2019 Global Metals, Mining and Steel Conference

RNS Number : 9356Y

BHP Group PLC

14 May 2019

 

Issued by:	BHP Group Plc
Date:	14 May 2019
To:	London Stock Exchange JSE Limited
For Release:	Immediately
Contact:	Helen Ratsey [phone]
BHP  - 2019 Global Metals, Mining and Steel Conference Presentation

UK Listing Authority Submissions

The following document has today been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do:

·    2019 Global Metals, Mining and Steel Conference Presentation.

The document may also be accessed via BHP's website - bhp.com

NEWS RELEASE

Release Time	IMMEDIATE
Date	14 May 2019
Release Number	11/19

BHP CEO speaks at Bank of America Merrill Lynch Global Metals, Mining and Steel Conference

BHP Chief Executive Officer, Andrew Mackenzie, today said BHP's focus remains clear: to maximise cash flow, maintain capital discipline and increase value and returns.

Speaking at the Bank of America Merrill Lynch Global Metals, Mining and Steel Conference in Barcelona, Mr Mackenzie, said BHP's strategy provides the framework to make the most of our portfolio while developing options to secure future success.

Since the beginning of 2016, BHP has strengthened its balance sheet through a US$16 billion reduction in net debt, reinvested US$20 billion in the business and returned more than US$25 billion to shareholders.

"We have increased volumes, reduced costs, and kept our people safer at work. These actions lifted return on capital by around 50 per cent," Mr Mackenzie said. "These are strong outcomes. There is still substantial opportunity to maximise the value of existing assets to release latent capacity and improve performance.

"We have shaped our portfolio around commodities with attractive fundamentals and we hold exploration licences and development options in the world's premier copper, oil and potash basins.

"Developments such as climate change and dramatic shifts in technology present both challenges and opportunities. To make sure that we secure the future prosperity of our Company, we constantly test our current assets and future options against many divergent scenarios for how the world will look well into the future. Decarbonisation, the electrification of transport, the future of work and food security are examples of strategic themes that we monitor.

"For example, Nickel West, which we will now retain in the portfolio, offers high-return potential as a future growth option, linked to the expected growth in battery markets and the relative scarcity of quality nickel sulphide supply.

"While nobody can predict what will happen with absolute precision, I am confident BHP's portfolio can thrive under almost all plausible outcomes in this changing world."

Mr Mackenzie said BHP was well placed in the short, medium and longer term with strict financial discipline and a transparent and consistent approach to capital allocation.

"Our institutionalised capital allocation framework transparently directs cash to its best use, be that development opportunities, the balance sheet, or returns to shareholders. We have a resilient portfolio, a transformation agenda and a suite of options and ideas to create future value at the right time. We have demonstrated this is the right formula for our shareholders.

"Regardless of how the world evolves, BHP is set up for a strong future."

An audio-webcast of the presentation will be made available at: https://edge.media-server.com/m6/p/d2ky883h 

A summary of guidance and project details contained in the presentation is included below.

Guidance

Asset	FY19e		Medium term
	Production	Unit costs1		Production	Unit costs1
Western Australia Iron Ore	265-270 Mt (100% basis)	<US$15/t		290 Mt (100% basis)	<US$13/t
Conventional Petroleum	113-118 MMboe	<US$11/boe		~110 MMboe average	<US$13/boe
Queensland Coal	43-46 Mt	US$68-72/t		49-54 Mt	US$57-64/t
Escondida	1.12-1.18 Mt	<US$1.15/lb		~1.20 Mt average	<US$1.15/lb

Future options

Options	Potential execution timing	Capex (US$m)	Tollgate	IRR2 (%)	Risk3 (1-5)	Description
Ruby Petroleum	<1 year	>250	Feasibility	>15	●●	Tie back into existing processing facilities in Trinidad & Tobago
Mad Dog northwest water injection Petroleum	<5 years	>250	Pre-feasibility	*	Non- operated	Incremental production of existing A-Spar production wells in Mad Dog field
Scarborough Petroleum	<5 years	<2,000	Pre-feasibility	*	Non- operated	Tie back development to existing LNG facility
Olympic Dam BFX4 Copper	<5 years	Up to ~2,500	Pre-feasibility	12-25	●●	Development into the Southern Mine Area, debottlenecking of existing surface infrastructure to increase production to 240‑300 ktpa
Resolution Copper	>5 years	<3,000	Concept	~15	Non- operated	Underground block cave with attractive grade profile and competitive cost curve position
Jansen Stage 15 Potash	<5 years	5,300 - 5,700	Feasibility	14-15	●●●	Tier 1 resource with potential initial capacity of 4.3‑4.5 Mtpa, with valuable expansion optionality
Jansen Stage 2-45 Potash	>15 years	~4,000 per stage	Opportunity assessment	~20	●●	Sequenced brownfield expansions of up to 12 Mtpa (4 Mtpa per stage)
Aggregate				~17		Aggregate unrisked value2 of ~US$14 billion spanning commodities and time periods

Note: * Mad Dog northwest water injection and Scarborough IRRs under review with joint venture partners.

Exploration

Options	Location	Ownership	Maturity	Earliest first production	Description
Trion Petroleum	Mexico - Gulf of Mexico	60% Operator	Appraisal	Mid 2020s	Large oil discovery in the Mexican deepwater Gulf of Mexico
Wildling Petroleum	US - Gulf of Mexico	80+% Operator	Appraisal	Mid 2020s	Large oil resource across multiple horizons near operated infrastructure in US Gulf of Mexico
Samurai Petroleum	US - Gulf of Mexico	50%	Appraisal	Early 2020s	Oil discovery in the Wildling mini basin
Northern Gas Petroleum	Trinidad and Tobago	70% Operator	Exploration	Mid 2020s	Potential material gas play in Deepwater Trinidad, well positioned to the Atlantic LNG plant onshore T&T
Magellan Southern Gas Petroleum	Trinidad and Tobago	65% Operator	Exploration	Mid 2020s	Potential material gas play in Deepwater Trinidad, well positioned to the Atlantic LNG plant onshore T&T
Western GOM Petroleum	US - Gulf of Mexico	100% Operator	Frontier	Early 2030s	Acquired a significant acreage position in Western Gulf of Mexico
Trinidad Oil Petroleum	Trinidad and Tobago	65-70% Operator	Frontier	Late 2020s	Potential oil play in deepwater Trinidad
Orphan Basin Petroleum	Canada	100% Operator	Frontier	Early 2030s	Recent bid success for blocks with large oil resource potential in the offshore Orphan Basin in Eastern Canada
Multi-billion barrel equivalent risked potential; unrisked NPV of up to US$15 billion6

1. Based on an exchange rate of AUD/USD 0.75 and USD/CLP 663. Unit costs are in nominal terms.

2. Calculated at 2019 analyst consensus price forecasts (except Potash which are at CRU and Integer price forecasts); ungeared, post-tax, nominal rates.

3. Risk profile is based on a BHP assessment of each project against defined quantified and non-quantified risk metrics rated out of 5; 5 represents more risk.

4. IRR of 12% to 25% represents different development options of varying levels of certainty. The upper end of range relates to investment in a potential lower capital and production development towards BFX.

5. Based on CRU and Integer (Argus Media) price assumptions (2025-2035 average mid-case: CRU US$325/t and Integer (Argus Media) US$342/t). Jansen Stage 1 IRR of 14-15% reflects capex range and excludes remaining funded investment of
~US$0.3 billion for completion of the shafts and installation of essential service infrastructure and utilities. Jansen Stages 2-4 capex is presented in real terms (July 2019) - those options would be brownfield and predominately require surface infrastructure, with shorter construction schedules and less risk than Stage 1. The execution of future stages would be subject to our review of supply and demand fundamentals and successful competition for capital under our Capital Allocation Framework. However, we expect that each subsequent expansion would be approved for development after the previous expansion had reached 3 to 4 years of full production. The existing shafts are capable of supporting production for
Stages 2-4.

6. Petroleum exploration and appraisal NPV: Unrisked values at BHP long-term price forecasts.

Further information on BHP can be found at: bhp.com

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