
which were acquired in May 2023 as part of the acquisition of OZL; and
· Higher average realised prices for copper, uranium, gold and silver,
which had an impact of US$0.1 bn.
This was partially offset by inflationary impacts on labour and contractors,
additional planned maintenance and increased exploration activity at Oak Dam
and OD Deeps.
Asset outlook
Integration of OZL has successfully delivered more than US$50 m of annualised
EBITDA synergies ahead of schedule through supply chain optimisation and
reducing corporate overheads. The operations are performing well with record
copper concentrate production at Carrapateena, record gold production at
Olympic Dam and record development metres at Prominent Hill. We are looking to
apply best practice from across the operations to further optimise operational
performance and lift productivity.
Production guidance for FY24 remains unchanged at between 310 and 340 kt, net
of the planned transfer of copper concentrate from Prominent Hill to Olympic
Dam for processing to realise improved margins by processing high-uranium
concentrate into cathode.
We are assessing options for a new two-stage smelter which could produce more
than 500 ktpa of copper, with a Final Investment Decision expected between
FY26 and FY27. In addition to productivity improvements mentioned above, we
are undertaking the following growth projects:
· At Prominent Hill, the Wira shaft mine expansion project is under
construction. After a review of this project, it is expected to come online in
FY26, for a total investment of US$673 m, both in-line with our estimates as
part of the acquisition. The hoisting shaft is expected to extend the mine
life to at least 2036 and may provide access to potential mineralisation
outside the current mine plan.
· At Carrapateena, the Block Cave Expansion project is progressing and
is expected to (i) extend the mine life beyond the existing sub-level cave and
(ii) increase production at Carrapateena from FY29. Crusher 2 is still
expected to come online in Q3 FY24 and to ramp up in Q4 FY24, which will
provide an uplift in mine productivity.
We have had continued exploration success at Oak Dam and OD Deeps, and are
progressing the external approval process for an access decline at Oak Dam to
enable faster and lower cost resource definition drilling of the mineral
deposit.
10
BHP | Financial results for the half year ended 31 December 2023
Iron ore
Production Commodity review and outlook(viii)
China posted record iron ore consumption and near-record blast furnace
129 Mt Down 2% utilisation rates in CY23, while India continued to exhibit rapid growth in
steel production. In contrast developed regions saw steel output contract once
HY23 132 Mt again, albeit at a lesser rate than in CY22. The global result was a
considerable improvement from the 4% decline in CY22, although the precise
FY24e 254 - 264.5 Mt scale of the turnaround in China for CY23 is not clear from publicly reported
data.
Over the next two years we expect a small further improvement in global steel
Average realised price production with growth led by India, Southeast Asia and to a lesser extent
China. We expect that reduced drag from developed regions will also help.
US$103.70/wmt Up 21%
In China, steel production was resilient at high levels in CY23, making it the
HY23 US$85.46/wmt 5(th) consecutive year the country produced more than 1 Bt of steel. Weakness
in the real estate sector, was more than offset by healthy growth in
infrastructure, machinery and autos, as well as net steel exports reaching a
seven-year high. In CY24 we expect modest growth in steel production in line
Underlying EBITDA with our long-held view that China's steel production would sit at a plateau
in the 1.0 to 1.1 Btpa range in the first half of the 2020s.
US$9.7 bn Up 27%
India was a continued bright spot with steel production rising around 12% to
HY23 US$7.6 bn ~140 Mt in CY23. That is a 40% increase since the beginning of the decade. In
CY24 we expect another year of strong growth as construction demand remains
68% contribution to the Group's Underlying EBITDA robust. Medium term, we note that the Indian government is targeting 300 Mtpa
of steel-making capacity by 2030.
69% Underlying EBITDA margin
In iron ore, conditions improved in CY23 with a broadly balanced market
overall, notwithstanding volatility in pricing within the year. For CY24 we
expect similar dynamics for the mass balance, but with both supply and demand
Underlying ROCE growth to slow somewhat from the rates of the prior year. Low-cost supply is
not growing at a rate sufficient to displace the high-cost production which is
85% required to keep the market balanced. Our estimate of real-time cost support
sits in the US$80 - US$100/t range on a 62% Fe CFR basis, unchanged from our
HY23 61% previous reporting period. How effectively China's stimulus policy is
implemented, especially with regards to real estate, and how the government
chooses to regulate steel production, are both swing factors in CY24.
Capital and exploration expenditure In the medium term, China's demand for iron ore is expected to be lower than
it is today as it moves beyond its crude steel production plateau and the
US$1.0 bn scrap-to-steel ratio rises, though we expect demand for our products from
elsewhere in developing Asia will offset this to a degree.
HY23 US$0.9 bn
Segment outlook
At WAIO, we are focused on increasing production to greater than 305 Mtpa
FY24e US$2.0 bn over the medium term. We are also studying options for growth of the WAIO
business up to 330 Mtpa and we expect to complete these studies in CY25.
Options under consideration include developing new mines, expanding and
leveraging existing infrastructure, including at Yandi and Port Hedland,
increasing ore beneficiation and building a new hub.
In Brazil, Samarco is ramping up production and supporting the local community
through jobs, investment and taxes. The Renova Foundation continues to make
progress on remediation activity and compensation.
11
BHP | Financial results for the half year ended 31 December 2023
Western Australia Iron Ore
Iron ore production Unit cost(1,2) Underlying EBITDA
126 Mt Down 3% US$18.46/t Up 1% US$9.6 bn Up 27%
C1(ix) US$15.98/t(3)
HY23 130 Mt HY23 US$18.30/t HY23 US$7.6 bn
FY24e 282 - 294 Mt (100% basis) FY24e US$17.40 - US$18.90/t
Medium-term >305 Mtpa (100% basis) Medium-term 305 Mtpa in
the medium term, we are undertaking the following projects:
· The Port Debottlenecking Project (PDP1) which remains on track to be
completed in CY24 following commissioning in December 2023, and is expected to
deliver an uplift in port throughput;
· The Rail Technology Programme (RTP) will be rolled out over the next
few years, and is expected to improve communications and signalling, enhance
operational safety and reduce variability on our WAIO rail network;
· The Western Ridge Crusher Project (WRC) was approved by the Board in
February 2024 for an expected investment of US$943 m (100% basis). It is
expected to deliver ~25 Mtpa (100% basis) from FY28 at a capital intensity of
US$38/t, to replace production from the depleting orebodies around Newman.
Average annual sustaining capital expenditure guidance over the medium term,
excluding costs associated with operational decarbonisation and our automation
programs, remains unchanged at US$5.50/t(vi).
12
BHP | Financial results for the half year ended 31 December 2023
Samarco
Iron ore production Total Renova Foundation spend
2.5 Mt Up 13% US$7.2 bn(1) Up 22%
HY23 2.2 Mt HY23 US$5.9 bn(1)
FY24e 4 - 4.5 Mt
1 Refers to total Renova spend since 2016 (100% basis).
Performance
Samarco continues to operate safely and efficiently since re-starting
operations in December 2020. Production increased 13% in HY24 to 2.5Mt (5.1 Mt
on a 100% basis), as a result of higher concentrator throughput. Production
guidance for FY24 remains unchanged at between 4 and 4.5 Mt.
The restart of the second concentrator, which will increase pellet production
capacity to approximately 16 Mtpa (100% basis) through a filtration and dry
stack tailings solution, is expected to deliver first production in Q3 FY25.
In December 2023, Samarco completed the restructure of its finances by issuing
new debt under the Judicial Reorganisation process. All eligible employees and
small suppliers who had claims under the Judicial Reorganisation process have
been paid in full. The restructure provides Samarco with a stable financial
position to support the funding of its remediation and compensation
obligations, as well as to fund the expansion of its operations and continue
to benefit its communities through job creation, investment and taxes.
Financials
BHP Brasil remains committed to supporting the Renova Foundation and its work
to progress the remediation and compensatory programs to restore the
environment and re-establish communities affected by the Samarco dam failure.
Renova made strong progress during HY24, and since March 2016, it has paid
compensation and financial assistance to approximately 430,000 people and
completed approximately 84% of resettlement cases(x).
For the half year ended 31 December 2023, BHP Brasil has recognised an income
statement charge of US$3.2 bn in relation to the Samarco dam failure, which
predominantly reflects the change in the assessment of the estimated costs to
resolve all aspects of the Federal Public Prosecution Office Claim and the
Framework Agreement obligations. As at 31 December 2023 BHP Brasil's provision
for the Samarco dam failure is US$6.5 bn.
For further information, please see note 9 - Significant events - Samarco dam
failure (#_9.__) for the Samarco dam failure provision.
13
BHP | Financial results for the half year ended 31 December 2023
Coal
Production Commodity review and outlook - Metallurgical coal(viii)
Metallurgical coal prices moved higher in the second half of CY23 on tight
Metallurgical coal fundamentals, particularly on the supply side of the industry. Pig iron
production grew strongly in India and China, while it contracted heavily in
11.3 Mt Down 17% Europe and was flat in developed Asia. Australian seaborne supply fell for a
4th consecutive year, while Mongolian exports doubled year-on-year.
HY23 13.6 Mt
In the near term, based on public company guidance we expect a modest supply
Energy coal recovery from Australia into the seaborne market. The availability of land
borne imports and the operational performance of Chinese domestic mines are
7.5 Mt Up 36% key uncertainties for assessing China's role in the seaborne trade in CY24. On
seaborne demand, India is expected to maintain its current strong momentum
HY23 5.5 Mt while we believe that OECD importing regions are likely to see a gradual
pickup in their steel industries.
Over the longer term, we believe that higher quality metallurgical coals (such
Average realised price as those produced by our BMA assets) will continue to be required in blast
furnace steel-making for decades, driven by the growth of the steel industry
Metallurgical coal in hard coking coal importing countries such as India. In particular, such
higher quality coking coals are expected to be valued for their potential to
US$266.43/t Down 1% help reduce the GHG emissions intensity of blast furnaces. And with the major
seaborne supply region of Queensland having become less conducive to long-life
HY23 US$268.73/t capital investment as a result of changes to the royalty regime, the scarcity
value of higher quality coking coals may well increase over time.
Thermal coal - export
Segment outlook
Aligned with this longer-term forecast, our strategic objective is to focus on
US$123.29/t Down 65% producing higher quality metallurgical coal. In October 2023, we announced
that together with Mitsubishi Development Pty Ltd (our 50:50 joint venture
HY23 US$354.30/t partner in BMA) the sale of our Blackwater and Daunia mines to Whitehaven Coal
for up to US$4.1 bn (100%). The sale is expected to complete on 2 April 2024.
In thermal coal, we are seeking the relevant approvals to continue mining at
Underlying EBITDA NSWEC beyond the current mining consent that expires at the end of FY26, and
proceed with a managed process to cease mining at the asset by the end of
US$1.0 bn Down 63% FY30.
HY23 US$2.6 bn
7% contribution to the Group's Underlying EBITDA
26% Underlying EBITDA margin
Underlying ROCE
15%
HY23 55%
Capital and exploration expenditure
US$0.4 bn
HY23 US$0.2 bn
FY24e US$0.7 bn
14
BHP | Financial results for the half year ended 31 December 2023
BMA
Metallurgical coal production Unit cost(1,2) Underlying EBITDA
11.3 Mt Down 17% US$129.00/t Up 29% US$0.8 bn Down 43%
HY23 13.6 Mt HY23 US$100.23/t HY23 US$1.4 bn
FY24e 46 - 50 Mt (100% basis) FY24e US$110 - US$116/t
1 Based on average exchange rates of: HY24 AUD/USD 0.65
(realised); HY23 AUD/USD 0.67 (realised); FY24e AUD/USD 0.67 (guidance).
2 Refer to Non-IFRS financial information (#_Units_costs) for
detailed unit cost reconciliation.
Financial performance
Underlying EBITDA decreased by 43% predominately driven by:
· Lower sales volumes in line with lower production volumes, which had
an unfavourable impact of US$0.4 bn; and
· Higher costs as a result of the increase in prime stripping to
recover depleted inventory positions following extended weather impacts and
labour constraints in prior periods, the impacts of inflation, and planned
higher maintenance activity, which were partially offset by lower diesel
prices.
Queensland remains one of the highest royalty jurisdictions in the world. The
change to the royalty regime in CY22 increased coal royalties to the highest
maximum rate in the world, and resulted in an additional US$0.3 bn in
royalties paid to the Queensland Government by BHP in relation to HY24 than
would have otherwise been paid. Combined with income taxes, this equates to an
adjusted effective tax rate including royalties of 62%.
Asset outlook
We are focused on improving value chain stability following depleted inventory
positions arising from extended weather impacts and labour constraints over
recent years, and we expect this will continue into CY25.
Following the planned sale of the Blackwater and Daunia mines, we expect 86%
of BMA's products will be sold by reference to the Platts PLV HCC FOB Qld
index, the highest quality metallurgical coal index, increasing from 64%
currently. BMA is also expected to benefit from simplified operations and
transport logistics, including the sale and shipment of all products through
the 100% owned Hay Point Coal Terminal. After the completion of the sale, we
will no longer recognise the closure and rehabilitation provisions for the two
sold mines of US$0.6 bn.
Given the negative impact on investment economics resulting from the change in
coal royalty rates, and the increase in sovereign risk due to the decision to
raise royalties without consultation, we will not be investing in any further
growth in Queensland, however we will sustain and optimise our existing
operations.
15
BHP | Financial results for the half year ended 31 December 2023
New South Wales Energy Coal
Energy coal production Underlying EBITDA
7.5 Mt Up 36% US$0.2 bn Down 84%
HY23 5.5 Mt HY23 US$1.2 bn
FY24e 13 - 15 Mt
Financial performance
Despite higher sales volumes in line with strong production, Underlying EBITDA
decreased by 84%, primarily due to lower average realised prices for thermal
coal of 65% which had an unfavourable impact of US$1.7 bn.
The additional volumes resulted in higher operating costs, however these were
more than offset by lower royalties (linked to lower prices).
Asset outlook
As announced in June 2022, we made the decision to retain NSWEC in our
portfolio and proceed with a managed process to cease mining by the end of
FY30.
We submitted a modification request to the NSW Government to extend mining
approval to 30 June 2030 in support of the 2030 closure plan. The modification
submission went on public exhibition for four weeks in November 2023. The
approval process will continue through FY24 alongside continued stakeholder
and community engagement on closure plans.
Subject to receiving the necessary approvals, as we look ahead to 2030 we will
not be allocating any growth capital to NSWEC. We will continue to optimise
the operation for value, with absolute costs expected to be stable in the
medium term after a period of higher inflation and input prices. The royalty
rates in NSW will rise from 8.2% to 10.8% for open cut mines, effective from 1
July 2024.
16
BHP | Financial results for the half year ended 31 December 2023
Group & Unallocated
Western Australia Nickel
Production Commodity review and outlook(viii)
The nickel industry moved into significant surplus over the course of CY23 as
40 kt Up 4% Indonesian supply continued to grow at pace at a time of weak traditional end
use demand in the OECD, and mixed outcomes across the electric vehicle value
HY23 38 kt chain versus expectations. Indonesian production of Class-II nickel products
is up around 3.6 times since CY19, and its production of intermediates has
FY24e 77 - 87 kt increased dramatically in the last two years. Whilst electric vehicle and
battery demand grew across CY23, a significant destocking cycle in the battery
value-chain impacted nickel and all battery metals. The conversion of
Indonesian-origin nickel products into cathode, which the London Metal
Average realised price(xi) Exchange (LME) chose to allow onto its platforms, saw the significant
non-Class-I surplus spill over into visible Class-I inventory, and then LME
US$18,602/t Down 24% pricing. LME prices had fallen deep into the cost curve by the end of CY23.
Whilst voluntary curtailments have been publicly announced by various
HY23 US$24,362/t operators, we estimate that we are in a multi-year run of surpluses that are
likely to average out well over 5% of annual demand.
Longer term, we continue to believe nickel will be a core beneficiary of the
Underlying EBITDA electrification mega-trend and that nickel sulphides will be particularly
attractive. Notwithstanding that, the industry is expected to experience a
US$(0.2) bn Down 276% difficult multi-year run as excess current and committed supply is gradually
absorbed by rising demand. Among the many cases we consider for this timing,
HY23 US$0.1 bn our base case is that the market may rebalance by the late 2020s.
Financial performance
During HY24 we integrated the West Musgrave project with the Nickel West
operations to create the Western Australia Nickel business unit. As the West
Capital and exploration expenditure Musgrave project is still in execution and is not yet operational, its
financial impact for the period is seen in capital and exploration
US$0.8 bn expenditure.
HY23 US$0.3 bn Despite higher production volumes at Nickel West, Underlying EBITDA decreased
by US$0.3 bn, to a loss of US$(0.2) bn, predominantly as a result of:
FY24e US$1.4 bn
· Significantly lower realised prices for nickel metal and
intermediate products, which had an unfavourable impact of US$0.3 bn; and
· The unfavourable impact of inflation on the cost base including
increased labour and contractor costs.
Nickel West also had increased deliveries of third party concentrate and ore,
however the lower nickel prices in the period largely offset the impact of
these volumes.
Due to the deterioration in the short-term and medium-term outlook for nickel,
BHP has lowered its nickel price assumptions. In addition, capital costs for
Western Australia Nickel have increased due to inflation. With regard to these
factors, we have recognised an impairment of US$2.5 bn (post tax) against the
carrying value of Western Australia Nickel. For further details please refer
to note 2 - Exceptional items (#_Western_Australia_Nickel) .
Business outlook
In the context of the above, we are assessing our plans for Western Australia
Nickel. These include optimising operations, reducing discretionary
expenditure and reviewing capital plans. We are also looking at the
longer-term future of Western Australia Nickel, including potentially entering
a period of care and maintenance at Nickel West, and assessing phasing and
capital spend for the development of the West Musgrave project.
17
BHP | Financial results for the half year ended 31 December 2023
Potash
Capital expenditure Commodity review and outlook(viii)
Potash prices declined across CY23 as prices reverted to more normal ranges
US$0.53 bn Up 64% with both demand and supply adjusting following the major supply related
shocks of the last few years. The existing operations in Russia and Belarus
HY23 US$0.33 bn are now back to around four-fifths of pre-shock capacity and global shipments
are tracking at 93% of CY20 levels.
FY24e US$1.2 bn
In the medium-term we expect existing capacity in Russia and Belarus to return
to normal operating rates. However, new projects in the region are expected to
face significant delays versus pre-sanctions timelines. Longer term, we
Underlying EBITDA believe that potash stands to benefit from the intersection of global
mega-trends: rising populations, changing diets and the need for the more
US$(0.13) bn sustainable intensification of agriculture on finite arable land. We consider
this compelling demand picture, rising geopolitical uncertainty and the
HY23 US$(0.09) bn maturity of the existing asset base to be an attractive, accelerated entry
opportunity in a lower-risk supply jurisdiction such as Saskatchewan, Canada.
Business outlook
In October 2023 we announced an investment of US$4.9 bn for stage 2 of the
Jansen potash project, which will increase our total planned potash production
capacity to ~8.5 Mtpa (representing approximately 10% of forecast FY30
supply). Transitioning directly from Jansen Stage 1 (JS1) to Jansen Stage 2
(JS2) during the construction period brings a number of operational benefits
including leveraging the experience of our integrated project team and
continued use of our existing suppliers and contractors. This will allow us to
realise potential synergies of ~US$300 m, which are embedded in JS2's
economics.
Jansen
Jansen Stage 1 Progress Production target date Investment estimate
38% End-CY26 US$5.7 bn
Project update
JS1 is now 38% complete and on track to deliver first production at the end of
CY26, with a two year ramp up period. In HY24, earthworks at JS1 continued,
with the concrete foundations for the mill nearing completion. In H2 FY24, we
expect to award all remaining major equipment and construction packages for
JS1 and will continue to progress underground mine construction activities.
Construction of JS2 is expected to commence in Q4 FY24 and to take
approximately six years, with first production expected in FY29, followed by a
three year ramp up period. JS2 will have a capital intensity of
US$1,050/t(xii), which is lower than JS1, due to leveraging existing and
planned infrastructure. At third party consensus prices, the project is
expected to generate an IRR of 15-18%, and EBITDA margins of 65-70%.
Capital expenditure in HY24 for JS1 and JS2 was US$0.53 bn and we remain on
track to spend US$1.2 bn for the full year.
The US$0.13 bn of operating costs incurred at Jansen relate to site services,
overheads, studies and social investments, which are expected to continue
throughout the project.
18
BHP | Financial results for the half year ended 31 December 2023
Minerals exploration and early-stage entry
Exploration expenditure As well as the successes seen in Copper South Australia, we continued to build
our portfolio of options in future facing commodities via high potential
US$199 m Up 28% exploration projects, equity investments, joint ventures and farm-in
agreements. Greenfield minerals exploration was also undertaken to advance
HY23 US$156 m copper targets in Sweden, Chile, Serbia, Peru, Canada, Australia and the
United States.
We have announced the second cohort
(https://www.bhp.com/news/media-centre/releases/2024/01/bhp-xplor-announces-second-program-helping-to-accelerate-critical-resources-exploration)
of our accelerator program, Xplor. After reviewing several hundred
applications, six early-stage minerals exploration companies were selected to
join the program. They will each receive funding of up to US$500,000 and will
have access to internal and external industry experts to support their growth.
Additionally, several companies were selected from the first Xplor cohort for
follow on investments, after successfully completing last year's program.
We closed the acquisition of Ragnar Metals' Swedish projects, which included
the Tullsta nickel sulphide project. Early drilling results at the project
have demonstrated several significant intercepts. Elsewhere, we continue to
progress nickel exploration activities in Australia and Canada. We also
continued to progress our strategy of partnering with mining companies focused
on early-stage copper and nickel exploration projects.
In H2, we intend to pilot exploration trials using generative artificial
intelligence. This work extends from a successful proof of concept of the
technology in HY24 which achieved early success in retrieving information from
large, unstructured government datasets.
19
BHP | Financial results for the half year ended 31 December 2023
Appendix 1
Financial Report for the half year ended 31 December 2023 (#_Financial_Report)
Financial performance summary(1)
A summary of performance for the HY24 and HY23 financial years is presented
below.
Key group metrics
HY24 HY23 Change
US$M US$M %
Revenue 27,232 25,713 6%
Profit from operations 4,803 10,833 (56%)
Attributable profit 927 6,457 (86%)
Basic earnings per share (cents) 18.3 127.5 (86%)
Interim dividend per share (cents) 72 90 (20%)
Net operating cash flow 8,884 6,770 31%
Capital and exploration expenditure 4,744 3,027 57%
Net debt 12,648 6,910 83%
Underlying EBITDA 13,875 13,230 5%
Underlying attributable profit 6,569 6,597 (0%)
Underlying basic earnings per ordinary share (cents) 129.6 130.3 (1%)
Key asset metrics
Half year ended 31 December 2023 Revenue(2) Underlying Underlying Exceptional Net operating Capital Exploration Exploration
US$M EBITDA(3) EBIT(3) items(4) assets(3) expenditure gross to profit
Copper
Escondida 4,427 2,347 1,897 12,737 853
Pampa Norte(5) 1,133 408 199 4,740 392
Antamina(6) 730 469 364 1,454 258
Copper South Australia(7) 1,853 591 232 16,061 581
Other(6) 22 (107) (141) 322 68
Total Copper from Group production 8,165 3,708 2,551 − 35,314 2,152
Third party products 1,223 28 28 − − −
Total Copper 9,388 3,736 2,579 − 35,314 2,152 89 89
Adjustment for equity accounted investments(6) (730) (263) (141) − − (258) (1) (1)
Total Copper statutory result 8,658 3,473 2,438 − 35,314 1,894 88 88
Iron Ore
Western Australia Iron Ore 13,991 9,646 8,679 20,937 927
Samarco(8) − − − (6,272) −
Other 59 21 9 (127) −
Total Iron Ore from Group production 14,050 9,667 8,688 (2,899) 14,538 927
Third party products 12 (1) (1) − − −
Total Iron Ore 14,062 9,666 8,687 (2,899) 14,538 927 44 22
Adjustment for equity accounted investments − − − − − − − −
Total Iron Ore statutory result 14,062 9,666 8,687 (2,899) 14,538 927 44 22
Coal
BHP Mitsubishi Alliance(9) 2,882 810 529 6,863 303
New South Wales Energy Coal(10) 980 257 216 (144) 43
Other − (31) (44) (27) 6
Total Coal from Group production 3,862 1,036 701 − 6,692 352
Third party products − − − − − −
Total Coal 3,862 1,036 701 − 6,692 352 7 2
Adjustment for equity accounted investments(10) (76) (61) (49) − − − − −
Total Coal statutory result 3,786 975 652 − 6,692 352 7 2
Group and unallocated items
Potash − (129) (130) 5,247 533 1 1
Western Australia Nickel(11) 725 (174) (240) (311) 780 27 25
Other(12) 1 64 (174) (666) 59 32 32
Total Group and unallocated items 726 (239) (544) (3,531) 4,270 1,372 60 58
Inter-segment adjustment − − − − − − − −
Total Group 27,232 13,875 11,233 (6,430) 60,814 4,545 199 170
20
BHP | Financial results for the half year ended 31 December 2023
Half year ended 31 December 2022 Revenue(2) Underlying Underlying Exceptional Net Capital Exploration Exploration
US$M EBITDA(3) EBIT(3) items(4) operating expenditure gross to profit
assets(3)
Copper
Escondida 4,089 2,160 1,737 12,103 605
Pampa Norte(5) 1,094 298 50 4,693 307
Antamina(6) 752 432 343 1,417 204
Copper South Australia(7) 1,133 259 62 9,911 270
Other(6) 1 (99) (108) (51) 9
Total Copper from Group production 7,069 3,050 2,084 − 28,073 1,395
Third party products 988 8 8 − − −
Total Copper 8,057 3,058 2,092 − 28,073 1,395 64 61
Adjustment for equity accounted investments(6) (752) (244) (154) − − (204) (3) −
Total Copper statutory result 7,305 2,814 1,938 − 28,073 1,191 61 61
Iron Ore
Western Australia Iron Ore 11,756 7,623 6,651 20,669 805
Samarco(8) − − − (3,235) −
Other 57 18 6 (41) 7
Total Iron Ore from Group production 11,813 7,641 6,657 111 17,393 812
Third party products 9 − − − − −
Total Iron Ore 11,822 7,641 6,657 111 17,393 812 50 26
Adjustment for equity accounted investments − − − − − − − −
Total Iron Ore statutory result 11,822 7,641 6,657 111 17,393 812 50 26
Coal
BHP Mitsubishi Alliance(9) 3,598 1,426 1,125 7,426 183
New South Wales Energy Coal(10) 2,016 1,288 1,247 (209) 50
Other − (29) (37) (11) 4
Total Coal from Group production 5,614 2,685 2,335 − 7,206 237
Third party products − − − − − −
Total Coal 5,614 2,685 2,335 − 7,206 237 4 1
Adjustment for equity accounted investments(10) (48) (54) (41) − − − − −
Total Coal statutory result 5,566 2,631 2,294 − 7,206 237 4 1
Group and unallocated items
Potash − (87) (88) 4,008 325 − −
Western Australia Nickel(11) 1,010 99 50 1,100 267 26 24
Other(12) 10 132 (98) (1,545) 39 15 15
Total Group and unallocated items 1,020 144 (136) (31) 3,563 631 41 39
Inter-segment adjustment − − − − − − − −
Total Group 25,713 13,230 10,753 80 56,235 2,871 156 127
1 Group profit before taxation comprised Underlying EBITDA;
exceptional items, depreciation, amortisation and impairments of US$9,072 m
(HY23: US$2,397 m) and net finance costs of US$821 m (HY23: US$652 m).
2 Total revenue from thermal coal sales, including BMA and NSWEC,
was US$980 m (HY23: US$2,123 m).
3 For more information on the reconciliation of non-IFRS financial
information to our statutory measures, reasons for usefulness and calculation
methodology, please refer to non-IFRS financial information
(#_Non-IFRS_Financial_Information) .
4 Excludes exceptional items relating to Net finance costs US$190
m and Income tax benefit US$978 m (HY23: Net finance costs US$222 m and Income
tax benefit US$2 m).
5 Includes Spence and Cerro Colorado.
6 Antamina, SolGold and Resolution (the latter two included in
Other) are equity accounted investments and their financial information
presented above with the exception of net operating assets reflects BHP
Group's share. Group and Copper level information is reported on a statutory
basis which reflects the application of the equity accounting method in
preparing the Group financial statements - in accordance with IFRS. Underlying
EBITDA of the Group and the Copper segment, includes depreciation,
amortisation and impairments (D&A), net finance costs and taxation expense
of US$263 m (HY23: US$244 m) related to equity accounted investments.
7 Includes Olympic Dam as well as Prominent Hill and Carrapateena
which were acquired on 2 May 2023 as part of the acquisition of OZL.
8 Samarco is an equity accounted investment and its financial
information presented above, with the exception of net operating assets,
reflects BHP Billiton Brasil Ltda's share. All financial impacts following the
Samarco dam failure have been reported as exceptional items in both reporting
periods.
9 On 18 October 2023, BHP announced the execution of Asset Sale
Agreements for the divestment of BHP's and Mitsubishi Development Pty Ltd's
respective interests in Blackwater and Daunia mines (part of the BHP
Mitsubishi Alliance) to Whitehaven Coal. While BHP continues to report its
share of profit and loss within the Coal Segment and asset tables, Blackwater
and Daunia assets and liabilities have been classified as 'Held for Sale' and
therefore excluded from Net Operating Assets. Refer to financial statements
note 11 - 'Assets and liabilities held for sale' (#_11.__) for further
information.
10 Includes Newcastle Coal Infrastructure Group (NCIG) which is an
equity accounted investment and its financial information presented above,
with the exception of net operating assets, reflects BHP Group's share. Total
Coal statutory result excludes contribution related to NCIG until future
profits exceed accumulated losses.
11 Includes Nickel West and West Musgrave which was acquired on 2 May
2023 as part of the acquisition of OZL.
12 Other includes functions, other unallocated operations including
legacy assets and consolidation adjustments. Revenue not attributable to
reportable segments comprises the sale of freight and fuel to third parties,
as well as revenues from unallocated operations. Exploration and technology
activities are recognised within relevant segments.
21
BHP | Financial results for the half year ended 31 December 2023
Underlying EBITDA waterfall
The following table and commentary describe the impact of the principal
factors(ii) that affected Underlying EBITDA for the half year ended 31
December 2023 compared with the half year ended 31 December 2022:
US$M Total Group Copper Iron ore Coal Group and unallocated
Half year ended 31 December 2022 13,230 2,814 7,641 2,631 144
Net price impact 776 406 2,065 (1,548) (147)
Change in sales prices 629 411 2,300 (1,778) (304)
Refer to Segment and asset performance (#_Segment_and_asset) for average
realised prices
Price-linked costs 147 (5) (235) 230 157
WAIO: Higher royalties in line with higher prices. NSWEC: Lower royalties in line with lower prices. Western Australia Nickel: Favourable impact of lower nickel price on third
party volumes.
Change in volumes 260 164 10 68 18
Escondida: Higher volumes due to higher concentrator feed grade and higher WAIO: Stronger demand in China for portside sales, combined with a favourable NSWEC: Higher volumes reflecting eased labour constraints and improved weather Western Australia Nickel: Higher volumes due to improved performance, and a
concentrator throughput. product mix at Jimblebar partially offset by continued tie-in activity for the conditions enabling uplift in truck productivity. shorter shutdown period at the Kalgoorlie Smelter offsetting downtime at the
Rail Technology Programme.
Kwinana Refinery.
Partially offset by:
BMA: Lower volumes due to a significant increase in planned maintenance across
the asset, an extended longwall move and geotechnical faulting. This was
partially offset by improved weather conditions.
Change in controllable cash costs (436) (105) 17 (130) (218)
Operating cash costs (372) (52) 19 (129) (210)
Escondida & Spence: Minor inventory drawdowns. WAIO: Net favourable inventory movements, largely due to a build in pre-crush BMA: Higher costs as a result of the increase in stripping to recover depleted Western Australia Nickel: Increased deliveries of third party nickel
stocks, partially offset by increased maintenance activity. inventory positions following extended weather impacts and labour constraints concentrate and ore.
in prior periods.
NSWEC: Higher stripping costs in line with higher volumes.
Exploration and business (64) (53) (2) (1) (8)
development Copper South Australia: Higher exploration spend for drilling activities at
Oak Dam and Olympic Dam.
Change in other costs (206) (105) (42) (42) (17)
Exchange rates 80 80 (15) (10) 25
Inflation (507) (234) (106) (107) (60)
Global inflation rate of 6.3%
Fuel, energy, and consumable price 340 176 71 75 18
movements Escondida, Spence and Copper South Australia: Primarily due to lower diesel, WAIO: Primarily due to lower diesel prices. BMA & NSWEC: Primarily due to lower diesel prices. Western Australia Nickel: Primarily due to lower diesel and ammonia prices.
acid, and electricity prices.
Non-Cash (119) (127) 8 − −
Escondida: Lower stripping capitalisation reflecting phase of mine plan.
One-off items − − − − −
Asset sales 38 − 1 (1) 38
Ceased and sold operations (23) (23) − − −
Cerro Colorado: Entered temporary care and maintenance in December 2023.
New and acquired operations 240 257 − − (17)
Copper South Australia: Contribution from OZL assets acquired in May 2023.
Other (4) 65 (26) (3) (40)
Antamina: Higher profit from higher capitalised stripping reflecting phase of G&U: Prior period fair value gain on OZL holdings, partially offset by
mine plan. HY24 VAT refund received in relation to previously divested Petroleum
operations.
Half year ended 31 December 2023 13,875 3,473 9,666 975 (239)
22
BHP | Financial results for the half year ended 31 December 2023
Exchange rates
The following exchange rates relative to the US dollar have been applied in
the financial information:
Average Average
Half year ended Half year ended As at As at As at
31 December 31 December 31 December 31 December 30 June
2023 2022 2023 2022 2023
Australian dollar(1) 0.65 0.67 0.68 0.68 0.66
Chilean peso 874 920 877 860 803
1 Displayed as US$ to A$1 based on common convention.
Capital and exploration expenditure
Historical capital and exploration expenditure and guidance are summarised
below:
FY24e HY24 HY23 FY23
US$ bn US$M US$M US$M
Maintenance and decarbonisation(1) 3.1 1,350 1,128 2,981
Development - Minerals 6.5 3,195 1,743 3,752
Capital expenditure (purchases of property, plant and equipment) 9.6 4,545 2,871 6,733
Add: exploration expenditure 0.4 199 156 350
Capital and exploration expenditure ~10 4,744 3,027 7,083
1 Includes capitalised deferred stripping of US$441 m for HY24 (HY23:
US$432 m) and US$0.9 bn estimated for FY24.
Major Projects
Commodity Project and ownership Project scope / capacity Capital First Progress
expenditure
production
US$M
target date
Potash Jansen Stage 1 Design, engineering and construction of an underground potash mine and surface 5,723 End-CY26 Project is 38% complete
infrastructure, with capacity to produce 4.15 Mtpa.
(Canada)
100%
Potash Jansen Stage 2 Development of additional mining districts, completion of the second shaft 4,859 FY29 Approval announced October 2023.
hoist infrastructure, expansion of processing facilities and addition of rail
(Canada) cars to facilitate production of an incremental 4.36 Mtpa.
100%
Production and unit cost guidance
Historical production and production guidance are summarised below:
Production Medium-term FY24 guidance HY24 HY23 HY24 vs HY23
guidance
Copper (kt) 1,720 - 1,910 894.4 834.4 7%
Escondida (kt) 1,200 - 1,300(1) 1,080 - 1,180 Unchanged 527.9 510.7 3%
Pampa Norte (kt) ~250(2) 210 - 250(2) Unchanged 138.1 147.3 (6%)
Copper South Australia (kt) 310 - 340 Unchanged 153.7 104.1 48%
Antamina (kt) 120 - 140 Unchanged 71.7 72.3 (1%)
Carajás (kt) - Unchanged 3.0
Iron ore (Mt) 254 - 264.5 129.0 132.0 (2%)
WAIO (Mt) 250 - 260 Unchanged 126.5 129.7 (3%)
WAIO (100% basis) (Mt) >305 282 - 294 Unchanged 142.1 146.4 (3%)
Samarco (Mt) 4 - 4.5 Unchanged 2.5 2.2 13%
Metallurgical coal - BMA (Mt) 23 - 25(3) Lowered 11.3 13.6 (17%)
BMA (100% basis) (Mt) 46 - 50(3) Lowered 22.6 27.2 (17%)
Energy coal - NSWEC (Mt) 13 - 15 Top end 7.5 5.5 36%
Nickel (kt) 77 - 87 Unchanged 39.8 38.4 4%
1 Medium term refers to FY25 and FY26.
2 Production guidance is provided for Spence only. Average of 250
ktpa over five years on the basis that remediation of the previously
identified TSF anomalies does not impact operations. Cerro Colorado produced
11 kt before ceasing production on 9 November 2023.
3 Excludes production from Blackwater and Daunia mines from the
expected date of sale completion, 2 April 2024.
23
BHP | Financial results for the half year ended 31 December 2023
Historical costs(1) and cost guidance for our major assets are summarised
below:
HY24 at
guidance realised HY24(3)
Medium-term FY24 exchange exchange Vs
guidance(2) guidance(2) rates(2) rates(3) HY23(3) HY23
Escondida unit cost (US$/lb)(4,5) 1.30 - 1.60 1.40 - 1.70 1.59 1.51 1.44 5%
Spence unit cost (US$/lb) 2.00 - 2.30 2.10 1.98 2.19 -10%
WAIO unit cost (US$/t)(6) <17 17.40 - 18.90 18.43 18.46 18.30 1%
BMA unit cost (US$/t) 110 - 116 128.76 129.00 100.23 29%
1 Refer to Non-IFRS financial information (#_Units_costs) for
detailed unit cost reconciliations and definitions.
2 FY24 and medium-term unit cost guidance are based on exchange rates
of AUD/USD 0.67 and USD/CLP 810.
3 Based on average exchange rates of: HY24 AUD/USD 0.65 USD/CLP 874
(realised); HY23 AUD/USD 0.67 USD/CLP 920 (realised).
4 Escondida unit costs for FY24 onwards exclude revenue based
government royalties.
5 Medium term refers to FY25 and FY26.
6 The breakdown of C1 unit costs, excluding third party royalties,
are detailed on page 12 (#_Western_Australia_Iron) .
Health, safety and social value
Key safety indicators(1)
Target/Goal HY24 FY23 HY23
Fatalities(2) Zero work-related fatalities 0 2 0
High-potential injury (HPI) frequency(2) Year-on-year improvement in HPI frequency 0.10 0.18 0.13
Total recordable injury frequency (TRIF)(2) Year-on-year improvement in TRIF 4.3 4.4 4.1
A fatal incident occurred subsequent to the reporting period at our BMA operations in January.
Social value: key indicators scorecard(1,3)
Target/Goal HY24 FY23 HY23
Operational greenhouse gas (GHG) emissions Reduce operational GHG emissions by at least 30 per cent from FY20 levels(5) 5.2 9.8 4.9
(Mt CO(2)-e)(4) by FY30
Value chain emissions: Steelmaking: 2030 goal to support industry to develop technologies and 114
pathways capable of 30 per cent GHG emissions intensity reduction in
Financial value committed in steelmaking partnerships and ventures to date integrated steelmaking, with widespread adoption expected post-2030
(US$ m)
Value chain emissions: Maritime transportation: 2030 goal to support 40 per cent GHG emissions 43 41 42
intensity reduction of BHP-chartered shipping of BHP products
Reduction(6) in emissions intensity of BHP-chartered shipping of our products
(%)
Social investment (US$M BHP equity share) Voluntary social investment aligned to the six pillars of our Social Value 36.1 149.6 41.1
Framework
Indigenous procurement spend (US$M) Purchases from Indigenous vendors target of US$297 million in FY24 289 332.6 141.1
Female employee representation (%)(7) Aspirational goal for gender balance(8) by the end of FY25 36.2(9) 35.2 33.6
Indigenous employee representation (%)(7) Australia(10): aim to achieve 9.7 per cent by the end of FY27 8.4(11) 8.6 8.3
Chile(12): aim to achieve 10.0 per cent by the end of FY25 10.2 9.7 8.9
Canada(13): aim to achieve 20.0 per cent by the end of FY26 9.4 7.7 6.7
Area under nature-positive management practices(14) (hectares) 2030 goal of having at least 30 per cent of the land and water we steward(15) - 82,132 -
under conservation, restoration or regenerative practices
1 All data points are presented on a total operations basis, unless
otherwise noted, and are indicative and subject to non-financial assurance
reviews. Excludes former OZL, unless otherwise noted.
2 Former OZL is included in HY24 fatalities and HPI frequency. HY24
TRIF includes former OZL Exploration from 1 December 2023, reflecting
progressive migration of employee data onto the BHP systems (updated data will
be provided in the full year results for FY24). HPI frequency and TRIF is
combined employee and contractor frequency per 1 million hours worked.
3 Includes selection of key social value framework metrics.
Additional metrics are included in OFR 6 in the Annual Report
(https://www.bhp.com/AR2023_page33) 2023.
4 HY24 operational GHG emissions includes emissions from former OZL.
HY23 operational GHG emissions have been restated after data finalisation for
Annual Report 2023 and do not include former OZL emissions.
5 Our operational GHG emissions are the Scope 1 and Scope 2 GHG
emissions from our operated assets. For our baseline year of FY20, our
operational GHG emissions were 14.5 Mt CO2-e. FY20 baseline has been adjusted
for divestment of our Petroleum business (merger with Woodside completed on 1
June 2022) and our interest in BMC (completed on 3 May 2022), and for
methodological changes (use of Intergovernmental Panel on Climate Change
(IPCC) Assessment Report 5 (AR5) Global Warming Potentials and the transition
to a facility-specific GHG emission calculation methodology for fugitives at
Caval Ridge). Our FY20 baseline year emissions will be updated to include the
acquisition of OZL.
6 Against CY08. CY08 was selected as the baseline year for this goal
to align with the base year for the International Maritime Organisation's 2030
emissions intensity goal and its corresponding reasoning and strategy.
7 Based on a 'point in time' snapshot of employees as at the end of
the relevant reporting period.
8 We define gender balance as a minimum 40% women and 40% men in line
with the definitions used by entities such as the International Labour
Organisation.
9 Includes some but not all former OZL reflecting progressive
migration of employee data onto BHP systems. Updated data will be provided in
the full year results for FY24.
10 Indigenous employee representation at Minerals Australia operations.
24
BHP | Financial results for the half year ended 31 December 2023
11 Indigenous employee representation in Australia, including Minerals
Australia operations and some but not all former OZL (operational and
non-operational roles) reflecting progressive migration of employee data onto
BHP systems. Updated data will be provided in the full year results for FY24.
12 Indigenous employee representation at Minerals Americas operations in
Chile.
13 Indigenous employee representation at the Jansen Potash project and
operations in Canada.
14 Area under our stewardship that has a formal management plan
including conservation, restoration or regenerative practices. 82,132 hectares
is the area as at 30 June 2023. This metric (which was previously reported as
a percentage of the areas of land and water that we stewarded at 30 June 2023)
is measured on an annual basis and an update, including restatement of the
FY23 percentage to reflect a correction to underlying data, will be provided
in the full year results for FY24.
15 Excluding greenfield exploration licences (or equivalent tenements),
which are outside the area of influence of our existing mine operations. 30%
will be calculated based on the areas of land and water that we steward at the
end of FY30.
The Financial Report (#_Financial_Report) for the half year ended 31 December
2023 has been prepared on the basis of accounting policies and methods of
computation consistent with those applied in the 30 June 2023 financial
statements contained within the Annual Report of the Group. This news release
including the Financial Report is unaudited. Variance analysis relates to the
relative financial and/or production performance of BHP and/or its operations
during the December 2023 half year compared with the December 2022 half year,
unless otherwise noted. Medium term refers to a five-year horizon, unless
otherwise noted. Numbers presented may not add up precisely to the totals
provided due to rounding.
The following abbreviations may have been used throughout this report: billion
tonnes (Bt); cost and freight (CFR); cost, insurance and freight (CIF); carbon
dioxide equivalent (CO2-e); dry metric tonne unit (dmtu); free on board (FOB);
giga litres (GL); greenhouse gas (GHG); grams per tonne (g/t); high-potential
injury (HPI); kilograms per tonne (kg/t); kilometre (km); million ounces per
annum (Mozpa); million pounds (Mlb); million tonnes (Mt); million tonnes per
annum (Mtpa); ounces (oz); OZ Minerals Ltd (OZL); pounds (lb); thousand ounces
(koz); thousand ounces per annum (kozpa); thousand tonnes (kt); thousand
tonnes per annum (ktpa); thousand tonnes per day (ktpd); tonnes (t); total
recordable injury frequency (TRIF); and wet metric tonnes (wmt).
The following footnotes apply to this Results Announcement:
i Based on a 'point in time' snapshot of employees as at 31
December 2023, including employees on extended absence, as used in internal
management reporting for the purposes of monitoring progress against our
goals. We define gender balance as a minimum 40% women and 40% men in line
with the definitions used by entities such as the International Labour
Organization. This includes some but not all former OZL reflecting progressive
migration of employee data onto BHP systems. Updated data will be provided in
the full year results for FY24. 'People leaders' are defined as employees with
one or more direct reports.
ii We use various non-IFRS financial information to reflect our
underlying performance. For further information on the reconciliations of
certain non-IFRS financial information measures to our statutory measures,
reasons for usefulness and calculation methodology, please refer to non-IFRS
financial information (#_Non-IFRS_Financial_Information) .
iii Calculated on a copper equivalent production weighted average basis.
iv Data sourced from the most recent published financial statements of
the ASX50 companies and excludes companies that recorded an accounting loss.
v Maintenance capital includes non-discretionary spend for the
following purposes: deferred development and production stripping; risk
reduction; compliance and asset integrity.
vi Subject to movements in exchange rates; +/- 50% in any given year.
vii Average for FY26-FY28.
viii The information in this section is based on BHP data, analysis and
desk top research on public data sources.
ix There may be differences in the manner that third parties calculate
or report unit costs data compared to BHP, which means that third-party data
may not be comparable to our data. WAIO C1 unit costs exclude third party
royalties, net inventory movements, depletion of production stripping,
exploration expenses, marketing purchases, demurrage, exchange rate
gains/losses, and other income.
x Resettlement cases completed includes completed construction
(families either moved in or handover to families in progress) or cash payment
made. Overall figures calculated considering total of 727 cases, which is the
total of known cases as at 31 December 2023.
xi Relates to refined nickel metal only. Excludes intermediate
products and nickel sulphate.
xii Expected capital intensity for Jansen Stage 2, US$/product tonne,
Real 1 July 2023
Forward-looking statements
This release contains forward-looking statements, which involve risks and
uncertainties. Forward-looking statements include all statements other than
statements of historical or present facts, including: statements regarding:
trends in commodity prices and currency exchange rates; demand for
commodities; global market conditions, guidance; reserves and resources and
production forecasts; expectations, plans, strategies and objectives of
management; our expectations, commitments, targets, goals and objectives with
respect to social value or sustainability; climate scenarios; approval of
certain projects and consummation of certain transactions; closure,
divestment, acquisition or integration of certain assets, operations or
facilities (including associated costs or benefits); anticipated production or
construction commencement dates; capital expenditure or costs and scheduling;
operating costs, and supply of materials and skilled employees; anticipated
productive lives of projects, mines and facilities; the availability,
implementation and adoption of new technologies; provisions and contingent
liabilities; and tax, legal and other regulatory developments.
Forward-looking statements may be identified by the use of terminology,
including, but not limited to, 'intend', 'aim', 'ambition', 'aspiration',
'goal', 'target', 'prospect', 'project', 'see', 'anticipate', 'estimate',
'plan', 'objective', 'believe', 'expect', 'commit', 'may', 'should', 'need',
'must', 'will', 'would', 'continue', 'forecast', 'guidance', 'outlook',
'trend' or similar words. These statements discuss future expectations or
performance, or provide other forward-looking information.
Forward-looking statements are based on management's expectations and reflect
judgements, assumptions, estimates and other information available, as at the
date made. BHP cautions against reliance on any forward-looking statements.
These statements do not represent guarantees or predictions of future
financial or operational performance and involve known and unknown risks,
uncertainties and other factors, many of which are beyond our control and
which may cause actual results to differ materially from those expressed in
the statements contained in this release.
For example, our future revenues from our assets, projects or mines described
in this release will be based, in part, on the market price of the commodities
produced, which may vary significantly from current levels. These variations,
if materially adverse, may affect the timing or the feasibility of the
development of a particular project, the expansion of certain facilities or
mines, or the continuation of existing assets.
In addition, there are limitations with respect to scenario analysis,
including any climate-related scenario analysis, and it is difficult to
predict which, if any, of the scenarios might eventuate. Scenario analysis is
not an indication of probable outcomes and relies on assumptions that may or
may not prove to be correct or eventuate.
Other factors that may affect the actual construction or production
commencement dates, revenues, costs or production output and anticipated lives
of assets, mines or facilities include our ability to profitably produce and
deliver the products extracted to applicable markets; the impact of economic
and geopolitical factors, including foreign currency exchange rates on the
market prices of the commodities we produce and competition in the markets in
which we operate; activities of government authorities in the countries where
we sell our products and in the countries where we are exploring or developing
projects, facilities or mines, including increases in taxes and royalties or
implementation of trade or export restrictions; changes in environmental and
other regulations, political or geopolitical uncertainty; labour unrest;
weather, climate variability or other manifestations of climate change; and
other factors identified in the risk factors discussed in OFR 8.1 in the
Annual Report (https://www.bhp.com/AR2023_page75) and BHP's filings with the
U.S. Securities and Exchange Commission (the 'SEC') (including in Annual
Reports on Form 20-F) which are available on the SEC's website at www.sec.gov
(http://www.sec.gov) .
Except as required by applicable regulations or by law, BHP does not undertake
to publicly update or review any forward-looking statements, whether as a
result of new information or future events.
Past performance cannot be relied on as a guide to future performance.
25
BHP | Financial results for the half year ended 31 December 2023
No offer of securities
Nothing in this release should be construed as either an offer, or a
solicitation of an offer, to buy or sell BHP securities in any jurisdiction,
or be treated or relied upon as a recommendation or advice by BHP.
Reliance on third party information
The views expressed in this release contain information that has been derived
from publicly available sources that have not been independently verified. No
representation or warranty is made as to the accuracy, completeness or
reliability of the information. This release should not be relied upon as a
recommendation or forecast by BHP.
No financial or investment advice - South Africa
BHP does not provide any financial or investment 'advice' as that term is
defined in the South African Financial Advisory and Intermediary Services Act,
37 of 2002, and we strongly recommend that you seek professional advice.
Emissions and energy consumption data
Due to the inherent uncertainty and limitations in measuring greenhouse gas
(GHG) emissions and operational energy consumption under the calculation
methodologies used in the preparation of such data, all GHG emissions and
operational energy consumption data or references to GHG emissions and
operational energy consumption volumes (including ratios or percentages) in
this Report are estimates. There may also be differences in the manner that
third parties calculate or report GHG emissions or operational energy
consumption data compared to BHP, which means third-party data may not be
comparable to our data. For information on how we calculate our GHG emissions
and operational energy consumption data refer to the BHP Scopes 1, 2 and 3 GHG
Emissions Calculation Methodology 2023 available at bhp.com/climate.
BHP and its subsidiaries
In this release, the terms 'BHP', the 'Company, the 'Group', 'BHP Group', 'our
business', 'organisation', 'we', 'us', 'our' and ourselves' refer to BHP Group
Limited and, except where the context otherwise requires, our subsidiaries.
Refer to note 30 'Subsidiaries' (https://www.bhp.com/AR2023_page188) of the
Financial Statements in the Annual Report for a list of our significant
subsidiaries. Those terms do not include non-operated assets.
This release covers BHP's functions and assets (including those under
exploration, projects in development or execution phases, sites and closed
operations) that have been wholly owned and/or operated by BHP or that have
been owned as a joint venture(1) operated by BHP (referred to in this release
as 'operated assets' or 'operations') during the period from 1 July 2023 to 31
December 2023.
BHP also holds interests in assets that are owned as a joint venture but not
operated by BHP (referred to in this release as 'non-operated joint ventures'
or 'non-operated assets'). Notwithstanding that this release may include
production, financial and other information from non-operated assets,
non-operated assets are not included in the BHP Group and, as a result,
statements regarding our operations, assets and values apply only to our
operated assets unless stated otherwise.
1 References in this release 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.
26
BHP | Financial results for the half year ended 31 December 2023
Further information on BHP can be found at bhp.com (http://www.bhp.com/)
Authorised for lodgement by:
The Board of BHP Group Limited
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27
Financial Report
Half year ended
31 December 2023
28
Contents
Half Year Financial Statements
Page
Consolidated Income Statement for the half year ended 31 December 2023
(#_Toc158894068) (#_Toc158894068)
29
Consolidated Statement of Comprehensive Income for the half year ended 31
December 2023 (#_Toc158894069) (#_Toc158894069) 29
Consolidated Balance Sheet as at 31 December 2023 (#_Toc158894070)
(#_Toc158894070)
30
Consolidated Cash Flow Statement for the half year ended 31 December 2023
(#_Toc158894071) (#_Toc158894071)
31
Consolidated Statement of Changes in Equity for the half year ended 31
December 2023 (#_Toc158894072) (#_Toc158894072)
32
Notes to the Financial Statements (#_Toc158894073) (#_Toc158894073)
33
1. Basis of preparation (#_Toc158894074) (#_Toc158894074)
33
2. Exceptional items (#_Toc158894075) (#_Toc158894075)
33
3. Interests in associates and joint venture entities (#_Toc158894076)
(#_Toc158894076)
34
4. Net finance costs (#_Toc158894077) (#_Toc158894077)
35
5. Income tax expense (#_Toc158894078) (#_Toc158894078)
36
6. Earnings per share (#_Toc158894079) (#_Toc158894079)
37
7. Dividends (#_Toc158894080) (#_Toc158894080)
38
8. Financial risk management - Fair values (#_Toc158894081)
(#_Toc158894081)
39
9. Significant events - Samarco dam failure (#_Toc158894082)
(#_Toc158894082)
41
10. Business combinations (#_Toc158894083) (#_Toc158894083)
48
11. Assets and liabilities directly associated with assets held for sale
(#_Toc158894084) (#_Toc158894084) 48
12. Subsequent events (#_Toc158894085) (#_Toc158894085)
48
Directors' Report (#_Toc158894086) (#_Toc158894086)
49
Directors' Declaration of Responsibility
(#_Toc158894093) 51
Auditor's Independence Declaration to the Directors of BHP Group Limited
(#_Toc158894094) (#_Toc158894094)
52
Independent Review Report (#_Toc158894095) (#_Toc158894095)
53
29
Consolidated Income Statement for the half year ended 31 December 2023
Notes Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2023 2022 2023
US$M US$M US$M
Revenue 27,232 25,713 53,817
Other income 261 269 394
Expenses excluding net finance costs (19,982) (15,429) (31,873)
(Loss)/profit from equity accounted investments, related impairments and 3 (2,708) 280 594
expenses
Profit from operations 4,803 10,833 22,932
Financial expenses (1,164) (863) (2,060)
Financial income 343 211 529
Net finance costs 4 (821) (652) (1,531)
Profit before taxation 3,982 10,181 21,401
Income tax expense (2,215) (3,038) (6,691)
Royalty-related taxation (net of income tax benefit) (61) (17) (386)
Total taxation expense 5 (2,276) (3,055) (7,077)
Profit after taxation 1,706 7,126 14,324
Attributable to non-controlling interests 779 669 1,403
Attributable to BHP shareholders 927 6,457 12,921
Basic earnings per ordinary share (cents) 6 18.3 127.5 255.2
Diluted earnings per ordinary share (cents) 6 18.3 127.3 254.7
The accompanying notes form part of this half year Financial Report.
Consolidated Statement of Comprehensive Income for the half year ended 31
December 2023
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2023 2022 2023
US$M US$M US$M
Profit after taxation 1,706 7,126 14,324
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Hedges:
Gains/(losses) taken to equity 114 100 95
(Gains)/losses transferred to the income statement (92) (125) (148)
Loss transferred to initial carrying amount of hedged item − − 35
Tax recognised within other comprehensive income (7) 8 5
Total items that may be reclassified subsequently to the income statement 15 (17) (13)
Items that will not be reclassified to the income statement:
Re-measurement gains/(losses) on pension and medical schemes 2 6 (18)
Equity investments held at fair value (47) (7) 17
Tax recognised within other comprehensive income − − 7
Total items that will not be reclassified to the income statement (45) (1) 6
Total other comprehensive (loss)/income (30) (18) (7)
Total comprehensive income 1,676 7,108 14,317
Attributable to non-controlling interests 779 669 1,400
Attributable to BHP shareholders 897 6,439 12,917
The accompanying notes form part of this half year Financial Report.
30
Consolidated Balance Sheet as at 31 December 2023
31 Dec 2023 30 June 2023
US$M US$M
ASSETS
Current assets
Cash and cash equivalents 10,319 12,428
Trade and other receivables 5,352 4,594
Other financial assets 607 470
Inventories 5,313 5,220
Assets held for sale 11 1,570 −
Current tax assets 446 508
Other 193 131
Total current assets 23,800 23,351
Non-current assets
Trade and other receivables 169 148
Other financial assets 1,050 1,115
Inventories 1,426 1,403
Property, plant and equipment 69,994 71,818
Intangible assets 1,615 1,610
Investments accounted for using the equity method 1,618 1,620
Deferred tax assets 76 56
Other 240 175
Total non-current assets 76,188 77,945
Total assets 99,988 101,296
LIABILITIES
Current liabilities
Trade and other payables 6,092 6,296
Interest bearing liabilities 2,839 7,173
Liabilities directly associated with the assets held for sale 11 752 −
Other financial liabilities 712 402
Current tax payable 290 611
Provisions 4,405 4,514
Deferred income 85 47
Total current liabilities 15,175 19,043
Non-current liabilities
Trade and other payables 42 4
Interest bearing liabilities 19,565 15,172
Other financial liabilities 1,607 2,157
Non-current tax payable 39 68
Deferred tax liabilities 3,325 4,299
Provisions 14,594 11,973
Deferred income 50 50
Total non-current liabilities 39,222 33,723
Total liabilities 54,397 52,766
Net assets 45,591 48,530
EQUITY
Share capital 4,819 4,737
Treasury shares (33) (41)
Reserves (26) 13
Retained earnings 36,632 39,787
Total equity attributable to BHP shareholders 41,392 44,496
Non-controlling interests 4,199 4,034
Total equity 45,591 48,530
The accompanying notes form part of this half year Financial Report.
31
Consolidated Cash Flow Statement for the half year ended 31 December 2023
Notes Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2023 2022 2023
US$M US$M US$M
Operating activities
Profit before taxation 3,982 10,181 21,401
Adjustments for:
Depreciation and amortisation expense 2,629 2,456 5,061
Impairments of property, plant and equipment, financial assets and intangibles 3,513 21 75
Net finance costs 821 652 1,531
Loss/(profit) from equity accounted investments, related impairments and 2,708 (280) (594)
expenses
Other 290 258 546
Changes in assets and liabilities:
Trade and other receivables (763) 888 867
Inventories (255) (53) (44)
Trade and other payables (33) (1,598) (1,086)
Provisions and other assets and liabilities (519) (399) 131
Cash generated from operations 12,373 12,126 27,888
Dividends received 199 75 347
Interest received 352 218 545
Interest paid (800) (434) (1,090)
Proceeds from cash management related instruments 311 274 331
Net income tax and royalty-related taxation refunded 175 55 232
Net income tax and royalty-related taxation paid (3,726) (5,544) (9,552)
Net operating cash flows 8,884 6,770 18,701
Investing activities
Purchases of property, plant and equipment (4,545) (2,871) (6,733)
Exploration and evaluation expenditure (199) (156) (350)
Exploration and evaluation expenditure expensed and included in operating cash 170 127 294
flows
Investment in subsidiaries, operations and joint operations, net of cash − − (5,868)
Net investment and funding of equity accounted investments (474) (369) (557)
Proceeds from sale of assets 59 81 444
Proceeds from sale of subsidiaries, operations and joint operations net of 55 74 82
their cash
Other investing (145) (175) (377)
Net investing cash flows (5,079) (3,289) (13,065)
Financing activities
Proceeds from interest bearing liabilities 4,991 350 8,182
Settlements of debt related instruments A − (383) (677)
Repayment of interest bearing liabilities A (6,315) (1,690) (3,289)
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts − (1) (88)
Dividends paid (4,045) (8,660) (13,268)
Dividends paid to non-controlling interests (614) (527) (1,175)
Net financing cash flows (5,983) (10,911) (10,315)
Net (decrease)/increase in cash and cash equivalents (2,178) (7,430) (4,679)
Cash and cash equivalents, net of overdrafts, at the beginning of the period 12,423 17,236 17,236
Foreign currency exchange rate changes on cash and cash equivalents 74 (201) (134)
Cash and cash equivalents, net of overdrafts, at the end of the period 10,319 9,605 12,423
The accompanying notes form part of this half year Financial Report.
32
Consolidated Statement of Changes in Equity for the half year ended 31
December 2023
Attributable to BHP shareholders
US$M Share capital Treasury shares Reserves Retained Total equity Non- Total
earnings attributable controlling equity
to BHP interests
shareholders
Balance as at 1 July 2023 4,737 (41) 13 39,787 44,496 4,034 48,530
Total comprehensive income − − (32) 929 897 779 1,676
Transactions with owners:
BHP Group Limited shares issued(1) 82 (82) − − − − −
Purchase of shares by ESOP Trusts − − − − − − −
Employee share awards exercised net of employee contributions net of tax − 90 (71) (19) − − −
Vested employee share awards that have lapsed, been cancelled or forfeited − − − − − − −
Accrued employee entitlement for unexercised awards net of tax − − 64 − 64 − 64
Dividends − − − (4,065) (4,065) (614) (4,679)
Balance as at 31 December 2023 4,819 (33) (26) 36,632 41,392 4,199 45,591
Balance as at 1 July 2022 4,638 (31) 12 40,338 44,957 3,809 48,766
Total comprehensive income − − (24) 6,463 6,439 669 7,108
Transactions with owners:
BHP Group Limited shares issued(1) 99 (99) − − − − −
Purchase of shares by ESOP Trusts − (1) − − (1) − (1)
Employee share awards exercised net of employee contributions net of tax − 111 (80) (31) − − −
Vested employee share awards that have lapsed, been cancelled or forfeited − − − − − − −
Accrued employee entitlement for unexercised awards net of tax − − 64 − 64 − 64
Dividends − − − (8,858) (8,858) (527) (9,385)
Balance as at 31 December 2022 4,737 (20) (28) 37,912 42,601 3,951 46,552
1 During the period, BHP Group Limited issued 2,919,231 fully paid
ordinary shares to the BHP Group Limited Employee Equity Trust and to Solium
Capital (Australia) Pty Ltd at A$43.52 per share (31 December 2022: 3,497,366
fully paid ordinary shares at A$40.51 per share), to satisfy the vesting of
employee share awards and related dividend equivalent entitlements under those
employee share plans.
The accompanying notes form part of this half year Financial Report.
33
Notes to the Financial Statements
1. Basis of preparation
This general purpose Financial Report for the half year ended 31 December 2023
is unaudited and has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as issued by the International Accounting Standards Board
(IASB) and AASB 134 'Interim Financial Reporting' as issued by the Australian
Accounting Standards Board (AASB) and the Australian Corporations Act 2001 as
applicable to interim financial reporting. The general purpose Financial
Report for the half year ended 31 December 2023 does not include all of the
notes of the type normally included in an annual report. Accordingly, this
report should be read in conjunction with the annual consolidated Financial
Statements for the year ended 30 June 2023 and any public announcements made
by the Group in accordance with the continuous disclosure obligations of the
ASX Listing Rules.
Segment Reporting disclosures from IAS 34/AASB 134 'Interim Financial
Reporting' have been disclosed within the Financial performance summary on
pages 20 and 21 outside of this Financial Report.
The half year Financial Statements have been prepared on a basis of accounting
policies and methods of computation consistent with those applied in the 30
June 2023 annual consolidated Financial Statements contained within the Annual
Report of the Group, with the exception of new accounting standards that
became effective for the Group from 1 July 2023. The adoption of these new
accounting standards has not had a significant impact on the Group. A number
of accounting standards and interpretations have been issued, and will be
applicable in future periods. While these remain subject to ongoing
assessment, no significant impacts have been identified to date. These
standards have not been applied in the preparation of these half year
Financial Statements.
All amounts are expressed in US dollars unless otherwise stated. The Group's
presentation currency and the functional currency of the majority of its
operations is US dollars as this is the principal currency of the economic
environment in which it operates. Amounts in this Financial Report have,
unless otherwise indicated, been rounded to the nearest million dollars.
The Directors have made an assessment of the Group's ability to continue as a
going concern for the 12 months from the date of this report and consider it
appropriate to adopt the going concern basis of accounting in preparing the
half year Financial Statements.
2. Exceptional items
Exceptional items are those gains or losses where their nature, including the
expected frequency of the events giving rise to them, and impact is considered
material to the Financial Statements. Such items included within the Group's
profit for the half year are detailed below.
Half year ended 31 December 2023 Gross Tax Net
US$M US$M US$M
Exceptional items by category
Samarco dam failure (3,120) (53) (3,173)
Impairment of Western Australia Nickel assets (3,500) 1,031 (2,469)
Total (6,620) 978 (5,642)
Attributable to non-controlling interests − − −
Attributable to BHP shareholders (6,620) 978 (5,642)
Samarco Mineração SA (Samarco) dam failure
The loss of US$3,173 million (after tax) relates to the Samarco dam failure,
which occurred in November 2015, and comprises the following:
Half year ended 31 December 2023 US$M
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to (54)
the Samarco dam failure
(Loss)/profit from equity accounted investments, related impairments and
expenses:
Samarco dam failure provision (2,982)
Fair value change on forward exchange derivatives 106
Net finance costs (190)
Income tax expense (53)
Total(1) (3,173)
1 Refer to note 9 'Significant events - Samarco dam failure' for
further information.
34
Western Australia Nickel impairment
The Group determined that the overall recoverable amount of the Western
Australia Nickel cash generating unit (CGU) to be approximately negative
US$700 million including closure provisions, resulting in an impairment to
property, plant and equipment of US$3,437 million and intangible assets of
US$63 million. The impairment is predominantly driven by lower nickel price
assumptions, uncertainty in the short-term and medium-term outlook for nickel,
escalation in capital costs for Western Australia Nickel, and changes to the
development plans for Western Australia Nickel. The Western Australia Nickel
CGU is part of the 'Group and unallocated items' reportable segment.
The post-impairment carrying value of Western Australia Nickel property, plant
and equipment is not material.
Recoverable amount used for the impairment assessment was determined using a
fair value less costs of disposal (FVLCD) methodology, applying discounted
cash flow techniques utilising a post-tax real discount rate of 7.5% per cent.
FVLCD may take into consideration market-based indicators of fair value. FVLCD
is based primarily on Level 3 inputs as defined in note 8 'Financial risk
management - Fair values'.
The exceptional items relating to the half year ended 31 December 2022 and the
year ended 30 June 2023 are detailed below.
Half year ended 31 December 2022 Gross Tax Net
US$M US$M US$M
Exceptional items by category
Samarco dam failure (142) 2 (140)
Total (142) 2 (140)
Attributable to non-controlling interests − − −
Attributable to BHP shareholders (142) 2 (140)
Year ended 30 June 2023 Gross Tax Net
US$M US$M US$M
Exceptional items by category
Samarco dam failure (340) 17 (323)
Chilean tax reform − (283) (283)
Total (340) (266) (606)
Attributable to non-controlling interests − (107) (107)
Attributable to BHP shareholders (340) (159) (499)
3. Interests in associates and joint venture entities
The Group's major shareholdings in associates and joint venture entities,
including their profit/(loss), are listed below:
Ownership interest at the Group's reporting date (Loss)/profit from equity accounted investments, related impairments and
expenses
31 Dec 31 Dec 30 June Half year Half year Year
2023 2022 2023 ended ended ended
% % % 31 Dec 31 Dec 30 June
2023 2022 2023
US$M US$M US$M
Share of profit/(loss) of equity accounted investments:
Compañia Minera Antamina SA 33.75 33.75 33.75 224 185 451
Samarco Mineração SA(1) 50.00 50.00 50.00 − − −
Other (56) (32) (72)
Share of profit of equity accounted investments 168 153 379
Samarco dam failure provision(1) (2,982) 18 (256)
Fair value change on forward exchange derivatives(1) 106 109 471
(Loss)/profit from equity accounted investments, related impairments and (2,708) 280 594
expenses
1 Refer to note 9 'Significant events - Samarco dam failure' for
further information.
35
4. Net finance costs
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2023 2022 2023
US$M US$M US$M
Financial expenses
Interest expense using the effective interest rate method:
Interest on bank loans, overdrafts and all other borrowings 764 487 997
Interest capitalised at 6.79% (31 December 2022: 5.20%; 30 June 2023: (217) (114) (271)
5.71%)(1)
Interest on lease liabilities 81 62 130
Discounting on provisions and other liabilities 479 613 1,293
Other gains and losses:
Fair value change on hedged loans 345 (754) (803)
Fair value change on hedging derivatives (323) 659 691
Exchange variations on net debt 35 (90) 9
Other − − 14
Total financial expenses 1,164 863 2,060
Financial income
Interest income (343) (211) (529)
Net finance costs 821 652 1,531
1 Interest has been capitalised at the rate of interest applicable
to the specific borrowings financing the assets under construction or, where
financed through general borrowings, at a capitalisation rate representing the
average interest rate on such borrowings.
36
5. Income tax expense
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2023 2022 2023
US$M US$M US$M
Total taxation expense comprises:
Current tax expense 3,271 2,738 6,690
Deferred tax (benefit)/expense (995) 317 387
Total taxation expense 2,276 3,055 7,077
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2023 2022 2023
US$M US$M US$M
Factors affecting income tax expense for the year
Income tax expense differs to the standard rate of corporation tax as follows:
Profit before taxation 3,982 10,181 21,401
Tax on profit at Australian prima facie tax rate of 30 per cent 1,195 3,054 6,420
Tax effect of (loss)/profit from equity accounted investments, related 844 (52) (37)
impairments and expenses(1)
Derecognition of deferred tax assets and current year tax losses 237 162 526
Tax on remitted and unremitted foreign earnings 96 37 137
Amounts over provided in prior years (8) (5) (18)
Foreign exchange adjustments (29) 11 94
Recognition of previously unrecognised tax assets (73) (28) (109)
Impact of tax rates applicable outside of Australia (244) (189) (558)
Other 197 48 236
Income tax expense 2,215 3,038 6,691
Royalty-related taxation (net of income tax benefit)(2) 61 17 386
Total taxation expense 2,276 3,055 7,077
1 This item removes the prima facie tax effect on (loss)/profit from
equity accounted investments, related impairments and expenses that are net of
tax, with the exception of the Samarco forward exchange derivatives described
in note 3 'Interests in associates and joint venture entities' which are
taxable.
2 Includes the revaluation of deferred tax balances in the year
ended 30 June 2023, following the substantive enactment of the Chilean Royalty
Bill, as presented in note 2 'Exceptional items'.
37
6. Earnings per share
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2023 2022 2023
US$M US$M US$M
Earnings attributable to BHP shareholders (US$M)(1) 927 6,457 12,921
Weighted average number of shares (Million)
- Basic(2) 5,067 5,064 5,064
- Diluted(3) 5,078 5,073 5,073
Earnings per ordinary share (US cents)(4)
- Basic 18.3 127.5 255.2
- Diluted 18.3 127.3 254.7
Headline earnings per ordinary share (US cents)(5)
- Basic 67.0 127.9 256.1
- Diluted 66.9 127.7 255.7
1 Diluted earnings attributable to BHP shareholders are equal to
earnings attributable to BHP shareholders.
2 The calculation of the number of ordinary shares used in the
computation of basic earnings per share is the weighted average number of
ordinary shares of BHP Group Limited outstanding during the period after
deduction of the number of shares held by the BHP Group Limited Employee
Equity Trust.
3 For the purposes of calculating diluted earnings per share, the
effect of 11 million dilutive shares has been taken into account for the half
year ended 31 December 2023 (31 December 2022: 9 million shares; 30 June
2023: 9 million shares). The Group's only potential dilutive ordinary shares
are share awards granted under employee share ownership plans. Diluted
earnings per share calculation excludes instruments which are considered
antidilutive.
At 31 December 2023, there are no instruments which are considered
antidilutive (31 December 2022: nil; 30 June 2023: nil).
4 Each American Depositary Share (ADS) represents twice the earnings
for BHP Group Limited ordinary share.
5 Headline earnings is a Johannesburg Stock Exchange defined
performance measure and is reconciled from earnings attributable to ordinary
shareholders as follows:
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2023 2022 2023
US$M US$M US$M
Earnings attributable to BHP shareholders 927 6,457 12,921
Adjusted for:
(Gain)/loss on sales of PP&E, Investments and Operations(i) (37) 2 (9)
Impairments of property, plant and equipment, financial assets and intangibles 3,530 21 75
Tax effect of above adjustments (1,023) (1) (17)
Subtotal of adjustments 2,470 22 49
Headline earnings 3,397 6,479 12,970
Diluted headline earnings 3,397 6,479 12,970
i Included in other income.
38
7. Dividends
Half year ended Half year ended Year ended
31 Dec 2023 31 Dec 2022 30 June 2023
Per share Total Per share Total Per share Total
US cents US$M US cents US$M US cents US$M
Dividends paid during the period
Prior year final dividend 80.0 4,065 175.0 8,858 175.0 8,858
Interim dividend N/A − N/A − 90.0 4,562
80.0 4,065 175.0 8,858 265.0 13,420
Dividends paid during the period differs from the amount of dividends paid in
the Consolidated 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$23 million was
made as part of the funding of the final dividend paid during the period and
is disclosed in 'Proceeds from cash management related instruments' in the
Consolidated Cash Flow Statement.
Each American Depositary Share (ADS) represents two ordinary shares of BHP
Group Limited. Dividends determined on each ADS represent twice the dividend
determined on each BHP Group Limited ordinary share.
Dividends are determined after period-end and announced with the results for
the period. Interim dividends are determined in February and paid in March.
Final dividends are determined in August and paid in September. Dividends
determined are not recorded as a liability at the end of the period to which
they relate. Subsequent to the half year, on 20 February 2024, BHP Group
Limited determined an interim ordinary dividend of 72 US cents per share
(US$3,649 million), which will be paid on 28 March 2024 (31 December 2022:
interim dividend of 90 US cents per share - US$4,559 million; 30 June 2023:
final dividend of 80 US cents per share - US$4,052 million).
BHP Group Limited dividends for all periods presented are, or will be, fully
franked based on a tax rate of 30 per cent.
39
8. Financial risk management - Fair values
Recognition and measurement
All financial assets and liabilities, other than derivatives and trade
receivables, are initially recognised at the fair value of consideration paid
or received, net of transaction costs as appropriate. Financial assets are
initially recognised on their trade date.
Financial assets are subsequently carried at fair value or amortised cost
based on:
· the Group's purpose, or business model, for holding the financial asset;
· whether the financial asset's contractual terms give rise to cash flows
that are solely payments of principal and interest.
The resulting Financial Statements classifications of financial assets can be
summarised as follows:
Contractual cash flows Business model 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 which are measured at fair value through profit or
loss under IFRS 9/AASB 9 'Financial Instruments'.
The Group has the intention of collecting payment directly from its customers
in most cases, however the Group also participates in receivables financing
programs in respect of selected customers. Receivables in these portfolios
which are classified as 'hold in order to sell', are provisionally priced
receivables and are therefore held at fair value through profit or loss prior
to sale to the financial institution.
With the exception of derivative contracts and provisionally priced trade
payables which are carried at fair value through profit or loss, 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.
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
according to the designation of the underlying instrument.
For financial assets and liabilities carried at fair value, the Group uses the
following to categorise the inputs to the valuation 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 inputs Based on quoted prices (unadjusted) in active markets for identical financial Based on inputs other than quoted prices included within Level 1 that are Based on inputs not observable in the market using appropriate valuation
assets and liabilities. observable for the financial asset or liability, either directly (i.e. as models, including discounted cash flow modelling.
unquoted prices) or indirectly (i.e. derived from prices).
40
Financial assets and liabilities
The financial assets and liabilities are presented by class in the table below
at their carrying amounts.
IFRS 13 Fair value hierarchy level(1) IFRS 9 Classification 31 Dec 30 June
2023 2023
US$M US$M
Current cross currency and interest rate swaps(2) 2 Fair value through profit or loss 40 34
Current other derivative contracts(3) 2,3 Fair value through profit or loss 281 407
Current other financial assets(4) 3 Fair value through profit or loss 251 −
Current other investments(5) 1,2 Fair value through profit or loss 35 29
Non-current cross currency and interest rate swaps(2) 2 Fair value through profit or loss 318 149
Non-current other derivative contracts(3) 2,3 Fair value through profit or loss 179 228
Non-current other financial assets(4) 3 Fair value through profit or loss − 246
Non-current other financial assets(6) Amortised cost 130 −
Non-current investment in shares 1,3 Fair value through other comprehensive income 181 224
Non-current other investments(5) 1,2 Fair value through profit or loss 242 268
Total other financial assets 1,657 1,585
Cash and cash equivalents Amortised cost 10,319 12,428
Trade and other receivables(7) Amortised cost 1,919 1,506
Provisionally priced trade receivables 2 Fair value through profit or loss 3,007 2,705
Total financial assets 16,902 18,224
Non-financial assets 83,086 83,072
Total assets 99,988 101,296
Current cross currency and interest rate swaps(2) 2 Fair value through profit or loss 316 147
Current other derivative contracts 2 Fair value through profit or loss 325 176
Current other financial liabilities(8) Amortised cost 71 79
Non-current cross currency and interest rate swaps(2) 2 Fair value through profit or loss 1,225 1,608
Non-current other derivative contracts(3) 2,3 Fair value through profit or loss 14 82
Non-current other financial liabilities(8) Amortised cost 368 467
Total other financial liabilities 2,319 2,559
Trade and other payables(9) Amortised cost 5,429 5,338
Provisionally priced trade payables 2 Fair value through profit or loss 591 841
Bank overdrafts and short-term borrowings(10) Amortised cost − 5
Bank loans(10) Amortised cost 2,543 7,502
Notes and debentures(10) Amortised cost 16,209 11,819
Lease liabilities(11) 3,578 3,019
Other(10) Amortised cost 74 −
Total financial liabilities 30,743 31,083
Non-financial liabilities 23,654 21,683
Total liabilities 54,397 52,766
1 All of the Group's financial assets and financial liabilities
recognised at fair value were valued using market observable inputs
categorised as Level 2 unless specified otherwise in the following footnotes.
2 Cross currency and interest rate swaps are valued using market
data including interest rate curves and foreign exchange rates. A discounted
cash flow approach is used to derive the fair value of cross currency and
interest rate swaps at the reporting date.
3 Includes net other derivative assets of US$90 million related to
power purchase contract agreements that are categorised as Level 3 (30 June
2023: US$46 million).
4 Includes receivables contingent on future coal price and on
outcome of future events relating to mining and regulatory approvals of US$251
million (30 June 2023: US$246 million).
5 Includes investments held by BHP Foundation which are restricted
and not available for general use by the Group of US$271 million (30 June
2023: US$290 million) of which other investments (mainly US Treasury Notes) of
US$133 million is categorised as Level 1 (30 June 2023: US$138 million).
6 Includes Senior notes relating to Samarco with a maturity date of
30 June 2031. Refer to note 9 'Significant events - Samarco dam failure' for
further information.
7 Excludes input taxes of US$595 million (30 June 2023: US$531
million) included in other receivables.
8 Includes the discounted settlement liability in relation to the
cancellation of power contracts at the Group's Escondida operations.
9 Excludes input taxes of US$114 million (30 June 2023: US$121
million) included in other payables.
10 All interest bearing liabilities, excluding lease liabilities, are
unsecured.
11 Lease liabilities are measured in accordance with IFRS 16/AASB 16
'Leases'.
41
The carrying amounts in the table above generally approximate to fair value.
In the case of US$533 million (30 June 2023: US$534 million) of fixed rate
debt not swapped to floating rate, the fair value at 31 December 2023 was
US$550 million (30 June 2023: US$538 million). The fair value is
determined using a method that can be categorised as Level 2 and uses inputs
based on benchmark interest rates, alternative market mechanisms or recent
comparable transactions.
For financial instruments that are carried at fair value on a recurring basis,
the Group determines whether transfers have occurred between levels in the
fair value hierarchy by reassessing categorisation at the end of each
reporting period. There were no transfers between categories during the
period.
9. Significant events - Samarco dam failure
As a result of the Samarco dam failure on 5 November 2015, BHP Billiton Brasil
Ltda (BHP Brasil) and other Group entities continue to incur costs and
maintain liabilities for future costs. The information presented in this note
should be read in conjunction with section 7 'Samarco', Financial Statements
note 4 'Significant events - Samarco dam failure' and Additional information
section 8 'Legal proceedings' in the 30 June 2023 Annual Report.
The financial impacts of the Samarco dam failure on the Group's income
statement, balance sheet and cash flow statement for the half year ended 31
December 2023 are shown below and have been treated as an exceptional item.
Financial impacts of Samarco dam failure Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2023 2022 2023
US$M US$M US$M
Income statement
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to (54) (47) (103)
the Samarco dam failure(1)
(Loss)/profit from equity accounted investments, related impairments and
expenses:
Samarco dam failure provision(2) (2,982) 18 (256)
Fair value change on forward exchange derivatives(3) 106 109 471
(Loss)/profit from operations (2,930) 80 112
Net finance costs(4) (190) (222) (452)
Loss before taxation (3,120) (142) (340)
Income tax (expense)/benefit(5) (53) 2 17
Loss after taxation (3,173) (140) (323)
Balance sheet movement
Other financial assets(6) 130 − −
Trade and other payables (12) − (6)
Derivatives (36) 83 337
Tax liabilities (53) 2 17
Provisions (2,851) 135 (260)
Net (increase)/decrease in liabilities (2,822) 220 88
42
Half year ended Half year ended Year ended
31 Dec 2023 31 Dec 2022 30 June 2023
US$M US$M US$M
Cash flow statement
Loss before taxation (3,120) (142) (340)
Adjustments for:
Samarco dam failure provision(2) 2,982 (18) 256
Fair value change on forward exchange derivatives(3) (106) (109) (471)
Proceeds from cash management related instruments 142 26 134
Net finance costs(4) 190 222 452
Changes in assets and liabilities:
Trade and other payables 12 − 6
Net operating cash flows 100 (21) 37
Net investment and funding of equity accounted investments(7) (446) (339) (448)
Net investing cash flows (446) (339) (448)
Net decrease in cash and cash equivalents (346) (360) (411)
1 Includes legal and advisor costs incurred.
2 US$3,000 million (31 December 2022: US$(33) million; 30 June 2023:
US$(33) million) change in estimate and US$(18) million (31 December 2022:
US$15 million; 30 June 2023: US$289 million) exchange translation.
3 The Group enters into forward exchange contracts to limit the
Brazilian reais exposure on the dam failure provisions. While not applying
hedge accounting, the fair value changes in the forward exchange instruments
are recorded within (Loss)/profit from equity accounted investments, related
impairments and expenses in the Income Statement.
4 Amortisation of discounting of provision.
5 Includes tax on forward exchange derivatives and other taxes
incurred during the period.
6 Senior notes relating to the Judicial Reorganisation (JR),
described below, with a maturity date of 30 June 2031.
7 Includes US$(321) million (31 December 2022: US$(339) million; 30
June 2023: US$(448) million) utilisation of the Samarco dam failure provision
and US$(125) million provided to Samarco following approval of the JR (31 Dec
2022: US$ nil; 30 June 2023: US$ nil) which subsequently converted into the
Senior notes referred to in footnote 6, inclusive of accrued interest.
Equity accounted investment in Samarco
BHP Brasil's investment in Samarco remains at US$ nil. No dividends have been
received by BHP Brasil from Samarco during the period and Samarco currently
does not have profits available for distribution.
Provision related to the Samarco dam failure
31 Dec 2023 30 June 2023
US$M US$M
At the beginning of the reporting period 3,681 3,421
Movement in provisions 2,851 260
Comprising:
Utilised (321) (448)
Adjustments charged to the income statement:
Change in cost estimate 3,000 (33)
Amortisation of discounting impacting net finance costs 190 452
Exchange translation (18) 289
At the end of the reporting period 6,532 3,681
Comprising:
Current 1,871 1,876
Non-current 4,661 1,805
At the end of the reporting period 6,532 3,681
Samarco dam failure provision and contingencies
As at 31 December 2023, BHP Brasil has identified a provision and certain
contingent liabilities arising as a consequence of the Samarco dam failure.
The provision related to the Samarco dam failure recognised as at 31 December
2023 is US$6,532 million and reflects the Group's best estimate of the
potential outflows necessary to resolve all aspects of the Federal Public
Prosecution Office BRL$155 billion claim and Framework Agreement obligations
(see below).
Contingent liabilities will only be resolved when one or more uncertain future
events occur or related impacts become capable of reliable measurement and, as
such, determination of contingent liabilities disclosed in the financial
statements requires significant judgement regarding the outcome of future
events. A number of the claims below do not specify the amount of damages
sought and, where this is specified, amounts could change as the matter
progresses.
Ultimately, future changes in all those matters for which a provision has been
recognised or contingent liability disclosed could have a material adverse
impact on BHP's business, competitive position, cash flows, prospects,
liquidity and shareholder returns.
43
The following table summarises the current status of significant ongoing
matters relating to the Samarco dam failure, along with developments during
the period, and the associated treatment in the Financial Statements:
Item Provision Contingent liability
Samarco dam failure - Framework Agreement
On 2 March 2016, BHP Brasil, Samarco and Vale S.A. (Vale) entered into a ü û
Framework Agreement with the Federal Government of Brazil, the states of
Espirito Santo and Minas Gerais, and certain other public authorities to
establish a foundation (Fundação Renova) that is developing and executing
environmental and socio-economic programs (Programs) to remediate and provide
compensation for damage caused by the Samarco dam failure (the Framework
Agreement).
Key programs include those for financial assistance and compensation of
impacted persons and those for remediation of impacted areas and resettlement
of impacted communities.
Samarco has primary responsibility for funding Fundação Renova with each of
BHP Brasil and Vale having secondary funding obligations in proportion to
their 50 per cent shareholding in Samarco. While Samarco has recommenced
operations, Samarco's long-term cash flow generation remains highly sensitive
to factors including returning to full production capacity, commodity prices
and foreign exchange rates.
Further, under the Samarco Judicial Reorganisation (refer to Samarco Judicial
Reorganisation (JR) below), Samarco's funding of obligations to remediate and
compensate the damages resulting from the dam failure, including funding
Fundação Renova, is capped at US$1 billion for the period CY2024 to CY2030.
Notwithstanding this cap, and subject to certain conditions, to the extent
that Samarco each year has a positive cash balance after meeting its various
obligations, during this period Samarco's shareholders are able to direct 50
per cent of Samarco's year end excess cash balance to fund remediation and
compensation obligations.
Execution of the Programs is a key component in the resolution of the Federal
Public Prosecution Office claim (outlined below). Therefore, the expected cost
of completion of the Programs and Samarco's potential ability to contribute to
remediation and compensation obligations have been considered when determining
BHP Brasil's provision in relation to the Samarco dam failure at 31 December
2023.
Uncertainty exists around the scope and cost of the Programs, including as a
result of ongoing legal actions in relation to the number of individuals
eligible for compensation and the amount of damages to which they are
entitled. Further information on the key areas of estimation uncertainty is
provided in the 'Key judgements and estimates' section below.
Federal Public Prosecution Office claim
BHP Brasil is among the defendants named in a claim brought by the Brazilian ü û
Federal Public Prosecution Office on 3 May 2016, seeking R$155 billion
(approximately US$32 billion) for reparation, compensation and moral damages
in relation to the Samarco dam failure.
Since early CY2021, BHP Brasil, Samarco and, Vale have been engaging in
negotiations with the Brazilian State and Federal Government and other public
entities to seek a settlement of obligations under the Framework Agreement,
the Federal Public Prosecution Office Claim, and other claims by government
entities relating to the Samarco dam failure.
On 25 January 2024, the Federal Court of Brazil issued a decision in relation
to the Federal Public Prosecution Office Claim quantifying collective moral
damages arising from the Samarco dam failure. The decision found that Samarco,
Vale and BHP Brasil are jointly and severally liable to pay collective moral
damages in the amount of R$47.6 billion (US$9.75 billion) (to be adjusted for
interest and inflation) when any and all appeals are finally determined.
On 1 February 2024, Samarco, Vale and BHP Brasil filed a clarification motion
with the Federal Court of Brazil in respect of certain factual inaccuracies in
the decision, including the calculation of damages. A decision remains
pending.
BHP Brasil also intends to appeal the decision, challenging the merits and
amount of damages. The appeal process is estimated to take approximately two
to five years.
As at 30 June 2023, the Group disclosed a contingent liability in relation to
the Federal Public Prosecution Office claim as, given the status of the claim
and ongoing settlement negotiations, it was not possible to reliably estimate
the potential outcomes of the claim beyond the estimated costs of completing
the programs under the Framework Agreement, which are being executed in
relation to financial assistance and compensation of impacted persons,
remediation of impacted areas and resettlement of impacted communities.
The Group has considered the additional information available from the status
of settlement negotiations, the judicial decision regarding collective moral
damages, updates to the estimated costs of executing the Framework Agreement
programs, and the extent to which Samarco may be in a position to fund any
future outflows to increase the provision related to the Samarco dam failure
to US$6,532 million at 31 December 2023.
44
The provision at 31 December 2023 reflects the Group's best estimate of
outflows required to resolve all aspects of the Federal Public Prosecution
Office claim, being reparation, compensation and moral damages.
Significant uncertainty remains around the resolution of the Federal Public
Prosecution Office Claim and the Framework Agreement obligations, and there is
a risk that outcomes may be materially higher or lower than amounts reflected
in BHP Brasil's provision for the Samarco dam failure.
Key areas of uncertainty include the outcomes of appeals relating to the
judicial decision regarding collective moral damages, the terms of any
potential future settlement agreement in respect of the Federal Public
Prosecution Office claim and the extent to which Samarco is able to directly
fund any future obligations relating to reparation, compensation and moral
damages. Further information on the key areas of estimation uncertainty is
provided in the 'Key judgements and estimates' section below.
BHP Brasil, Samarco and Vale continue to maintain security, as required by a
Governance Agreement, ratified on 8 August 2018, with the security currently
comprising insurance bonds and a charge over certain Samarco assets.
Australian class action claim
BHP Group Limited is named as a defendant in a shareholder class action filed û ü
in the Federal Court of Australia on behalf of persons who acquired shares in
BHP Group Limited on the Australian Securities Exchange (ASX) or shares in BHP
Group Plc (now BHP Group (UK) Ltd) on the London Stock Exchange (LSE) and
Johannesburg Stock Exchange (JSE) in periods prior to the Samarco dam failure.
The amount of damages sought is unspecified.
United Kingdom group action claims
BHP Group (UK) Ltd (formerly BHP Group Plc) and BHP Group Limited (BHP û ü
Defendants) are named as defendants in group action claims for damages filed
in the courts of England. These claims were filed on behalf of certain
individuals, municipalities, businesses, faith-based institutions and
communities in Brazil allegedly impacted by the Samarco dam failure.
The amount of damages sought in these claims is unspecified. A trial in
relation to the BHP Defendant's liability for the dam failure is listed for
October 2024.
In December 2022, the BHP Defendants filed their defence and a contribution
claim against Vale. The contribution claim contends that if the BHP
Defendant's defence is not successful and the BHP Defendants are ordered to
pay damages to the claimants, Vale should contribute to any amount payable.
Vale contested the jurisdiction of the English courts to determine this
contribution claim on the basis that the Brazilian courts are a more
appropriate forum, with the court dismissing Vale's application on 7 August
2023. In November 2023, the English courts refused Vale's request for
permission to appeal that decision. Vale also challenged the jurisdiction of
the English courts on the basis that the claims are covered by an arbitration
clause and should be submitted to arbitration in Brazil. In December 2023, the
English courts dismissed Vale's arbitration challenge, and Vale has not sought
permission to appeal from that decision. Accordingly, the contribution claim
will proceed in the UK.
In January 2024, the BHP Defendants were served with a new group action filed
in the courts of England on behalf of additional individuals and businesses in
Brazil allegedly impacted by the Samarco dam failure. The new action makes
broadly the same claims as the original action and the amount of damages
sought in these claims is unspecified.
Criminal charges
The Federal Prosecutors' Office has filed criminal charges against BHP Brasil, û ü
Samarco and Vale and certain employees and former employees of BHP Brasil
(Affected Individuals) in the Federal Court of Ponte Nova, Minas Gerais.
BHP Brasil rejects outright the charges against the company and the Affected
Individuals and is defending itself from all charges while fully supporting
each of the Affected Individuals in their defence of the charges.
Civil public action commenced by Associations concerning the use of TANFLOC û ü
for water treatment
The Vila Lenira Residents Association, State of Espirito Santo Rural Producers
and Artisans Association, Colatina Velha Neighbourhood Residents Association,
and United for the Progress of Palmeiras Neighbourhood Association have filed
a lawsuit against Samarco, BHP Brasil and Vale and others, including the State
of Minas Gerais, the State of Espirito Santo and the Federal Government.
The plaintiffs allege that the defendants carried out a clandestine study on
the citizens of the locations affected by the Fundão Dam Failure, using
TANFLOC - a tannin-based flocculant/coagulant - that is currently used for
wastewater treatment applications. The plaintiffs claim that this product
allegedly put the population at risk due to its alleged experimental
qualities.
45
The plaintiffs are seeking multiple kinds of relief - material damages, moral
damages, loss of profits - and that the defendants should pay for water supply
in all locations where there is no water source other than the Doce River.
On 17 November 2023, the Court dismissed the case without prejudice on the
basis of a lack of standing by the Associations to sue and procedural
deficiencies in the complaint filed. The plaintiffs filed a motion for
clarification and a decision is pending.
Other claims
BHP Brasil is among the companies named as defendants in a number of legal û ü
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 reparation and
violations of Brazilian environmental and other laws, among other matters. The
lawsuits seek various remedies including reparation 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, studies and investigations relating to the
Samarco dam failure have been commenced by numerous agencies and individuals
of the Brazilian government and are ongoing.
Additional lawsuits and government investigations relating to the Samarco dam
failure could be brought against BHP Brasil and other Group entities in Brazil
or other jurisdictions.
The outcomes of these claims, investigations and proceedings remain uncertain
and continue to be disclosed as contingent liabilities.
Commitments
Under the terms of the Samarco joint venture agreement, BHP Brasil does not
have an existing obligation to fund Samarco.
However, BHP Brasil has agreed to fund a total of up to US$925 million for the
Fundação Renova programs during calendar year 2024. Any additional requests
for funding or future investment provided would be subject to a future
decision by BHP Brasil, accounted for at that time.
46
Samarco judicial reorganisation
Samarco filed for Judicial Reorganisation (JR) in April 2021, with the Second
Business State Court for the Belo Horizonte District of Minas Gerais, State of
Minas Gerais, Brazil (JR Court), following enforcement actions taken by
certain financial creditors of Samarco which threatened Samarco's operations.
The JR was an insolvency proceeding that provided a means for Samarco to
restructure its financial debts and establish a stable financial position to
allow Samarco to continue to rebuild its operations and strengthen its ability
to meet obligations in relation to reparation, compensation and moral damages
in relation to the Samarco dam failure. Samarco's operations continued during
the JR proceeding.
On 28 July 2023, Samarco and one of the financial creditors jointly filed a
consensual Judicial Reorganisation Plan (Consensual Plan) with the JR Court.
The parties also filed terms of adhesion that demonstrate approval of the
Consensual Plan by the majority of Samarco's creditors as required under
Brazilian Bankruptcy Law.
On 1 September 2023, the JR Court ratified the Consensual Plan. Following the
ratification, Samarco entered into definitive debt restructure agreements with
its financial creditors to implement the debt restructure, including the
exchange of Samarco's existing financial debt for US$3.6 billion of long-term
unsecured debt that matures in June 2031 and remains non-recourse to Samarco's
shareholders. Further, as part of the agreement Samarco issued Senior notes to
its Shareholders which also mature in June 2031.
The debt restructure does not impact Fundação Renova's ability to undertake
the Programs under the Framework Agreement. Samarco continues to have primary
responsibility for funding Fundação Renova and each of BHP Brasil and Vale
will continue to have secondary responsibility to fund 50% of Fundação
Renova if Samarco does not meet its funding obligations under the Framework
Agreement. Under the Consensual Plan, Samarco's funding obligation to
remediate and compensate the damages resulting from the dam failure, including
funding Fundação Renova, is capped at US$1 billion for the period CY2024 to
CY2030 (Renova Cap). Notwithstanding the Renova Cap, and subject to certain
conditions, to the extent that Samarco each year has a positive cash balance
after meeting its various obligations including operating capital
requirements, debt service and Renova Cap requirements, Samarco's shareholders
are able to direct 50% of Samarco's year end excess cash balance to fund
remediation and compensation obligations.
BHP Brasil has considered the extent to which Samarco may be in a position to
fund any future outflows, when determining the dam failure related provision
at 31 December 2023.
47
Key judgements and estimates
Judgements
The outcomes of litigation are inherently difficult to predict and significant
judgement has been applied in assessing the likely outcome of legal claims and
determining which legal claims require recognition of a provision or
disclosure of a contingent liability. The facts and circumstances relating to
these cases are regularly evaluated in determining whether a provision for any
specific claim is required.
Management has determined that a provision can be recognised at 31 December
2023 to reflect the estimated costs to resolve all aspects of the Federal
Public Prosecution Office claim and the Framework Agreement. 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 above, given their status.
Estimates
The provision for the Samarco dam failure reflects the Group's estimate of the
costs to resolve all aspects of the Federal Public Prosecution Office claim
and Framework Agreement and requires the use of significant judgements,
estimates and assumptions.
While the provision has been measured based on the latest information
available, changes in facts and circumstances are likely in future reporting
periods and may lead to material revisions to these estimates and there is a
risk that outcomes may be materially higher or lower than amounts currently
reflected in the provision. However, it is currently not possible to determine
what facts and circumstances may change, therefore revisions in future
reporting periods due to the key estimates and factors outlined below cannot
be reliably measured.
The key estimates that may have a material impact upon the provision in the
next and future reporting periods include the:
· the scope and cost of completing the programs under the Framework
Agreement, including as a result of ongoing legal actions in relation to the
number of people eligible for compensation and the amount of damages to which
they are entitled;
· the outcomes of appeals relating to the judicial decision regarding
collective moral damages, including any appeals that may be lodged by the
Brazilian Federal Public Prosecution Office;
· the terms of any potential future settlement agreement in respect of
the Federal Public Prosecution Office Claim, including amounts payable,
obligations of the parties to perform ongoing programs of work in relation to
reparation and compensation, and the period of time over which any settlement
amounts may be payable; and
· the extent to which Samarco is able to directly fund any future
obligations relating to reparation, compensation or moral damages. Samarco's
long-term cash flow generation remains highly sensitive to factors including
its ability to return to full production capacity, commodity prices and
foreign exchange rates.
The provision may also be affected by factors including but not limited to
updates to discount and foreign exchange rates.
In addition, the provision may be impacted by decisions in, or resolution of,
existing and potential legal claims in Brazil and other jurisdictions,
including the outcome of the United Kingdom group action claims and the
Australian class action.
Given these factors, future actual cash outflows may differ from the amounts
currently provided and changes to any of the key assumptions and estimates
outlined above could result in a material impact to the provision in the next
and future reporting periods.
48
10. Business combinations
On 2 May 2023 (Acquisition Date), the Group acquired 100 per cent of the
issued share capital of OZ Minerals Limited (OZL) for a net cash consideration
of US$5.9 billion. The terms of the acquisition did not include any contingent
consideration.
There have been no significant adjustments to the provisional fair values as
at 31 December 2023. Due to the size, complexity and timing of the
acquisition, the valuation process is ongoing and will be completed within 12
months of the acquisition.
Refer to note 29 of the 30 June 2023 annual consolidated Financial Statements
contained within the Annual Report of the Group for details of the
acquisition.
11. Assets and liabilities directly associated with assets held for sale
On 18 October 2023, the Group announced that BHP and Mitsubishi Development
Pty Ltd (MDP) had entered into an Asset Sale Agreement to divest the
Blackwater and Daunia mines (which are part of the BHP Mitsubishi Alliance
(BMA) metallurgical coal joint venture in Queensland) to Whitehaven Coal
(Buyer). Each of BHP and MDP hold a 50% interest in BMA.
The purchase price comprises US$2.1 billion cash on completion, US$1.1 billion
in cash over 3 years after completion and the potential for up to US$0.9
billion in a price-linked earnout payable over 3 years on a 100% interest
basis. Subject to the satisfaction of certain conditions, including customary
competition and regulatory requirements, transaction completion is expected to
occur in the June 2024 quarter. The Buyer has paid a US$100 million deposit
(US$50 million BHP share) on signing which BHP and MDP are entitled to retain
in certain limited circumstances if the proposed divestment is terminated.
BMA will continue to operate the assets until completion. The Buyer will
assume economic and operating control of the Blackwater and Daunia mines on
completion of the sale, including all current and future environmental
liabilities and rehabilitation obligations.
At 31 December 2023, the Group's share of assets and liabilities have been
classified as 'Assets held for sale' and 'Liabilities directly associated with
the assets held for sale'. Blackwater and Daunia mines are not considered to
meet the criteria for classification as a discontinued operation given their
relative size to the Group and the Coal segment.
The assets and liabilities classified as current assets and liabilities held
for sale are presented in the table below:
31 Dec 2023
US$M
Assets
Inventories 140
Property, plant and equipment 1,382
Intangible assets 45
Other 3
Total assets 1,570
Liabilities
Interest bearing liabilities 69
Other financial liabilities 45
Provisions 638
Total liabilities 752
Net assets 818
12. Subsequent events
Other than the matters outlined elsewhere in this Financial Report, no matters
or circumstances have arisen since the end of the half 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.
49
Directors' Report
The Directors present their report together with the half year Financial
Statements for the half year ended 31 December 2023 and the auditor's review
report thereon.
Review of Operations
A detailed review of the Group's operated and non-operated assets, the results
of those operations during the half year ended 31 December 2023 and likely
future developments are given on pages 1 to 26. The Review of Operations has
been incorporated into, and forms part of, this Directors' Report.
Principal Risks and Uncertainties
The principal risks affecting the Group are described on pages 73 to 81 of the
Group's Annual Report for the year ended 30 June 2023 (a copy of which is
available on the Group's website at www.bhp.com (http://www.bhp.com) ) and are
grouped into the categories of risks listed below. Our principal risks may
occur as a result of our activities globally, including in connection with our
operated and non-operated assets, third parties engaged by BHP or through our
value chain. Our principal risks, individually or collectively, could threaten
our viability, strategy, business model, future performance, solvency or
liquidity and reputation. They could also materially and adversely affect the
health and safety of our people or members of the public, the environment, the
communities where we or our third-party partners operate, or the interests of
our stakeholders, which could in each case, lead to litigation, regulatory
investigation or enforcement action (including class actions or actions
arising from contractual, legacy or other liabilities associated with divested
assets), or a loss of stakeholder and/or investor confidence. There are no
material changes in those risk factors for the first six months of this
financial year except to the extent described in the 'Outlook' section.
· Operational events: Risks associated with operational events in
connection with our activities globally, resulting in significant adverse
impacts on our people, communities, the environment or our business.
· Significant social or environmental impacts: Risks associated with
significant impacts of our operations on and contributions to communities and
environments throughout the life cycle of our assets and across our value
chain.
· Low-carbon transition: Risks associated with the transition to a
low-carbon economy.
· Adopting technologies and maintaining digital security: Risks associated
with adopting and implementing new technologies, and maintaining the
effectiveness of our existing digital landscape (including cyber defences)
across our value chain.
· Ethical misconduct: Risks associated with actual or alleged deviation
from societal or business expectations of ethical behaviour (including
breaches of laws or regulations) and wider or cumulative organisational
cultural failings, resulting in significant reputational impacts.
· Optimising growth and portfolio returns: Risks associated with our
ability to position our asset portfolio to generate returns and value for
shareholders, including through acquisitions, mergers and divestments.
Long-term price volatility, sustained low prices or increases in costs may
adversely affect BHP's financial performance as our products are usually sold
at prevailing market prices and generally BHP does not have the ability to
offset costs through price increases.
· Accessing key markets: Risks associated with market concentration and our
ability to sell and deliver products into existing and future key markets,
impacting our economic efficiency.
· Inadequate business resilience: Risks associated with unanticipated or
unforeseeable adverse events and a failure of planning and preparedness to
respond to, manage and recover from adverse events (including potential
physical climate-related impacts).
Dividend
Full details of dividends are given on page 4.
50
Board of Directors
The Directors of BHP at any time during or since the end of the half year
ended 31 December 2023 are:
Ken MacKenzie - Chairman since 1 September 2017 (a Director since 22 September
2016)
Mike Henry - an Executive Director since 1 January 2020
Terry Bowen - a former Director from 1 October 2017 to 1 November 2023
Xiaoqun Clever-Steg - a Director since 1 October 2020
Ian Cockerill - a Director since 1 April 2019
Gary Goldberg - a Director since 1 February 2020
Michelle Hinchliffe - a Director since 1 March 2022
Christine O'Reilly - a Director since 12 October 2020
Catherine Tanna - a Director since 4 April 2022
Dion Weisler - a Director since 1 June 2020
Auditor's independence declaration
Ernst & Young in Australia are the auditors of BHP Group Limited. Their
auditor's independence declaration under Section 307C of the Australian
Corporations Act 2001 is set out on page 52 and forms part of this Directors'
Report.
Rounding of amounts
BHP Group Limited is an entity to which Australian Securities and Investments
Commission (ASIC) Corporations (Rounding in Financial/Directors' Reports)
Instrument 2016/191 applies. Amounts in the Directors' Report and half year
Financial Statements have been rounded to the nearest million dollars in
accordance with ASIC Instrument 2016/191.
Signed in accordance with a resolution of the Board of Directors.
Ken MacKenzie - Chairman
Mike Henry - Chief Executive Officer
Dated this 20th day of February 2024
51
Directors' Declaration of Responsibility
The half year Financial Report is the responsibility of, and has been approved
by, the Directors. In accordance with a resolution of the Directors of BHP
Group Limited, the Directors declare that:
(a) in the Directors' opinion and to the best of their knowledge, the
half year Financial Statements and notes, set out on pages 27 to 48, have been
prepared in accordance with the Australian Corporations Act 2001, including:
(i) complying with applicable accounting standards and the
Australian Corporations Regulations 2001; and
(ii) giving a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group as at 31 December 2023 and of its
performance for the half year ended on that date;
(b) for the purposes of the Disclosure Guidance and Transparency Rules
in the United Kingdom, to the best of the Directors' knowledge, the Directors'
Report, which incorporates the Review of Operations on pages 1 to 26,
includes: a fair review of (i) the important events during the first six
months of the current financial year and their impact on the half year
Financial Statements; (ii) a description of the principal risks and
uncertainties for the remaining six months of the year; and (iii) related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the Group during that period, and changes in the
related party transactions described in the last annual report that could have
such a material effect; and
(c) in the Directors' opinion, there are reasonable grounds to believe
that BHP Group Limited will be able to pay its debts as and when they become
due and payable.
Signed on behalf of the Directors in accordance with a resolution of the Board
of Directors.
Ken MacKenzie - Chairman
Mike Henry - Chief Executive Officer
Dated this 20th day of February 2024
52
Auditor's Independence Declaration to the Directors of BHP Group Limited
As lead auditor for the review of the financial report of BHP Group Limited
for the half year ended 31 December 2023, I declare to the best of my
knowledge and belief, there have been:
a. No contraventions of the auditor independence requirements of the
Corporations Act 2001 in relation to the review;
b. No contraventions of any applicable code of professional conduct in
relation to the review; and
c. No non-audit services provided that contravene any applicable code of
professional conduct in relation to the review.
This declaration is in respect of BHP Group Limited and the entities it
controlled during the financial period.
Ernst & Young
Rodney Piltz
Partner
20 February 2024
53
Independent auditor's review report to the members of BHP Group Limited
Conclusion
We have reviewed the accompanying half year financial report of BHP Group
Limited and its subsidiaries (collectively the Group), which comprises the
consolidated balance sheet as at 31 December 2023, the consolidated income
statement, consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated cash flow statement for the
half year ended on that date, notes comprising a summary of significant
accounting policies and other explanatory information, and the directors'
declaration.
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the half year financial report of the Group
does not comply with the Corporations Act 2001, including:
a. Giving a true and fair view of the consolidated financial position of the
Group as at 31 December 2023 and of its consolidated financial performance for
the half year ended on that date; and
b. Complying with International Accounting Standard IAS 34 Interim Financial
Reporting as issued by the International Accounting Standards Board (IASB),
Australian Accounting Standard AASB 134 Interim Financial Reporting and the
Corporations Regulations 2001.
Basis for conclusion
We conducted our review in accordance with Australian Auditing Standard on
Review Engagements ASRE 2410 Review of a Financial Report Performed by the
Independent Auditor of the Entity (ASRE 2410). Our responsibilities are
further described in the Auditor's responsibilities for the review of the
half-year financial report section of our report. We are independent of the
Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board's APES 110 Code of Ethics for
Professional Accountants (including Independence Standards) (the Code) that
are relevant to our audit of the annual financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
Directors' responsibilities for the half year financial report
The directors of the Company are responsible for the preparation of the half
year financial report that gives a true and fair view in accordance with
International Accounting Standards as issued by the IASB, Australian
Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of
the half year financial report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error.=
Auditor's responsibilities for the review of the half year financial report
Our responsibility is to express a conclusion on the half year financial
report based on our review.
ASRE 2410 requires us to conclude whether we have become aware of any matter
that makes us believe that the half year financial report is not in accordance
with the Corporations Act 2001 including giving a true and fair view of the
Group's financial position as at 31 December 2023 and its performance for the
half year ended on that date, and complying with International Accounting
Standard IAS 34 Interim Financial Reporting as issued by the IASB, Australian
Accounting Standard AASB 134 Interim Financial Reporting and the Corporations
Regulations 2001.
A review of a half year financial report consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with Australian Auditing
Standards and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion.
Ernst & Young
Rodney Piltz
Partner
Melbourne
20 February 2024
54
Non-IFRS Financial Information
Half year ended
31 December 2023
55
Non-IFRS financial information
We use various non-IFRS financial information to reflect our underlying
financial performance.
Non-IFRS financial information is not defined or specified under the
requirements of IFRS, but is derived from the Group's Consolidated Financial
Statements prepared in accordance with IFRS. The non-IFRS financial
information and the below reconciliations included in this document are
unaudited. The non-IFRS financial information presented is consistent with how
management review financial performance of the Group with the Board and the
investment community.
The "Definition and calculation of non-IFRS financial information" section
outlines why we believe non-IFRS financial information is useful and the
calculation methodology. We believe non-IFRS financial information provides
useful information, however 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 non-IFRS financial
information and their nearest respective IFRS measure.
Exceptional items
To improve the comparability of underlying financial performance between
reporting periods, some of our non-IFRS financial information adjusts the
relevant IFRS measures for exceptional items. Refer to the Group's Financial
Report for further information on exceptional items.
Exceptional items are those gains or losses where their nature, including the
expected frequency of the events giving rise to them, and impact is considered
material to the Group's Consolidated Financial Statements. The exceptional
items included within the Group's profit for the financial periods are
detailed below.
Half year ended 31 December 2023 2022
US$M US$M
Revenue − −
Other income − −
Expenses excluding net finance costs, depreciation, amortisation and (54) (47)
impairments
Depreciation and amortisation − −
Net impairments (3,500) −
(Loss)/profit from equity accounted investments, related impairments and (2,876) 127
expenses
Profit/(loss) from operations (6,430) 80
Financial expenses (190) (222)
Financial income − −
Net finance costs (190) (222)
Profit/(loss) before taxation (6,620) (142)
Income tax (expense)/benefit 978 2
Royalty-related taxation (net of income tax benefit) − −
Total taxation (expense)/benefit 978 2
Profit/(loss) after taxation (5,642) (140)
Total exceptional items attributable to non-controlling interests − −
Total exceptional items attributable to BHP shareholders (5,642) (140)
Exceptional items attributable to BHP shareholders per share (US cents) (111.3) (2.8)
Weighted basic average number of shares (Million) 5,067 5,064
56
Non-IFRS financial information derived from Consolidated Income Statement
Underlying attributable profit
Half year ended 31 December 2023 2022
US$M US$M
Profit after taxation attributable to BHP shareholders 927 6,457
Total exceptional items attributable to BHP shareholders(1) 5,642 140
Underlying attributable profit 6,569 6,597
1 Refer to Exceptional items for further information.
Underlying basic earnings per ordinary share
Half year ended 31 December 2023 2022
US cents US cents
Basic earnings per ordinary share 18.3 127.5
Exceptional items attributable to BHP shareholders per share(1) 111.3 2.8
Underlying basic earnings per ordinary share 129.6 130.3
1 Refer to Exceptional items for further information.
Underlying EBITDA
Half year ended 31 December 2023 2022
US$M US$M
Profit from operations 4,803 10,833
Exceptional items included in profit from operations(1) 6,430 (80)
Underlying EBIT 11,233 10,753
Depreciation and amortisation expense 2,629 2,456
Net impairments 3,513 21
Exceptional items included in Depreciation, amortisation and impairments(1) (3,500) −
Underlying EBITDA 13,875 13,230
1 Refer to Exceptional items for further information.
57
Underlying EBITDA - Segment
Half year ended 31 December 2023 Copper Iron Ore Coal Group and unallocated items/ eliminations(2) Total Group
US$M
Profit from operations 2,438 5,788 652 (4,075) 4,803
Exceptional items included in profit from operations(1) − 2,899 − 3,531 6,430
Depreciation and amortisation expense 1,031 971 322 305 2,629
Net impairments 4 8 1 3,500 3,513
Exceptional items included in Depreciation, amortisation and impairments(1) − − − (3,500) (3,500)
Underlying EBITDA 3,473 9,666 975 (239) 13,875
Half year ended 31 December 2022 Copper Iron Ore Coal Group and unallocated items/ eliminations(2) Total Group
US$M
Profit from operations 1,938 6,768 2,294 (167) 10,833
Exceptional items included in profit from operations(1) − (111) − 31 (80)
Depreciation and amortisation expense 875 980 336 265 2,456
Net impairments 1 4 1 15 21
Exceptional items included in Depreciation, amortisation and impairments(1) − − − − −
Underlying EBITDA 2,814 7,641 2,631 144 13,230
1 Refer to Exceptional items for further information.
2 Group and unallocated items includes functions, other unallocated
operations, including Potash, Western Australia Nickel (which is made up of
Nickel West and West Musgrave which was acquired on 2 May 2023 as part of the
acquisition of OZ Minerals Ltd), legacy assets and consolidation adjustments.
Underlying EBITDA - Group and unallocated items
Half year ended 31 December 2023 Profit from operations Exceptional items included in profit from operations(1) Depreciation and amortisation Net impairments Exceptional items included in Depreciation, amortisation and impairments(1) Underlying EBITDA
US$M
Potash (130) − 1 − − (129)
Western Australia Nickel(2) (3,740) 3,500 66 3,500 (3,500) (174)
Other(3) (205) 31 238 − − 64
Total (4,075) 3,531 305 3,500 (3,500) (239)
Half year ended 31 December 2022 Profit from operations Exceptional items included in profit from operations(1) Depreciation and amortisation Net impairments Exceptional items included in Depreciation, amortisation and impairments(1) Underlying EBITDA
US$M
Potash (88) − 1 − − (87)
Western Australia Nickel(2) 50 − 49 − − 99
Other(3) (129) 31 215 15 − 132
Total (167) 31 265 15 − 144
1 Refer to Exceptional items for further information.
2 Western Australia Nickel includes Nickel West and West Musgrave
(acquired on 2 May 2023 as part of the acquisition of OZ Minerals Ltd).
3 Other includes functions, other unallocated operations, legacy
assets and consolidation adjustments.
58
Underlying EBITDA margin
Half year ended 31 December 2023 Copper Iron Ore Coal Group and unallocated items/ Total Group
US$M eliminations(1)
Revenue - Group production 7,435 14,050 3,786 726 25,997
Revenue - Third-party products 1,223 12 − − 1,235
Revenue 8,658 14,062 3,786 726 27,232
Underlying EBITDA - Group production 3,445 9,667 975 (239) 13,848
Underlying EBITDA - Third-party products 28 (1) − − 27
Underlying EBITDA(2) 3,473 9,666 975 (239) 13,875
Segment contribution to the Group's Underlying EBITDA(3) 25% 68% 7% 100%
Underlying EBITDA margin(4) 46% 69% 26% 53.3%
Half year ended 31 December 2022 Copper Iron Ore Coal Group and unallocated items/ Total Group
US$M eliminations(1)
Revenue - Group production 6,317 11,813 5,566 1,010 24,706
Revenue - Third-party products 988 9 − 10 1,007
Revenue 7,305 11,822 5,566 1,020 25,713
Underlying EBITDA - Group production 2,806 7,641 2,631 144 13,222
Underlying EBITDA - Third-party products 8 − − − 8
Underlying EBITDA(2) 2,814 7,641 2,631 144 13,230
Segment contribution to the Group's Underlying EBITDA(3) 22% 58% 20% 100%
Underlying EBITDA margin(4) 44% 65% 47% 53.5%
1 Group and unallocated items includes functions, other unallocated
operations, including Potash, Western Australia Nickel (which is made up of
Nickel West and West Musgrave which was acquired on 2 May 2023 as part of the
acquisition of OZ Minerals Ltd), legacy assets and consolidation adjustments.
2 We differentiate sales of our production (which may include
third-party product feed) from direct sales of third-party products to better
measure our operational profitability as a percentage of revenue. We may buy
and sell third-party products to ensure a steady supply of product to our
customers where there is occasional production variability or shortfalls from
our assets.
3 Percentage contribution to Group Underlying EBITDA, excluding
Group and unallocated items.
4 Underlying EBITDA margin excludes third-party products.
Effective tax rate
2023 2022
Half year ended 31 December Profit before taxation Income tax expense % Profit before taxation Income tax expense %
US$M US$M US$M US$M
Statutory effective tax rate 3,982 (2,276) 57.2 10,181 (3,055) 30.0
Adjusted for:
Exchange rate movements − (29) − 11
Exceptional items(1) 6,620 (978) 142 (2)
Adjusted effective tax rate 10,602 (3,283) 31.0 10,323 (3,046) 29.5
1 Refer to Exceptional items for further information.
59
Non-IFRS financial information derived from Consolidated Cash Flow Statement
Capital and exploration expenditure
Half year ended 31 December 2023 2022
US$M US$M
Capital expenditure (purchases of property, plant and equipment) 4,545 2,871
Add: Exploration and evaluation expenditure 199 156
Capital and exploration expenditure (cash basis) 4,744 3,027
Free cash flow
Half year ended 31 December 2023 2022
US$M US$M
Net operating cash flows 8,884 6,770
Net investing cash flows (5,079) (3,289)
Free cash flow 3,805 3,481
Non-IFRS financial information derived from Consolidated Balance Sheet
Net debt and gearing ratio
31 Dec 2023 31 Dec 2022 30 June 2023
US$M US$M US$M
Interest bearing liabilities - Current 2,839 2,015 7,173
Interest bearing liabilities - Non-current 19,565 12,686 15,172
Total interest bearing liabilities 22,404 14,701 22,345
Comprising:
Borrowing 18,826 12,007 19,326
Lease liabilities 3,578 2,694 3,019
Less: Lease liability associated with index-linked freight contracts 840 247 287
Less: Cash and cash equivalents 10,319 9,605 12,428
Less: Net debt management related instruments(1) (1,183) (2,063) (1,572)
Less: Net cash management related instruments(2) (220) 2 36
Less: Total derivatives included in net debt (1,403) (2,061) (1,536)
Net debt 12,648 6,910 11,166
Net assets 45,591 46,552 48,530
Gearing 21.7% 12.9% 18.7%
1 Represents the net cross currency and interest rate swaps included
within current and non-current other financial assets and liabilities.
2 Represents the net forward exchange contracts related to cash
management included within current and non-current other financial assets and
liabilities.
60
Net debt waterfall
31 Dec 2023 31 Dec 2022
US$M US$M
Net debt at the beginning of the period (11,166) (333)
Net operating cash flows 8,884 6,770
Net investing cash flows (5,079) (3,289)
Net financing cash flows (5,983) (10,911)
Net (decrease)/increase in cash and cash equivalents (2,178) (7,430)
Carrying value of interest bearing liability net repayments/(proceeds) 1,324 1,340
Carrying value of debt related instruments settlements/(proceeds) − 383
Carrying value of cash management related instruments (proceeds)/settlements (311) (274)
Fair value change on hedged loans (345) 754
Fair value change on hedging derivatives 323 (659)
Foreign currency exchange rate changes on cash and cash equivalents 74 (201)
Lease additions (excluding leases associated with index-linked freight (298) (320)
contracts)
Transfer to liability directly associated with assets held for sale 69 −
Other (140) (170)
Non-cash movements (317) (596)
Net debt at the end of the period (12,648) (6,910)
Net operating assets
31 Dec 2023 31 Dec 2022
US$M US$M
Net assets 45,591 46,552
Less: Non-operating assets
Cash and cash equivalents (10,319) (9,605)
Trade and other receivables(1) (12) (22)
Other financial assets(2) (1,197) (1,219)
Current tax assets (446) (444)
Deferred tax assets (76) (54)
Assets held for sale(3) (1,570) −
Add: Non-operating liabilities
Trade and other payables(4) 272 149
Interest bearing liabilities 22,404 14,701
Other financial liabilities(5) 1,761 2,276
Current tax payable 290 469
Non-current tax payable 39 65
Deferred tax liabilities 3,325 3,367
Liabilities directly associated with the assets held for sale(3) 752 −
Net operating assets 60,814 56,235
1 Represents external finance receivable and accrued interest
receivable included within other receivables.
2 Represents cross currency and interest rate swaps, forward
exchange contracts related to cash management and investment in shares, other
investments and receivables contingent on outcome of future events relating to
mining and regulatory approvals.
3 Represents Blackwater and Daunia coal assets and liabilities
classified as held for sale as at 31 December 2023.
4 Represents accrued interest payable included within other
payables.
5 Represents cross currency and interest rate swaps and forward
exchange contracts related to cash management.
61
Other non-IFRS financial information
Principal factors that affect Revenue, Profit from operations and Underlying EBITDA
The following table describes the impact of the principal factors that
affected Revenue, Profit from operations and Underlying EBITDA for half year
ended 31 December 2023 and relates them back to our Consolidated Income
Statement.
Revenue Total expenses, Profit from operations Depreciation, Underlying
US$M Other income US$M amortisation EBITDA
and Profit/(loss) from equity and impairments US$M
accounted investments and Exceptional Items
US$M US$M
Half year ended 31 December 2022
Revenue 25,713
Other income 269
Expenses excluding net finance costs (15,429)
Profit/(loss) from equity accounted investments, related impairments and 280
expenses
Total other income, expenses excluding net finance costs and Profit/(loss) (14,880)
from equity accounted investments, related impairments and expenses
Profit from operations 10,833
Depreciation, amortisation and impairments 2,477
Exceptional item included in Depreciation, amortisation and impairments −
Exceptional items (80)
Underlying EBITDA 13,230
Change in sales prices 629 − 629 − 629
Price-linked costs − 147 147 − 147
Net price impact 629 147 776 − 776
Change in volumes 228 32 260 − 260
Operating cash costs − (372) (372) − (372)
Exploration and business development − (64) (64) − (64)
Change in controllable cash costs(1) − (436) (436) − (436)
Exchange rates (1) 81 80 − 80
Inflation on costs − (507) (507) − (507)
Fuel, energy, and consumable price movements − 340 340 − 340
Non-cash − (119) (119) − (119)
One-off items − − − − −
Change in other costs (1) (205) (206) − (206)
Asset sales − 38 38 − 38
Ceased and sold operations (98) 75 (23) − (23)
New and acquired operations 610 (370) 240 − 240
Other 151 (155) (4) − (4)
Depreciation, amortisation and impairments − (165) (165) 165 −
Exceptional items − (6,510) (6,510) 6,510 −
Half year ended 31 December 2023
Revenue 27,232
Other income 261
Expenses excluding net finance costs (19,982)
(Loss)/profit from equity accounted investments, related impairments and (2,708)
expenses
Total other income, expenses excluding net finance costs and Profit/(loss) (22,429)
from equity accounted investments, related impairments and expenses
Profit from operations 4,803
Depreciation, amortisation and impairments 6,142
Exceptional item included in Depreciation, amortisation and impairments (3,500)
Exceptional items 6,430
Underlying EBITDA 13,875
1 Collectively, we refer to the change in operating cash costs and
change in exploration and business development as Change in controllable cash
costs. Operating cash costs by definition do not include non-cash costs. The
change in operating cash costs also excludes the impact of exchange rates and
inflation, changes in fuel, energy costs and consumable costs, changes in
exploration and evaluation and business development costs and one-off items.
These items are excluded so as to provide a consistent measurement of changes
in costs across all segments, based on the factors that are within the control
and responsibility of the segment.
62
Underlying return on capital employed (ROCE)
31 Dec 2023 31 Dec 2022
US$M US$M
Profit after taxation 1,706 7,126
Exceptional items(1) 5,642 140
Subtotal 7,348 7,266
Adjusted for:
Net finance costs 821 652
Exceptional items included within net finance costs(1) (190) (222)
Income tax expense on net finance costs (187) (166)
Profit after taxation excluding net finance costs and exceptional items 7,792 7,530
Annualised Profit after taxation excluding net finance costs and exceptional 15,584 15,060
items
Net assets at the beginning of the period 48,530 48,766
Net debt at the beginning of the period 11,166 333
Capital employed at the beginning of the period 59,696 49,099
Net assets at the end of the period 45,591 46,552
Net debt at the end of the period 12,648 6,910
Capital employed at the end of the period 58,239 53,462
Average capital employed 58,968 51,281
Underlying Return on Capital Employed 26.4% 29.4%
1 Refer to Exceptional items for further information.
Underlying return on capital employed (ROCE) by segment
Half year ended 31 December 2023 Copper Iron Ore Coal Group and unallocated Total Group
US$M items/ eliminations(1)
Annualised profit after taxation excluding net finance costs and exceptional 3,242 12,180 1,032 (870) 15,584
items
Average capital employed 31,029 14,406 6,743 6,790 58,968
Underlying Return on Capital Employed 10% 85% 15% − 26.4%
Half year ended 31 December 2022 Copper Iron Ore Coal Group and unallocated Total Group
US$M items/ eliminations(1)
Annualised profit after taxation excluding net finance costs and exceptional 2,776 9,352 3,250 (318) 15,060
items
Average capital employed 25,184 15,273 5,934 4,890 51,281
Underlying Return on Capital Employed 11% 61% 55% − 29.4%
1 Group and unallocated items includes functions, other unallocated
operations including Potash, Western Australia Nickel (which is made up of
Nickel West and West Musgrave which was acquired on 2 May 2023 as part of the
acquisition of OZ Minerals Ltd), legacy assets and consolidation adjustments.
63
Underlying return on capital employed (ROCE) by asset
Half year ended Western Australia Iron Ore Antamina Escondida BHP Mitsubishi Alliance Pampa Norte Copper South Australia(1) Western Australia Nickel(2) Potash(3) New South Wales Energy Coal(4) Other Total Group
31 December 2023
US$M
Annualised profit after taxation excluding net finance costs and exceptional 12,184 426 2,484 822 258 372 (514) (258) 300 (490) 15,584
items
Average capital employed 19,718 1,382 10,693 6,903 4,221 14,462 1,648 4,859 (338) (4,580) 58,968
Underlying Return on Capital Employed 62% 31% 23% 12% 6% 3% (31%) − − − 26.4%
Half year ended Western Australia Iron Ore Antamina Escondida BHP Mitsubishi Alliance Pampa Norte Copper South Australia(1) Western Australia Nickel(2) Potash(3) New South Wales Energy Coal(4) Other Total Group
31 December 2022
US$M
Annualised profit after taxation excluding net finance costs and exceptional 9,362 346 2,464 1,626 86 98 (2) (114) 1,706 (512) 15,060
items
Average capital employed 19,123 1,308 10,209 6,250 4,498 9,189 1,089 3,789 (546) (3,628) 51,281
Underlying Return on Capital Employed 49% 26% 24% 26% 2% 1% (0%) − − − 29.4%
1 Includes Olympic Dam as well as Prominent Hill and Carrapateena
which were acquired on 2 May 2023 as part of the acquisition of OZ Minerals
Ltd.
2 Western Australia Nickel includes Nickel West and West Musgrave
(acquired on 2 May 2023 as part of the acquisition of OZ Minerals Ltd).
3 Potash ROCE has not been shown because it is distorted as the
asset is non-producing and in its development phase.
4 NSWEC ROCE has not been shown as it is distorted by negative
capital employed due to the rehabilitation provision being the primary balance
remaining on Balance Sheet following previous impairments.
64
Unit costs
Unit costs do not include the re-allocation to Assets in FY2024 of the costs
associated with the employee entitlements and allowances review conducted in
FY2023, which were reported in Group and Unallocated in that period.
The calculation of Escondida and Spence unit costs is set out in the table
below.
Escondida unit costs Spence unit costs
US$M H1 FY2024 H1 FY2023 H1 FY2024 H1 FY2023
Revenue 4,427 4,089 1,029 892
Underlying EBITDA 2,347 2,160 428 295
Gross costs 2,080 1,929 601 597
Less: by-product credits 248 190 49 40
Less: freight 89 110 22 23
Net costs 1,743 1,629 530 534
Sales (kt) 522.6 512.1 121.4 110.5
Sales (Mlb) 1,152.1 1,129.0 267.6 243.6
Cost per pound (US$)(1) 1.51 1.44 1.98 2.19
1 H1 FY24 based on average realised exchange rates of USD/CLP 874
(H1 FY23 USD/CLP 920).
The calculation of WAIO unit costs is set out in the table below.
WAIO unit costs
US$M H1 FY2024 H1 FY2023
Revenue 13,991 11,756
Underlying EBITDA 9,646 7,623
Gross costs 4,345 4,133
Less: freight 979 1,020
Less: re-allocation of costs associated with the employee entitlements and 33 −
allowances review
Less: royalties 992 793
Net costs 2,341 2,320
Sales (kt, equity share) 126,786 126,753
Cost per tonne (US$)(1) 18.46 18.30
1 H1 FY24 based on an average realised exchange rate of AUD/USD 0.65
(H1 FY23 AUD/USD 0.67).
The calculation of BMA unit costs is set out in the table below.
BMA unit costs
US$M H1 FY2024 H1 FY2023
Revenue 2,882 3,598
Underlying EBITDA 810 1,426
Gross costs 2,072 2,172
Less: freight 14 19
Less: re-allocation of costs associated with the employee entitlements and 4 −
allowances review
Less: royalties 631 799
Net costs 1,423 1,354
Sales (kt, equity share) 11,031 13,509
Cost per tonne (US$)(1) 129.00 100.23
1 H1 FY24 based on an average realised exchange rate of AUD/USD 0.65
(H1 FY23 AUD/USD 0.67).
65
Definition and calculation of Non-IFRS financial information
Non-IFRS financial information Reasons why we believe the non-IFRS financial information are useful Calculation methodology
Underlying attributable profit Allows the comparability of underlying financial performance by excluding the Profit after taxation attributable to BHP shareholders excluding any
impacts of exceptional items and is also the basis on which our dividend exceptional items attributable to BHP shareholders.
payout ratio policy is applied.
Underlying basic earnings per share On a per share basis, allows the comparability of underlying financial Underlying attributable profit divided by the weighted basic average number of
performance by excluding the impacts of exceptional items. shares.
Underlying EBITDA Used to help assess current operational profitability excluding the impacts of Earnings before net finance costs, depreciation, amortisation and impairments,
sunk costs (i.e. depreciation from initial investment). Each is a measure that taxation expense, Discontinued operations and exceptional items. Underlying
management uses internally to assess the performance of the Group's segments EBITDA includes BHP's share of profit/(loss) from investments accounted for
and make decisions on the allocation of resources. 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 Earnings before net finance costs, taxation expense, Discontinued operations
costs and taxation expense (each of which are managed at the Group level) as and any exceptional items. Underlying EBIT includes BHP's share of
well as Discontinued operations and any exceptional items. 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 Purchases of property, plant and equipment and exploration and evaluation
deployment of capital. Represents the total outflows of our operational expenditure.
investing expenditure.
Free cash flow It is a key measure used as part of our Capital Allocation Framework. Reflects Net operating cash flows less net investing cash flows.
our operational cash performance inclusive of investment expenditure, which
helps to highlight how much cash was generated in the period to be available
for the servicing of debt and distribution to shareholders.
Net debt Net debt shows the position of gross debt less index-linked freight contracts Interest bearing liabilities less liability associated with index-linked
offset by cash immediately available to pay debt if required and any freight contracts less cash and cash equivalents less net cross currency and
associated derivative financial instruments. Liability associated with interest rate swaps less net cash management related instruments for the Group
index-linked freight contracts, which are required to be remeasured to the at the reporting date.
prevailing freight index at each reporting date, are excluded from the net
debt calculation due to the short-term volatility of the index they relate to
not aligning with how the Group uses net debt for decision making in relation
to the Capital Allocation Framework. Net debt includes the fair value of
derivative financial instruments used to hedge cash and borrowings to reflect
the Group's risk management strategy of reducing the volatility of net debt
caused by fluctuations in foreign exchange and interest rates.
Net debt, along with the gearing ratio, is used to monitor the Group's capital
management by relating net debt relative to equity from shareholders.
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 Operating assets net of operating liabilities, including the carrying value of
highlighting the net operating assets of the business separate from the equity accounted investments and predominantly excludes cash balances, loans
financing and tax balances. to associates, interest bearing liabilities, derivatives hedging our net debt,
assets held for sale, liabilities directly associated with assets held for
sale and tax balances.
66
This measure helps provide an indicator of the underlying performance of our
assets and enhances comparability between them.
Underlying return on capital employed (ROCE) Indicator of the Group's capital efficiency and is provided on an underlying Profit after taxation excluding exceptional items and net finance costs (after
basis to allow comparability of underlying financial performance by excluding taxation) divided by average capital employed.
the impacts of exceptional items.
Profit after taxation excluding exceptional items and net finance costs (after
taxation) is profit after taxation 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 Total taxation expense/(benefit) excluding exceptional items and exchange rate
financial performance by excluding the impacts of exceptional items. movements included in taxation expense/(benefit) divided by Profit before
taxation excluding exceptional items.
Unit cost Used to assess the controllable financial performance of the Group's assets Ratio of net costs of the assets to the equity share of sales tonnage. Net
for each unit of production. Unit costs are adjusted for site specific costs is defined as revenue less Underlying EBITDA and excludes freight,
non-controllable factors to enhance comparability between the Group's assets. re-allocation of the costs associated with the employee entitlements and
allowance review in FY2023, 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. The re-allocation to Assets in FY2024 of the
costs associated with the employee entitlements and allowances review in
FY2023 are excluded in Asset unit costs as these costs were already recognised
in Group and Unallocated in FY2023.
Escondida and Spence 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 and BMA 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.
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, energy, and consumable price movements, non-cash
costs and one-off items as defined below for each operation from the prior
period to the current period.
67
Exploration and evaluation and business development Exploration and evaluation 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, energy, and consumable price movements Fuel and energy expense and price differences above inflation on consumables
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.
New and acquired operations Underlying EBITDA for operations that were acquired in the current period
minus Underlying EBITDA for operations that were acquired 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.
68
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