Wrap Text
BHP Billiton Plc - Annual Financial Report 2013
Issued by: BHP Billiton Plc
Date: 25 September 2013
To: London Stock Exchange
JSE Limited
For Release: Immediately
Contact: Elizabeth Hobley +44 (0) 20 7802 4054
BHP Billiton Plc – Annual Financial Report 2013
UK Listing Authority Submissions
The following documents have today been submitted to the National Storage Mechanism
and will shortly be available for inspection at: www.hemscott.com/nsm.do
• Annual Report 2013
www.bhpbilliton.com/home/investors/reports/Documents/2013/BHPBillitonAn
nualReport2013.pdf
• Summary Review 2013
www.bhpbilliton.com/home/investors/reports/Documents/2013/BHPBillitonSu
mmaryReview2013.pdf
• Notice of Annual General Meeting 2013 - BHP Billiton Plc
www.bhpbilliton.com/home/investors/shareholderinfo/Documents/2013/BHPB
illitonNoticeOfMeetingPlc2013.pdf
• Proxy Form (UK Principal Register)
• Proxy Form (South Africa Branch Register)
• Smartphone Voting Card 2013 – BHP Billiton Plc
• Sustainability Report 2013
www.bhpbilliton.com/home/aboutus/sustainability/reports/Documents/2013/B
HPBillitonSustainabilityReport2013.pdf
• Form 20-F
www.bhpbilliton.com/home/investors/reports/Documents/2013/BHPBillitonFor
m20F2013.pdf
The documents (with the exception of the Proxy Forms) may also be accessed via
BHP Billiton’s website - www.bhpbilliton.com - or using the web links above.
Additional Information
The following information is extracted from the Annual Report 2013 (page references
are to pages in the Annual Report) and should be read in conjunction with BHP
Billiton’s Final Results announcement issued on 20 August 2013. Both documents
can be found at www.bhpbilliton.com and together, constitute the material required
by DTR 6.3.5 to be communicated to the media in unedited full text through a
Regulatory Information Service. This material is not a substitute for reading the
Annual Report 2013 in full.
1. Principal risks and uncertainties
We believe that because of the international scope of our operations and the
industries in which we are engaged, there are numerous factors that may have an
effect on our results and operations. The following describes the material risks that
could affect the BHP Billiton Group.
External risks
Fluctuations in commodity prices and impacts of ongoing global economic
volatility may negatively affect our results, including cash flows and asset
values
The prices we obtain for our oil, gas and minerals are determined by, or linked to,
prices in world markets, which have historically been subject to substantial volatility.
Our usual policy is to sell our products at the prevailing market prices. The diversity
provided by our relatively broad portfolio of commodities does not insulate the effects
of price changes. Fluctuations in commodity prices can occur due to sustained price
shifts reflecting underlying global economic and geopolitical factors, industry demand
and supply balances, product substitution and national tariffs. See section 3.4.1 for
summaries of pricing trends for our most significant commodities. The ongoing
global economic volatility has negatively affected commodity market prices and
demand. The ongoing uncertainty and impact on global economic growth,
particularly in the developed economies, may continue to adversely affect future
demand and prices for commodities. The impact of potential longer-term sustained
price shifts and shorter-term price volatility, including the effects of unwinding the
sustained monetary stimulus in the United States, creates the risk that our financial
and operating results including cash flows and asset values, will be materially and
adversely affected by unforeseen declines in the prevailing prices of our products.
Our financial results may be negatively affected by currency exchange rate
fluctuations
Our assets, earnings and cash flows are influenced by a wide variety of currencies
due to the geographic diversity of the countries in which we operate. Fluctuations in
the exchange rates of those currencies may have a significant impact on our
financial results. The US dollar is the currency in which the majority of our sales are
denominated. Operating costs are influenced by the currencies of those countries
where our mines and processing plants are located and also by those currencies in
which the costs of imported equipment and services are determined. The Australian
dollar, South African rand, Chilean peso, Brazilian real and US dollar are the most
important currencies influencing our operating costs. Over recent years, the level of
exchange of currencies in which the majority of our operating costs are incurred (in
particular the Australian dollar, if sustained relative to US dollar denominated
commodity prices) has and may continue to adversely impact our profit margins.
Given the dominant role of the US currency in our affairs, the US dollar is the
currency in which we present financial performance. We do not generally believe
that active currency hedging provides long-term benefits to our shareholders. From
time to time, we consider currency protection measures appropriate in specific
commercial circumstances, subject to strict limits established by our Board.
Therefore, in any particular year, our financial results may be negatively affected by
currency exchange rate fluctuations.
Reduction in Chinese demand may negatively impact our results
The Chinese market has been driving global materials demand and pricing over the
past decade. Sales into China generated US $19.4 billion (FY2012: US$21.6 billion),
or 29.4 per cent (FY2012: 29.9 per cent), of our revenue in the year ended 30 June
2013. The FY2013 sales into China by Business included 58.8 per cent Iron Ore,
19.4 per cent Copper, 8.4 per cent Coal and 4.5 per cent Petroleum. A slowing in
China’s economic growth could result in lower prices and demand for our products
and negatively impact our results including cash flows.
In response to its increased demand for commodities, China is increasingly seeking
strategic self-sufficiency in key commodities, including investments in existing
businesses or new developments in other countries. These investments may
adversely impact future commodity demand and supply balances and prices.
Actions by governments or political events in the countries in which we
operate could have a negative impact on our business
We have operations in many countries around the globe, which have varying
degrees of political and commercial stability. We operate in emerging markets, which
may involve additional risks that could have an adverse impact upon the profitability
of an operation. These risks could include terrorism, civil unrest, nationalisation,
renegotiation or nullification of existing contracts, leases, permits or other
agreements, restrictions on repatriation of earnings or capital and changes in laws
and policy, as well as other unforeseeable risks. Risks relating to bribery and
corruption, including possible delays or disruption resulting from a refusal to make
so-called facilitation payments, may be prevalent in some of the countries in which
we operate. If any of our major operations are affected by one or more of these risks,
it could have a negative effect on the operations in those countries, as well as the
Group’s overall operating results and financial condition.
Our operations are based on material long-term investments that are dependent on
long-term fiscal stability and could be adversely impacted by changes in fiscal
legislation. The mining industry has been identified as a source of tax revenue and
can also be impacted by broader fiscal measures applying to business generally.
Our business could be adversely affected by new government regulations, such as
controls on imports, exports and prices. Increasing requirements relating to
regulatory, environmental and social approvals can potentially result in significant
delays in construction and may adversely affect the economics of new mining and oil
and gas projects, the expansion of existing operations and results of our operations.
We have oil and gas operations located in the Gulf of Mexico region of the United
States. A six-month moratorium on drilling was issued in June 2010 following the
Deepwater Horizon oil spill. Even though the moratorium has been lifted, the industry
now faces more stringent permitting requirements. Delays or additional costs may
occur in receiving future permits for deepwater drilling activities in the Gulf of Mexico.
Infrastructure, such as rail, ports, power and water, is critical to our business
operations. We have operations or potential development projects in countries where
government provided infrastructure or regulatory regimes for access to infrastructure,
including our own privately operated infrastructure, may be inadequate or uncertain
or subject to legislative change. These may adversely impact the efficient operations
and expansion of our Businesses.
We operate in several countries where ownership of land is uncertain and where
disputes may arise in relation to ownership. In Australia, the Native Title Act 1993
provides for the establishment and recognition of native title under certain
circumstances. In South Africa, the Extension of Security of Tenure Act (1997) and
the Restitution of Land Rights Act (1994) provide for various landholding rights. Such
legislation could negatively affect new or existing projects.
These regulations are complex, difficult to predict and outside of our control and
could negatively affect our Company and results.
Business risks
Failure to discover new reserves, maintain or enhance existing reserves or
develop new operations could negatively affect our future results and financial
condition
The demand for our products and production from our operations results in existing
reserves being depleted over time. As our revenues and profits are derived from our
oil and gas and minerals operations, our results and financial condition are directly
related to the success of our exploration and acquisition efforts, and our ability to
replace existing reserves. Exploration activity occurs adjacent to established
operations and in new regions, in developed and less developed countries. These
activities may increase land tenure, infrastructure and related political risks. A failure
in our ability to discover new reserves, enhance existing reserves or develop new
operations in sufficient quantities to maintain or grow the current level of our
reserves could negatively affect our results, financial condition and prospects.
Future deterioration in commodities pricing may make drilling some acreage and
existing reserves uneconomic. Our actual drilling activities and future drilling budget
will depend on drilling results, commodity prices, drilling and production costs,
availability of drilling services and equipment, lease expirations, gathering systems,
transportation pipelines and other infrastructure constraints, regulatory approvals
and other factors.
There are numerous uncertainties inherent in estimating ore and oil and gas
reserves, and geological, technical and economic assumptions that are valid at the
time of estimation may change significantly when new information becomes
available. The uncertain global financial outlook may affect economic assumptions
related to reserve recovery and require reserve restatements. Reserve restatements
could negatively affect our results and prospects.
Potential changes to our portfolio of assets through acquisitions and
divestments may have a material adverse effect on our future results and
financial condition
We regularly review the composition of our asset portfolio and from time to time may
add assets to the portfolio or divest assets from the portfolio. There are a number of
risks associated with such divestments or acquisitions. These include adverse
market reaction to such changes or the timing or terms on which such changes are
made, the imposition of adverse regulatory conditions and obligations, commercial
objectives not being achieved as expected, unforeseen liabilities arising from such
changes to the portfolio, sales revenues and operational performance not meeting
our expectations, anticipated synergies or cost savings being delayed or not being
achieved, inability to retain key staff and transaction-related costs being more than
anticipated. These factors could negatively affect our reputation, future results and
financial condition.
Increased costs and schedule delays may adversely affect our development
projects
Although we devote significant time and resources to our project planning, approval
and review process, many of our development projects are highly complex and rely
on factors that are outside our control, which may cause us to underestimate the
cost or time required to complete a project. In addition, we may fail to manage
projects as effectively as we anticipate and unforeseen challenges may emerge.
Any of these may result in increased capital costs and schedule delays at our
development projects, adversely affecting our development projects and impacting
anticipated financial returns.
Financial risks
If our liquidity and cash flow deteriorate significantly it could adversely affect
our ability to fund our major capital programs
We seek to maintain a solid 'A' credit rating as part of our strategy; however,
fluctuations in commodity prices and the ongoing global economic volatility may
continue to adversely impact our future cash flows and ability to access capital from
financial markets at acceptable pricing. If our key financial ratios and solid 'A' credit
rating are not maintained, our liquidity and cash reserves, interest rate costs on
borrowed debt, future access to financial capital markets and the ability to fund
current and future major capital programs could be adversely affected.
We may not recover our investments in mining, oil and gas assets, which may
require financial write-downs
One or more of our assets may be impacted by changed market or industry
structures, commodity prices, technical operating difficulties, inability to recover our
mineral, oil or gas reserves and increased operating cost levels. These may cause
us to fail to recover all or a portion of our investment in mining and oil and gas assets
and may require financial write-downs adversely impacting our financial results.
The commercial counterparties we transact with may not meet their
obligations which may negatively impact our results
We contract with a large number of commercial and financial counterparties,
including customers, suppliers and financial institutions. The ongoing global
economic volatility has placed strains on global financial markets, reduced liquidity
and adversely affected business conditions generally. We maintain a ‘one book’
approach with commercial counterparties to ensure that all credit exposures are
quantified. Our existing counterparty credit controls may not prevent a material loss
due to credit exposure to a major customer or financial counterparty. In addition,
customers, suppliers, contractors or joint venture partners may fail to perform against
existing contracts and obligations. Non-supply of key inputs, such as tyres, mining
and mobile equipment and other key consumables, may unfavourably impact costs
and production at our operations. These factors could negatively affect our financial
condition and results of operations.
Operational risks
Cost pressures and reduced productivity could negatively impact our
operating margins and expansion plans
Cost pressures may continue to occur across the resources industry. As the prices
for our products are determined by the global commodity markets in which we
operate, we do not generally have the ability to offset these cost pressures through
corresponding price increases, which can adversely affect our operating margins.
Notwithstanding our efforts to reduce costs and a number of key cost inputs being
commodity price-linked, the inability to reduce costs and a timing lag may adversely
impact our operating margins for an extended period.
Our Australian-based operations may continue to be affected by the Australian Fair
Work Act 2009 as labour agreements expire and businesses are required to
collectively bargain with unions. In some instances labour unions are pursuing wage
claims in the bargaining process, and/or claims about union access and involvement
in operational decision-making. These claims may adversely affect workplace
flexibility, productivity and costs. Industrial action in pursuit of claims associated with
the bargaining process has occurred in some Businesses, and is likely to continue to
occur as unions press for new claims as part of the bargaining process.
A number of our operations, such as aluminium and copper, are energy or water
intensive and, as a result, the Group’s costs and earnings could be adversely
affected by rising costs or by supply interruptions. These could include the
unavailability of energy, fuel or water due to a variety of reasons, including
fluctuations in climate, significant increases in costs, inadequate infrastructure
capacity, interruptions in supply due to equipment failure or other causes and the
inability to extend supply contracts on economical terms.
These factors could lead to increased operating costs at existing operations and
could negatively impact our operating margins and expansion plans.
Unexpected natural and operational catastrophes may adversely impact our
operations
We operate extractive, processing and logistical operations in many geographic
locations both onshore and offshore. Our key port facilities are located at Port
Hedland and Hay Point in Australia. We have 12 underground mines, including
seven underground coal mines. Our operational processes may be subject to
operational accidents such as port and shipping incidents, underground mine and
processing plant fire and explosion, open-cut pit wall failures, loss of power supply,
railroad incidents, loss of well control, environmental pollution and mechanical critical
equipment failures. Our operations may also be subject to unexpected natural
catastrophes such as earthquakes, flood, hurricanes and tsunamis. Our northwest
Western Australia iron ore, Queensland coal and Gulf of Mexico oil and gas
operations are located in areas subject to cyclones or hurricanes. Our Chilean
copper operations are located in a known earthquake and tsunami zone. Based on
our claims, insurance premiums and loss experience, our risk management
approach is not to purchase insurance for property damage, business interruption
and construction-related risk and primary liability exposures. Existing business
continuity plans may not provide protection for all of the costs that arise from such
events. The impact of these events could lead to disruptions in production, increased
costs and loss of facilities more than offsetting premiums saved, which would
adversely affect our financial results and prospects. Third party claims arising from
these events may exceed the limit of liability insurance policies we have in place.
Our non-controlled assets may not comply with our standards
Some of our assets are controlled and managed by joint venture partners or by other
companies. Management of our non-controlled assets may not comply with our
management and operating standards, controls and procedures, including our
health, safety, environment and community (HSEC) standards. Failure to adopt
equivalent standards, controls and procedures at these assets could lead to higher
costs and reduced production and adversely impact our results and reputation.
Breaches in our information technology security processes may adversely
impact the conduct of our business activities
We maintain global information technology (IT) infrastructure, applications and
communications networks to support our business activities. These systems could
be subject to security breaches resulting in theft, disclosure or corruption of
information, including information relating to acquisitions and divestments, strategic
decision-making, investment market communications or commercially sensitive
information relating to major contracts. Security breaches could also result in
misappropriation of funds or disruptions to our business operations.
Sustainability risks
HSEC impacts, incidents or accidents and related regulations may adversely
affect our people, operations and reputation or licence to operate
Safety
Potential safety events that may have a material adverse impact on our operations
include fire, explosion or rock fall incidents in underground mining operations,
personnel conveyance equipment failures in underground operations, aircraft
incidents, incidents involving light vehicles and mining mobile equipment, ground
control failures, well blowouts, explosions or gas leaks, isolation and working from
heights or lifting operations.
Environment
Environmental incidents that have the potential to create a material impact include
uncontrolled tailings containment breaches, subsidence from mining activities,
escape of polluting substances and uncontrolled releases of hydrocarbons.
Our operations by their nature have the potential to impact biodiversity, water
resources and related ecosystem services. Changes in scientific understanding of
these impacts, regulatory requirements or stakeholder expectations may prevent or
delay project approvals and result in increased costs for mitigation, offsets or
compensatory actions.
We provide for operational closure and site rehabilitation. Our operating and closed
facilities are required to have closure plans. Changes in regulatory or community
expectations may result in the relevant plans not being adequate. This may impact
financial provisioning and costs at the affected operations.
Community
We contribute to the communities in which we operate by providing skilled
employment opportunities, salaries and wages, taxes and royalties and community
development programs, including a commitment to one per cent of pre-tax profits
invested in community programs. Notwithstanding these actions, local communities
may become dissatisfied with the impact of our operations or oppose our new
development projects, including through litigation, potentially affecting costs and
production, and in extreme cases viability. Community related risks may include
community protests or civil unrest, delays to proposed developments and inadvertent
breaches of human rights or other international laws or conventions.
Health
Health risks faced include fatigue and occupational exposure to noise, silica,
manganese, diesel exhaust particulate, fluorides, coal tar pitch, nickel and sulphuric
acid mist. Longer-term health impacts may arise due to unanticipated workplace
exposures or historical exposures of our workforce to hazardous substances. These
effects may create future financial compensation obligations.
We invest in workplace and community health programs, where indicated by risk
assessment. However, infectious diseases such as HIV and malaria may have a
material adverse impact upon our workers or on our communities, primarily in Africa.
Because we operate globally, we may be affected by potential pandemic influenza
outbreaks, such as A(H1N1) and avian flu, in any of the regions in which we operate.
HSEC legislation
The nature of the industries in which we operate means that many of our activities
are highly regulated by health, safety and environmental laws. As regulatory
standards and expectations are constantly developing, we may be exposed to
increased litigation, compliance costs and unforeseen environmental rehabilitation
expenses.
Legislation requiring manufacturers, importers and downstream users of chemical
substances, including metals and minerals, to establish that the substances can be
used without negatively affecting health or the environment may impact our
operations and markets. These potential compliance costs, litigation expenses,
regulatory delays, rehabilitation expenses and operational costs could negatively
affect our financial results.
Hydraulic fracturing
Our Onshore US operations involve hydraulic fracturing, an essential and common
practice in the oil and gas industry to stimulate production of natural gas and oil from
dense subsurface rock formations. Hydraulic fracturing involves using water, sand
and a small amount of chemicals to fracture the hydrocarbon-bearing rock formation,
to allow flow of hydrocarbons into the wellbore. We routinely apply hydraulic
fracturing techniques in our drilling and completion programs.
Attention given to the hydraulic fracturing process could lead to greater opposition to
oil and gas production activities using hydraulic fracturing techniques. Increased
regulation could impose more stringent permitting, public disclosure and well
construction requirements on hydraulic fracturing operations. The hydraulic
fracturing process is typically regulated by relevant state regulatory bodies. Some
states in the United States are considering changes to regulations in relation to
permitting, public disclosure and/or well construction requirements on hydraulic
fracturing and related operations. Arkansas, Louisiana and Texas have adopted
various laws, regulations or issued regulatory guidance concerning hydraulic
fracturing.
Several US federal agencies are reviewing or advancing regulatory proposals
concerning hydraulic fracturing and related operations. The US Environmental
Protection Agency (EPA) commenced a study of the potential impacts of hydraulic
fracturing activities on drinking water resources and issued a non-determinative
Progress Report in December 2012. The EPA is expected to issue a final report for
peer review in CY2014. The US Bureau of Land Management (BLM) issued a
revised proposed rule that would impose new requirements on hydraulic fracturing
operations conducted on federal lands, including the disclosure of chemical additives
used. Activity at the federal level, including the ongoing EPA study, BLM rules and
other analysis by federal and state agencies to assess the impacts of hydraulic
fracturing could spur additional legislative or regulatory actions.
While we have not yet realised a material delay or substantially higher operating
costs as a result of current regulatory requirements in our Onshore US operations,
we cannot predict whether additional federal, state or local laws or regulations will be
enacted and what such actions would require or prohibit. Additional legislation or
regulation could subject our operations to delays and increased costs, or prohibit
certain activities, which could adversely affect the financial performance of our
Onshore US operations.
Due to the nature of our operations, HSEC incidents or accidents and related
regulations may adversely affect our reputation or licence to operate.
Climate change and greenhouse effects may adversely impact our operations
and markets
Carbon-based energy is a significant input in a number of the Group’s mining and
processing operations and we have significant sales of carbon-based energy
products.
A number of governments or governmental bodies have introduced or are
contemplating regulatory change in response to the impacts of climate change.
Under the December 2009 Copenhagen Accord, developed countries established
individual greenhouse gas targets and developing countries established national
mitigation actions. The European Union Emissions Trading System (EU ETS), which
came into effect on 1 January 2005, has had an impact on greenhouse gas and
energy-intensive businesses based in the EU. Our Petroleum Assets in the United
Kingdom are currently subject to the EU ETS, as are our EU-based customers.
Elsewhere, there is current and emerging climate change regulation that will affect
energy prices, demand and margins for carbon-intensive products. The Australian
Government’s response has included the introduction in 2001 of a renewable energy
target of 20 per cent by the year 2020, and a carbon pricing scheme which
commenced with a fixed price on 1 July 2012. From a medium to long-term
perspective, we are likely to see some changes in the cost position of our
greenhouse gas-intensive assets and energy-intensive assets as a result of
regulatory impacts in the countries where we operate. These proposed regulatory
mechanisms may impact our operations directly or indirectly through our suppliers
and customers. Inconsistency of regulations, particularly between developed and
developing countries, may also change the competitive position of some of our
assets. Assessments of the potential impact of future climate change regulation are
uncertain given the wide scope of potential regulatory change in the many countries
where we operate. The South African Government plans to introduce a carbon tax
beginning in 2015; however the details are not yet finalised. Carbon pricing has also
been discussed as part of a broader tax reform package in Chile.
The physical impacts of climate change on our operations are highly uncertain and
will be particular to the geographic circumstances. These may include changes in
rainfall patterns, water shortages, rising sea levels, increased storm intensities and
higher temperatures. These effects may adversely impact the productivity and
financial performance of our operations.
A breach of our governance processes may lead to regulatory penalties and
loss of reputation
We operate in a global environment straddling multiple jurisdictions and complex
regulatory frameworks. Our governance and compliance processes, which include
the review of internal control over financial reporting and specific internal controls in
relation to offers of things of value to government officials and representatives of
state-owned enterprises, may not prevent future potential breaches of law,
accounting or governance practice. The BHP Billiton Code of Business Conduct,
together with our mandatory policies, such as the anti-corruption and the competition
policies, may not prevent instances of fraudulent behaviour and dishonesty nor
guarantee compliance with legal or regulatory requirements. This may lead to
regulatory fines, disgorgement of profits, litigation, loss of operating licences or
reputational damage.
2. Approach to risk management
We believe that the identification and management of risk is central to achieving our
corporate purpose of creating long-term shareholder value.
Risk will manifest itself in many forms and has the potential to impact our health and
safety, environment, community, reputation, regulatory, market and financial
performance and, thereby, the achievement of our corporate purpose.
By understanding and managing risk, we provide greater certainty and confidence
for our shareholders, employees, customers, suppliers, and for the communities in
which we operate. Successful risk management can be a source of competitive
advantage.
Our risks are managed on an enterprise-wide basis. The natural diversification in our
portfolio of commodities, geographies, currencies, assets and liabilities is a key
element in our risk management approach.
Risk management is embedded in our critical business activities, functions and
processes. Materiality and our tolerance for risk are key considerations in our
decision-making.
Risk issues are identified, analysed and assessed in a consistent manner.
Performance requirements exist for the identification, assessment, control and
monitoring of material risk issues that could threaten our corporate purpose and
business plans. These include:
• The potential for impacts on the achievement of our corporate purpose and
business plans is identified through risk assessments using approved
materiality and tolerability criteria. The severity of any risk event is assessed
according to a matrix that describes the degree of harm, injury or loss from
the most severe impact associated with that risk event, assuming reasonable
effectiveness of controls.
• A risk assessment (risk identification, risk analysis and risk evaluation) is
conducted for material risk issues.
• Risk controls are designed, implemented, operated and assessed to produce
a residual risk that is tolerable. Performance standards are established for
critical controls over material risks with supporting monitoring and verification
processes.
We have established processes that apply when entering or commencing new
activities in higher governance risk countries. Risk assessments and a supporting
risk management plan are required to ensure that potential reputation, legal,
business conduct and corruption-related exposures are tolerable and legislative
compliance is maintained, including relevant anti-corruption legislation and the
application of any sanctions or trade embargos.
Our risk management governance approach is described in sections 5.13.1 and 5.14
of the Group’s Annual Report 2013.
3. Management of principal risks
The scope of our operations and the number of industries in which we operate and
engage mean that a range of factors may impact our results. Material risks that could
negatively affect our results and performance are described in section 1.7.1 of the
Group’s Annual Report 2013. Our approach to managing these risks is outlined
below.
Principal risk area Risk management approach
External risks
Risks arise from fluctuations in The diversification of our portfolio of
commodity prices and currency commodities, geographies and
exchange rates, demand changes in currencies is a key strategy for reducing
major markets (such as China or volatility. Section 3.4 of the Group’s
Europe) or actions by governments and Annual Report 2013 describes external
political events that impact long-term factors and trends affecting our results
fiscal stability. and note 29 ‘Financial risk management’
to the financial statements in the Group’s
Annual Report 2013 outlines the Group’s
financial risk management strategy,
including market, commodity, and
currency risk. The Financial Risk
Management Committee oversees these,
as described in section 5.15 of the
Group’s Annual Report 2013. We
engage with governments and other key
stakeholders to ensure the potential
impacts of proposed fiscal, tax, resource
investment, infrastructure access and
regulatory changes are understood and
where possible mitigated.
Business risks
Executing our business strategy creates We support our business strategy
risks related to identifying and proving through minerals and petroleum
reserves, adding and divesting assets exploration programs. The Group
and managing our capital development Resource and Business Optimisation
projects. function provides governance and
technical leadership for Mineral
Resource development and Ore
Reserves reporting as described in
section 2.13.2 and section 2.6 of the
Group’s Annual Report 2013. Our
governance over reporting of Petroleum
reserves is described in section 2.13.1 of
the Group’s Annual Report 2013.
We have established investment
approval processes that apply to all
major capital projects and asset
divestment and acquisitions. The
Investment Committee oversees these
as described in section 5.15 of the
Group’s Annual Report 2013. The Group
Project Management function additionally
ensures that the optimum framework and
capabilities are in place to deliver safe,
predictable and competitive projects.
Additionally we have established project
hubs as operating centres for the study
and execution of a pipeline of major
capital projects using a program
management approach.
Financial risks
Continued volatility in global financial We seek to maintain a solid 'A' credit
markets may adversely impact future rating, supported by our portfolio risk
cash flows, the ability to adequately management strategy. As part of this
access and source capital from financial strategy, commodity prices and currency
markets and our credit rating. This may exchange rates are not hedged, and
impact planned expenditures, as well as wherever possible we take the prevailing
the ability to recover investments in market price, which serves to mitigate
mining and oil and gas projects. In counterparty performance risk. We use
addition, the commercial counterparties Cash Flow at Risk analysis to monitor
(customers, suppliers and financial volatilities and key financial ratios. Credit
institutions) we transact with may, due to limits and review processes are
adverse market conditions, not meet established for all customers and
their obligations. financial counterparties. The Financial
Risk Management Committee oversees
these as described in section 5.15 of the
Group’s Annual Report 2013. Note 29
‘Financial risk management’ to the
financial statements in the Group’s
Annual Report 2013 outlines our financial
risk management strategy.
Operational risks
Operating cost pressures, reduced We seek to ensure that adequate
productivity and labour shortages could operating margins are maintained
negatively impact operating margins and through our strategy to own and operate
expansion plans. Non-controlled assets large, long-life, low-cost and expandable
may not comply with our standards. upstream assets.
Unexpected natural and operational The Group's concentrated effort to
catastrophes may adversely impact our reduce operating costs and drive
operations. Breaches in IT security productivity improvements has realised
processes may adversely impact the tangible results, with a reduction in
conduct of our business activities. controllable costs.
The capability to sustain productivity
improvements is being further enhanced
through continued refinements to our
Operating Model. The Operating Model
is designed to deliver a simple and
scalable organisation, providing a
competitive advantage through defining
work, organisation and performance
measurement. Defined global business
processes, including 1SAP, provide a
standardised way of working across the
organisation. Common processes
generate reliable data and improve
operating discipline. Global sourcing
arrangements have been established to
ensure continuity of supply and
competitive costs for key supply inputs.
We seek to influence the application of
our standards to non-controlled assets.
Through the application of our risk
management processes, we identify
material catastrophic operational risks
and implement the critical controls and
performance requirements to maintain
control effectiveness. Business continuity
plans are required to be established to
mitigate consequences. Consistent with
our portfolio risk management approach,
we continue to be largely self-insured for
losses arising from property damage,
business interruption and construction.
IT security controls to protect IT
infrastructure, applications and
communication networks and respond to
security incidents are in place and
subject to regular monitoring and
assessment. To maintain adequate
levels of protection, we also continue to
monitor the development of threats in the
external environment and assess
potential responses to those threats.
Sustainability risks
HSEC incidents or accidents and related Our approach to sustainability risks is
regulations may adversely affect our reflected in Our Charter and described in
people, operations and reputation or section 2.8. A comprehensive set of
licence to operate. The potential physical Group Level Documents (GLD) set out
impacts and related government Group-wide HSEC-related performance
regulatory responses to climate change requirements to ensure effective
and greenhouse effects may adversely management control of these risks.
impact our operations and markets.
Our Code of Business Conduct sets out
Given that we operate in a challenging requirements related to working with
global environment straddling multiple integrity, including dealings with
jurisdictions, a breach of our governance government officials and third parties.
processes may lead to regulatory Processes and controls are in place for
penalties and loss of reputation. the financial control over financial
reporting, including under Sarbanes-
Oxley. We have established anti-
corruption and anti-trust related
performance requirements overseen by
the Legal and Compliance function. The
Disclosure Committee oversees our
compliance with securities dealing
obligations and continuous and periodic
disclosure obligations.
4. Related party transactions
There have been no related party transactions that have taken place during the year
ended 30 June 2013 that have materially affected the financial position or the
performance of the BHP Billiton Group during that period. Details of the related party
transactions that have taken place during the year ended 30 June 2013 are set out
in Notes 31 ‘Key Management Personnel’ and 32 ‘Related party transactions’ to the
Financial Statements on pages 257 to 263 of the Annual Report 2013.
5. Statement of Directors’ responsibilities
“In accordance with a resolution of the Directors of the BHP Billiton Group, the
Directors declare that:
(a) in the Directors’ opinion and to the best of their knowledge the financial
statements and notes, set out in sections 9.1 and 9.2, are in accordance with
the UK Companies Act 2006 and the Australian Corporations Act 2001,
including:
(i) Complying with the applicable Accounting Standards; and
(ii) Giving a true and fair view of the assets, liabilities, financial position
and profit or loss of each of BHP Billiton Limited, BHP Billiton Plc, the
BHP Billiton Group and the undertakings included in the consolidation
taken as a whole as at 30 June 2013 and of their performance for the
year ended 30 June 2013;
(b) the financial report also complies with International Financial Reporting
Standards, as disclosed in note 1;
(c) to the best of the Directors’ knowledge, the Directors’ Report includes a fair
review of the development and performance of the business and the financial
position of the BHP Billiton Group and the undertakings included in the
consolidation taken as a whole, together with a description of the principal
risks and uncertainties that the Group faces; and
(d) in the Directors’ opinion there are reasonable grounds to believe that each of
the BHP Billiton Group, BHP Billiton Limited and BHP Billiton Plc will be able
to pay its debts as and when they become due and payable.”
Sponsor: Absa Capital (the investment banking division of Absa Bank Limited, affiliated
with Barclays).
BHP Billiton Plc Registration number 3196209
Registered in England and Wales
Registered Office: Neathouse Place London SW1V 1BH United Kingdom
A member of the BHP Billiton Group which is headquartered in Australia
Date: 25/09/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
