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BHP BILLITON PLC - Annual Financial Report 2016

Release Date: 21/09/2016 07:05
Code(s): BIL     PDF:  
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Annual Financial Report 2016

BHP Billiton Plc
Registration number 3196209
Registered in England and Wales
Share code: BIL
ISIN: GB0000566504


Issued by:                 BHP Billiton Plc


Date:                      21 September 2016


To:                        London Stock Exchange
                           JSE Limited


For Release:               Immediately


Contact:                   Helen Ratsey +44 (0) 20 7802 7540



                        BHP Billiton Plc – Annual Financial Report 2016


 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.morningstar.co.uk/uk/NSM

      -    Annual Report 2016
           http://www.bhpbilliton.com/~/media/bhp/documents/investors/annual-
           reports/2016/bhpbillitonannualreport2016.pdf

      -    Sustainability Report 2016
           http://www.bhpbilliton.com/~/media/bhp/documents/investors/annual-
           reports/2016/bhpbillitonsustainabilityreport2016.pdf

      -    Form 20-F
           http://www.bhpbilliton.com/~/media/bhp/documents/investors/annual-
           reports/2016/bhpbillitonform20f2016.pdf

      -    Notice of Annual General Meeting 2016 - BHP Billiton Plc
           http://www.bhpbilliton.com/~/media/bhp/documents/investors/annual-
           reports/2016/bhpbillitonnoticeofmeetingplc2016.pdf

      -    Proxy Form (UK Principal Register)

      -    Proxy Form (South Africa Branch Register)

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 2016 (page references
are to pages in the Annual Report) and should be read in conjunction with BHP
Billiton’s Final Results announcement issued on 16 August 2016. 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 2016 in full.

1. Principal risks and uncertainties

1.1 Approach to risk management

Identifying and managing risk is central to achieving our corporate purpose of
creating long-term shareholder value.

If realised, risks have the potential to impact our health, safety, environment,
community, regulatory, market and financial performance, as well as our reputation,
and thereby the achievement of our corporate purpose. Successful risk management
can be a source of competitive advantage.

We provide greater certainty and confidence for our stakeholders by understanding
and managing risk.

BHP Billiton's risks are viewed and managed on a Company-wide basis. Our
diversified portfolio of commodities, geographies, currencies, assets and liabilities is
a key part of our risk management approach.

We embed risk management in our critical business activities, functions, processes
and systems. Materiality and risk tolerance are key considerations in our decision-
making.

We seek to identify, analyse and assess risk issues. We implement the following
performance requirements for material risks that could threaten our corporate
purpose or strategy:

- Risk assessments – we identify, analyse (including likelihood and impact
assessment), evaluate, treat and monitor risks.

- Risk controls – we design, implement, operate and assess controls to determine
control effectiveness. We establish performance standards for critical controls over
material risks with supporting verification processes.

- Risk materiality and tolerability evaluation – we assess the materiality of the risk
based on the degree of financial and non-financial impacts, including health,
safety, environment, community, reputation and legal impacts. Tolerability
assessment is based on a combination of residual risk and control effectiveness.

We apply established processes when entering or commencing new activities in
high-risk countries. These include risk assessments and supporting risk
management plans to ensure potential reputation, legal, business conduct and
corruption-related exposures are managed and legislative compliance is maintained,
including relevant anti-corruption legislation and the application of any relevant
sanctions or trade embargoes.

For information on our risk management governance approach, refer to sections
2.13.1 and 2.14 of the Annual Report 2016.

Robust risk assessment and viability statement

In accordance with the UK Corporate Governance Code, the Board confirms that it
has carried out a robust assessment of the Company's principal risks, including
those that would threaten the business model, future performance, solvency or
liquidity.

In accordance with the UK Corporate Governance Code (longer-term viability), the
Directors have assessed the prospects of the Company over the next three years,
taking account of the Company's current position and principal risks.

The Directors believe a three-year viability assessment period is appropriate for the
following reasons. BHP Billiton has a two-year budget, a five-year outlook and a 20-
year strategic planning horizon. The extent and synchronised nature of the decline in
commodity prices experienced in FY2016 were stronger than anticipated, and the
Company has publicly stated our view that the outlook for the sector remains
challenging and volatile in the short to medium term. A significant proportion of the
variability in plans and budgets for the Company is influenced by exchange rate
volatility and price volatility. A three-year period was therefore seen as striking an
appropriate balance.

The Directors’ assessment took into account, among other things, the Company’s
commodity price protocols including low-case prices; the latest funding and liquidity
update; the long-dated maturity profile of the Company’s debt and the maximum
debt maturing in any one year; the Company-level risk profile and the mitigating
actions available should particular risks materialise; the annual Board strategy
forum, which provides a strategic review of the Company’s markets and plans under
divergent scenarios and considers available strategic options; the flexibility in the
Company’s capital and exploration expenditure programs under the enhanced
capital allocation framework; and the reserve life of the Company’s minerals assets
and the reserves-to-production life of its oil and gas assets.

The Directors’ assessment also took account of additional stress-testing of the
balance sheet against two significant risk events: a shipping blockage of the Port
Hedland Channel that could disrupt export of iron ore and a short-term extreme
hypothetical event that catches the global resource industry off-guard, causing an
abrupt and significant disruption to global capital markets.
The Directors were also mindful of the scenario analysis incorporated into the
Company’s corporate planning process. While the scenarios use a 20-year time
horizon, scenario planning is important in helping identify the key uncertainties facing
the global economy and natural resources sector.

Taking account of these matters, and the Company’s current position and principal
risks, the Directors have a reasonable expectation that BHP Billiton will be able to
continue in operation and meet its liabilities as they fall due over the next three
years.

Risk factors

There are a number of factors that may have an adverse effect on our results and
operations.

The principal risks discussed below, separately or in combination, could have a
material effect on BHP Billiton's strategic and operational plans and its reputation. In
addition, we have also set out the risks relating to the failure of the Fundão tailings
dam at Samarco Mineração S.A. (Samarco dam failure), which could, separately or
in combination with the principal risks, have a material effect on our business,
competitive position, cash flows, prospects, liquidity and shareholder returns.

Samarco dam failure

Our potential liabilities from litigation and other actions resulting from the
Samarco dam failure are subject to significant uncertainty and cannot be
reliably estimated at this time but they could have a material adverse effect on
our business.

On 5 November 2015, the Samarco Mineração S.A. (Samarco) iron ore operations
experienced a tailings dam failure that resulted in a release of mine tailings, flooding
the communities of Bento Rodrigues, Gesteira and Paracatu and impacting other
communities downstream and the Rio Doce. Samarco is a joint venture owned
equally by BHP Billiton Brasil Limitada (BHP Billiton Brasil) and Vale S.A. (Vale). For
information on the Samarco dam failure, refer to section 1.4 of the Annual Report
2016.

The Samarco dam failure and subsequent suspension of Samarco's mining and
processing operations have had a significant impact on our financial results for the
year ended 30 June 2016, as described in section 1.4 of the Annual Report 2016
and in note 3 'Significant events - Samarco dam failure' to the Financial Statements
in the Annual Report 2016.

Mining and processing operations remain suspended following the dam failure.
Samarco is currently progressing plans to resume operations; however, significant
uncertainties surrounding the nature and timing of any resumption of operations
remain, including as a result of Samarco's significant debt obligations. For further
details of financial information relating to Samarco refer to note 28 'Investments
accounted for using the equity method' to the Financial Statements in the Annual
Report 2016.

BHP Billiton Brasil is among the defendants named in a number of legal proceedings
initiated by individuals, non-governmental organisations (NGOs), corporations and
governmental entities in Brazilian federal and state courts following the Samarco
dam failure. The other defendants include Vale and Samarco. The lawsuits seek
various remedies, including rehabilitation costs, compensation to injured individuals
and families of the deceased, recovery of personal and property losses, moral
damages and injunctive relief. These legal proceedings include civil public actions
filed by state prosecutors in Minas Gerais (claiming damages of approximately
R$7.5 billion (US$2.3 billion)), public defenders in Minas Gerais (claiming damages
of approximately R$10 billion (US$3.1 billion)) and state prosecutors in Espírito
Santo (claiming damages of approximately R$2 billion (US$620 million)). Given the
preliminary status of all these proceedings, and the duplicative nature of the
damages sought in these proceedings and the R$20 billion (US$6.2 billion) and
R$155 billion (US$48 billion) claims noted below, it is not possible at this time to
provide a range of possible outcomes or a reliable estimate of potential future
exposures for BHP Billiton Brasil.

Among the claims brought against BHP Billiton Brasil is a public civil claim
commenced by the Federal Government of Brazil, states of Espírito Santo, Minas
Gerais and other public authorities (Brazilian Authorities) on 30 November 2015,
seeking the establishment of a fund of up to R$20 billion (US$6.2 billion) in
aggregate for clean-up costs and damages.

On 2 March 2016, BHP Billiton Brasil together with Samarco and Vale entered into a
Framework Agreement (Framework Agreement) with the Brazilian Authorities to
establish the Fundação Renova that will develop and execute environmental and
socio-economic programs to remediate and provide compensation for damage
caused by the Samarco dam failure. In light of the significant uncertainties
surrounding the nature and timing of ongoing future operations at Samarco and
based on currently available information, at 30 June 2016, BHP Billiton recognised a
provision of US$1.2 billion, before tax and after discounting, in respect of BHP
Billiton Brasil's potential obligations under the Framework Agreement.

The Framework Agreement was ratified by the Federal Court of Appeal in Brasilia on
5 May 2016, suspending the R$20 billion public civil claim. However, on 30 June
2016, the Superior Court of Justice issued a preliminary order (Interim Order)
suspending the ratification of the Framework Agreement and reinstating the R$20
billion public civil claim. Samarco, Vale and BHP Billiton Brasil and the Federal
Government have appealed the Interim Order before the Superior Court of Justice. It
is not possible at this time to provide a range of possible outcomes or a reliable
estimate of potential future exposures for BHP Billiton Brasil in relation to the R$20
billion public civil claim.

BHP Billiton Brasil is also among the defendants named in a claim brought by the
Federal Public Prosecution Service on 3 May 2016, seeking R$155 billion
(approximately US$43 billion) for reparation, compensation and moral damages in
relation to the Samarco dam failure. Given the preliminary status of these
proceedings, it is not possible at this time to provide a range of possible outcomes or
a reliable estimate of potential future exposures for BHP Billiton Brasil.

In addition, government inquiries and investigations relating to the Samarco dam
failure have been commenced by numerous agencies of the Brazilian Government,
and other lawsuits and investigations are at the early stages of proceedings,
including a shareholder action filed in the United States against BHP Billiton and
certain current or former Directors and officers. For more information on the
shareholder action and other lawsuits relating to the Samarco dam failure, refer to
section 6.5 of the Annual Report 2016. Additional lawsuits and government
investigations relating to the Samarco dam failure may be brought against BHP
Billiton Brasil and possibly other BHP Billiton entities in Brazil or other jurisdictions.

Works are underway to reinforce and improve the dam structures at Samarco so as
to contain the remaining tailings materials. A large portion of the works are
scheduled to be completed before the next wet season commences. The potential
nonetheless remains for further release or downstream movement of tailings
material during this season, which may result in additional claims, fines and
proceedings (or impact existing proceedings) and may also have additional
consequences on the environment and the feasibility, timing and scope of any restart
of Samarco operations.

Our potential costs and liabilities in relation to the Samarco dam failure are subject to
a high degree of uncertainty and cannot be reliably estimated at this time. The total
amounts that we may be required to pay will be dependent on many factors,
including the timing and nature of a potential restart of operations at Samarco, the
number of claims that become payable, the quantum of any fines levied, the
outcome of litigation and the amount and timing of payments under any judgements
or settlements. Nevertheless, such potential costs and liabilities could have a
material adverse effect on our business, competitive position, cash flows, prospects,
liquidity and shareholder returns. For more information on the Samarco dam failure,
refer to section 1.4 of the Annual Report 2016.

External risks

Fluctuations in commodity prices (including sustained price shifts) 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 significant 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 necessarily
insulate the Company from the effects of price changes. Fluctuations in commodity
prices can occur due to price shifts reflecting underlying global economic and
geopolitical factors, industry demand, increased supply due to the development of
new productive resources or increased production from existing resources,
technological change, product substitution and national tariffs. We are particularly
exposed to price movements in iron ore, coal, copper, oil and gas. For example, a
US$1 per tonne decline in the average iron ore price and US$1 per barrel decline in
the average oil price would have an estimated impact on FY2016 profit after taxation
of US$141 million and US$58 million, respectively. For more information in relation
to commodity price impacts, refer to section 1.8.1 of the Annual Report 2016.
Volatility in global economic growth, particularly in developing economies, has the
potential to adversely affect future demand and prices for commodities. The impact
of sustained price shifts and short-term price volatility, including the effects of
unwinding the sustained monetary stimulus in the United States, and uncertainty
surrounding the details of the United Kingdom's exit from the European Union
following the June 2016 referendum, creates the risk that our financial and operating
results, including cash flows and asset values, will be materially and adversely
affected by short or long-term declines in the prevailing prices of our products.

Our financial results may be negatively affected by exchange rate fluctuations

The geographic diversity of the countries in which we operate means that our assets,
earnings and cash flows are influenced by a wide variety of currencies. 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 is
denominated and the currency in which we present our financial performance.
Operating costs are influenced by the currencies of those countries where our assets
and facilities are located and also by those currencies in which the costs of imported
equipment and services are determined. The Australian dollar, Chilean peso and US
dollar are some of the currencies influencing our operating costs. We do not
generally believe 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 the Board.

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$13.2 billion (FY2015: US$16.3 billion)
or 42.6 per cent (FY2015: 36.6 per cent) of our revenue in FY2016. FY2016 sales
into China by commodity included 61 per cent Iron Ore, 28 per cent Copper, 10 per
cent Coal and one per cent Nickel (reported in Group and Unallocated). A continued
slowing in China’s economic growth and demand could result in lower prices for our
products and negatively impact our results, including cash flows.

Actions by governments, additional regulation or political events in the
countries in which we operate could have a negative impact on our business

There are varying degrees of political, judicial and commercial stability in the
locations in which we have operated and non-operated assets around the globe. At
the same time, our exposure to emerging markets may involve additional risks that
could have an adverse effect on the profitability of an operation. These risks could
include terrorism, civil unrest, judicial activism, regulatory investigation,
nationalisation, protectionism, renegotiation or nullification of existing contracts,
leases, permits or other agreements, imposts, controls or prohibitions on the
production or use of certain products, 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 our operations in those
countries, as well as the Company’s overall operating results, financial condition and
prospects.

Our operated and non-operated assets are based on material long-term
investments that are dependent on long-term fiscal stability and could be adversely
affected by changes in fiscal legislation, changes in interpretation of fiscal legislation,
periodic challenges and disagreements with tax authorities and legal proceedings
relating to fiscal matters. The natural resources industry continues to be regarded as
a source of tax revenue and can also be adversely affected by broader fiscal
measures applying to businesses generally. The Group is currently involved in a
number of uncertain tax and royalty matters – refer to note 5 ‘Income tax expense’ to
the Financial Statements in the Annual Report 2016 for further detail.

Our business could be adversely affected by new or evolving government
regulations and international standards, such as controls on imports, exports, prices
and greenhouse gas emissions. The nature of the industries in which we operate
means many of our activities are highly regulated by laws relating to health, safety,
environment and community impacts. Increasing requirements relating to regulatory,
environmental, social or community approvals can potentially result in significant
delays or interruptions and may adversely affect the economics of new mining and
oil and gas projects, the expansion of existing operations and the performance of our
operations. As regulatory standards and expectations are constantly developing, we
may be exposed to increased regulatory review, compliance costs to meet new
operating and reporting standards and unforeseen closure and site rehabilitation
expenses.

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, uncertain or subject to legislative change. The impact of climate change
may increase competition for, and the regulation of, limited resources, such as
power and water. These factors may adversely affect the expansion of our business
and ability of our assets to operate efficiently.

We operate in countries where land tenure can be uncertain and where disputes
may arise in relation to ownership and use. For example, in Australia, the Native
Title Act 1993 provides for the establishment and recognition of native title under
certain circumstances.

New or evolving regulations and international standards are complex, difficult to
predict and outside our control. Potential compliance costs, litigation expenses,
regulatory delays, rehabilitation expenses and operational costs arising from
government action, regulatory change and evolving standards could negatively affect
our Company, future results, prospects and our financial condition.

Business risks

Failure to discover or acquire new resources, maintain 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, gas and minerals operations, our future results and financial condition are directly
related to the success of our exploration and acquisition efforts, and our ability to
generate reserves to meet our future production requirements at a competitive cost.
Exploration activity occurs adjacent to established operations and in new regions, in
developed and less-developed countries. These activities may increase land tenure,
infrastructure and related political risks. A failure in our ability to discover or acquire
new resources, maintain reserves or develop new operations in sufficient quantities
to maintain or grow the current level of our reserves could negatively affect our
results, financial condition and prospects. Deterioration in commodities pricing may
make some existing reserves uneconomic. Our actual exploration drilling activities
and future drilling budget will depend on our inventory size and quality, drilling
results, commodity prices, drilling and production costs, availability of drilling
services and equipment, lease expirations, land access, transportation pipelines,
railroads and other infrastructure constraints, regulatory approvals and other factors.

There are numerous uncertainties inherent in estimating mineral and oil and gas
reserves. Geological assumptions about our mineralisation that are valid at the time
of estimation may change significantly when new information becomes available.
Estimates of reserves that will be recovered, or the cost at which we anticipate
reserves will be recovered, are based on uncertain assumptions. The uncertain
global financial outlook may affect economic assumptions related to reserve
recovery and may require reserve restatements. Reserve restatements could
negatively affect our results and prospects.

Potential changes to our portfolio of assets through acquisitions and
divestments may have a material adverse effect on our future results and
financial condition

We regularly review the composition of our asset portfolio and from time-to-time may
add assets to, or divest assets from, the portfolio. There are a number of risks
associated with acquisitions or divestments. These include:
- adverse market reaction to such changes or the timing or terms on which changes
  are made;

- the imposition of adverse regulatory conditions and obligations;

- commercial objectives not being achieved as expected;

- unforeseen liabilities arising from 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 processes, 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. For instance, incidents or unexpected
conditions encountered during development projects may cause setbacks or cost
overruns, required licences, permits or authorisations to build a project may be
unobtainable at anticipated costs, or may be obtained only after significant delay and
market conditions may change, thereby making a project less profitable than initially
projected.

In addition, we may fail to develop and 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 and adversely affect 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 strong balance sheet. However, fluctuations in commodity
prices and the ongoing global economic volatility may adversely affect our future
cash flows and ability to access capital from financial markets at acceptable pricing.
If our key financial ratios and credit rating are not maintained, our liquidity and cash
reserves, interest rate costs on borrowed debt, future access to financial capital
markets and the ability to fund current and future major capital programs could be
adversely affected.

We may not fully recover our investments in mining, oil and gas assets, which
may require financial write-downs

One or more of our assets may be adversely affected 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, oil and gas assets
and may require financial write-downs, including goodwill, adversely affecting our
financial results.

The commercial counterparties we transact with may not meet their obligations,
which may negatively affect our results

We contract with many commercial and financial counterparties, including end-
customers, suppliers and financial institutions. Global economic volatility continues
to strain global financial markets, with tighter liquidity in China and uncertain
business conditions generally. We maintain a ‘one book’ approach with commercial
counterparties to ensure all credit exposures are quantified. However, our existing
counterparty credit controls may not prevent a material loss due to credit exposure to
a major customer segment 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, diesel 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

Unexpected natural and operational catastrophes may adversely impact our
operations

We operate onshore and offshore extractive, processing and logistical operations in
many geographic locations. Our key port facilities are located at Coloso and
Antofagasta in Chile and Port Hedland and Hay Point in Australia. We have four
underground mines, including one underground coal mine. 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 or tailings/waste storage facility failures, loss of power supply, railroad incidents,
loss of well control, environmental pollution, and mechanical critical equipment
failures and cyber security attacks on Company infrastructure. Our operations may
also be subject to unexpected natural catastrophes such as earthquakes, floods,
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 and Peruvian base metals operations
are located in a known earthquake and tsunami zone. Based on our risk
management and concerns about the value of external insurance in the natural
resource sector, our risk financing (insurance) approach is to minimise or not to
purchase external insurance for certain risks, including property damage and
business interruption, sabotage and terrorism, marine cargo, construction, primary
public liability and employee benefits. Existing business continuity plans may not
provide protection for all the costs that arise from such events, including clean-up
costs, litigation and other claims. The impact of these events could lead to
disruptions in production, increased costs and loss of facilities. Where external
insurance is purchased, third party claims arising from these events may exceed the
limit of liability of the insurance policies we have in place. Additionally, any uninsured
or underinsured losses could have a material adverse effect on our financial position
or results of operations.

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.
Although our efforts to reduce costs and a number of key cost inputs are commodity
price-linked, the inability to reduce costs and a timing lag may adversely impact our
operating margins for an extended period.

A number of our operations, such as 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, inadequate
infrastructure capacity, interruptions in supply due to equipment failure or other
causes and the inability to extend supply contracts on economic terms.

Many of our Australian employees have conditions of employment, including wages,
governed by the operation of the Australian Fair Work Act 2009. Conditions of
employment are often contained within collective agreements that are required to be
renegotiated on expiry (typically every three to four years). In some instances, under
the operation of the Fair Work Act it can be expected that unions will pursue
increases to conditions of employment, including wages, and/or claims for greater
union involvement in business decision-making.

In circumstances where a collective agreement is being renegotiated, industrial
action is permitted under the Fair Work Act. Industrial action and any subsequent
settlement to mitigate associated commercial damage can adversely affect
productivity and customer perceptions as a reliable supplier, and contribute to
increases in costs.

The industrial relations environment in Chile remains challenging and it is possible
that we will see further disruptions. Changes to labour legislation are being
considered by the Chilean Congress, and if passed would result in the right to have
a single negotiating body across different operations owned by a single company,
which may also result in higher risk of operational stoppages.

More broadly, cost and productivity pressures on our Company and our contractors
and sub-contractors may increase the risk of industrial action and employment
litigation.

These factors could lead to increased operating costs at existing operations,
interruptions or delays and could negatively impact our operating margins and
expansion plans.

Our non-operated assets and our commercial counterparties may not comply
with our standards

Some of our assets are operated and managed by joint venture partners or by other
companies. Management of our non-operated assets may not comply with our
management and operating standards, controls and procedures, including our
health, safety, environment and community (HSEC) standards. Failure to adopt
equivalent standards, controls and procedures at these assets could lead to higher
costs and reduced production, litigation and regulatory action, delays or interruptions
and adversely impact our results, prospects and reputation.

Commercial counterparties, such as our suppliers, contractors and customers, may
not comply with our HSEC standards causing adverse reputational and legal
impacts.

Breaches in, or failures of, our information technology may adversely impact
our business activities

We maintain and increasingly rely on information technology (IT) systems, consisting
of digital infrastructure, applications and networks to support our business activities.
These systems may be subject to security breaches (e.g. cyber-crime or activists) or
other incidents (e.g. from negligence) that can result in misappropriation of funds,
increased health and safety risks to people, disruption to our operations,
environmental damage, poor product quality, loss of intellectual property, disclosure
of commercially or personally sensitive information, legal or regulatory breaches and
liability, other costs and reputational damage.

Evolving convergence of IT and Operational Technology (OT) networks across
industries, including ours, present additional cyber-related risk as traditionally IT
networks have been focused on availability of service to the enterprise.

Sustainability risks

Safety, health, environmental and community impacts, incidents or accidents
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 people,
operations, reputation or licence to operate include fire, explosion or rock fall
incidents in underground mining operations, personnel conveyance equipment
failures in underground operations, aircraft incidents, road incidents involving buses
and light vehicles, incidents between light vehicles and mobile mining equipment,
ground control failures, uncontrolled tailings containment breaches, well blowouts,
explosions or gas leaks and accidents involving inadequate isolation, working from
heights or lifting operations.

Health

Health risks faced include fatigue, musculoskeletal illnesses and occupational
exposure to substances or agents including noise, silica, coal mine dust, diesel
exhaust particulate, nickel and sulphuric acid mist and mental illness. 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, adversely impact our people, reputation or
licence to operate and affect the way we conduct our operations.
Given we operate globally, we could be affected by a public health emergency such
as influenza or other infectious disease outbreaks in any of the regions in which we
operate.

Environment

Our operations by their nature have the potential to adversely impact air quality,
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.

Environmental incidents have the potential to lead to material adverse impacts on
our people, operations, reputation or licence to operate. These include uncontrolled
tailings containment breaches, subsidence from mining activities, escape of polluting
substances and uncontrolled releases of hydrocarbons.

We provide for operational closure and site rehabilitation. Our operating and closed
facilities are required to have closure plans. Changes in regulatory or community
expectations may result in the relevant plans not being adequate. This may increase
financial provisioning and costs at the affected operations.

Climate change may adversely affect the value of our Company, and our operations
and markets

The physical and non-physical impacts of climate change may affect our operations,
productivity and the markets in which we sell our products. This includes acute and
chronic changes in weather, policy and regulatory change, technological
development and market and economic responses. Fossil fuel-related emissions are
a significant source of greenhouse gases contributing to climate change. We
produce fossil fuels such as coal, oil and gas for sale to customers, and we use
fossil fuels in our mining and processing operations either directly or through the
purchase of fossil fuel based electricity.

A number of national governments have already introduced, or are contemplating
the introduction of, regulatory responses to greenhouse gas emissions from the
combustion of fossil fuels to address the impacts of climate change. This includes
countries where we have operations such as Australia, the United States and Chile,
as well as customer markets such as China, India and Europe. In addition, the
international community completed a new global climate agreement at the 21st
Conference of the Parties (COP21) in Paris in December 2015. The absence of
regulatory certainty, global policy inconsistencies and the challenges presented by
managing our portfolio across a variety of regulatory frameworks has the potential to
adversely affect our operations and supply chain. From a medium- to long-term
perspective, we are likely to see some adverse 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 adversely affect our operations directly or indirectly through our
suppliers and customers. Assessments of the potential impact of future climate
change regulation are uncertain given the wide scope of potential regulatory change
in the many countries in which we operate. For example, the Australian Government
repealed a carbon tax in 2014 and carbon pricing is being discussed as part of a
broader tax reform package in Chile.

There is a potential gap between the current valuation of fossil fuel reserves on the
balance sheets of companies and in global equities markets and the reduced value
that could result if a significant proportion of reserves were rendered incapable of
extraction in an economically viable fashion due to technology, regulatory or market
responses to climate change. In such a scenario, stranded reserve assets held on
our balance sheet may need to be impaired or written off and our inability to make
productive use of such assets may also negatively impact our financial condition and
results.

The growth of alternative energy supply options, such as renewables and nuclear,
could also present a change to the energy mix that may reduce the value of fossil
fuel assets.

The physical effects of climate change on our operations may include changes in
rainfall patterns, water shortages, rising sea levels, increased storm intensities and
higher temperatures. These effects may adversely affect the financial performance
of our operations.

Community

Local communities may be directly impacted by and become dissatisfied with our
operations or oppose our new development projects, including through legal action,
potentially affecting schedules, costs and production, and in extreme cases viability
and adversely impacting our reputation and licence to operate. Community-related
risks may include community protests or civil unrest, complaints to grievance
mechanisms and civil society activism and may cause delays or changes to
proposed developments and interruptions to existing operations. Our operations or
activities also risk the potential for adverse impacts on human rights or breaches of
other international laws or conventions.

Hydraulic fracturing

Our Onshore US operations involve hydraulic fracturing, which involves using water,
sand and a small amount of chemicals to fracture hydrocarbon-bearing subsurface
rock formations, to allow flow of hydrocarbons into the wellbore. We depend on the
use of hydraulic fracturing techniques in our onshore US drilling and completion
programs.

In the United States, the hydraulic fracturing process is typically regulated by
relevant US state regulatory bodies. Arkansas, Louisiana and Texas (the states in
which we currently operate) have adopted various laws and regulations, or issued
regulatory guidance, concerning hydraulic fracturing. Some states are considering
changes to regulations in relation to permitting, public disclosure, and/or well
construction requirements on hydraulic fracturing and related operations, including
the possibility of outright bans on the process. 

Several US federal agencies are also reviewing or advancing regulatory proposals
concerning hydraulic fracturing and related operations. The US Environmental
Protection Agency (EPA) commenced a study of the potential impacts of hydraulic
fracturing activities on drinking water resources. The agency issued a non-
determinative Progress Report in December 2012 and released a preliminary
analysis on 30 March 2015. The EPA's Science Advisory Board (SAB) engaged a
research advisory panel to address criticism over the study's core conclusion and
that panel issued a draft report on 7 January 2016. The EPA's Office of Inspector
General continues to research the EPA's and states' ability to manage potential
threats to water resources from hydraulic fracturing and produced a report on 16 July
2015 identifying two areas for improvement. The US Bureau of Land Management
(BLM) issued a final rule on 20 March 2015 that would impose new requirements on
hydraulic fracturing operations conducted on federal lands, including the disclosure
of chemicals used, wellbore integrity, water use and disposal of flow back water. The
BLM regulation took effect on 24 June 2015. On 30 September 2015, the US District
Court for the District of Wyoming granted a motion for a preliminary injunction that
prevents enforcement of the regulation by BLM pending litigation. Activity at the
federal level, including the ongoing EPA study, BLM rules and other analysis by
federal and state agencies to assess the impacts of hydraulic fracturing, could spur
additional legislative or regulatory actions.

While we have not experienced a material delay or substantially higher operating
costs in our Onshore US operations as a result of current regulatory requirements,
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.

A breach of our governance processes may lead to regulatory penalties and loss of
reputation

We operate in a global environment that encompasses multiple jurisdictions and
complex regulatory frameworks. Our governance and compliance processes, which
include the review of internal controls over financial reporting and specific internal
controls in relation to trade and financial sanctions and offers of anything of value to
government officials and representatives of state-owned enterprises, may not
prevent future potential breaches of law, or of accounting or governance practice.
Our Code of Business Conduct, together with our mandatory policies, such as the
anti-corruption, trade and financial sanctions and 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, allegations or investigations by regulatory
authorities, loss of operating licences and/or reputational damage.

1.2 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 1.9.2 of the
Annual Report 2016. Our approach to managing these risks is outlined below.

Principal risk area                         Risk management approach

Samarco dam failure                         The Board has spent a significant
                                            amount of time discussing Samarco and
Our potential liabilities from litigation   considering our approach to the
and other actions resulting from the        Samarco dam failure.
Samarco dam failure are subject to
significant uncertainty and cannot be       Soon after the Samarco dam failure
reliably estimated at this time.            occurred, a sub-committee of the Board
                                            was established to further consider and
                                            oversee matters relating to the Samarco
                                            dam failure, including BHP Billiton's
                                            support of the recovery and response
                                            efforts, investigation of the cause of the
                                            dam failure and our engagement with
                                            key stakeholders. The Samarco sub-
                                            committee comprises John Schubert
                                            (Chairman), Jac Nasser, Lindsay
                                            Maxsted and Malcolm Brinded.
                                            Alongside the Samarco sub-committee,
                                            the Risk and Audit Committee and the
                                            Sustainability Committee have
                                            continued to consider matters relating to
                                            Samarco as part of the ongoing duties
                                            of those committees, including Samarco
                                            funding and the review of significant
                                            dams in the portfolio.
                                            We believe these efforts provide a
                                            robust and comprehensive approach for
                                            the Board to best provide its oversight
                                            and input, and allows appropriate
                                            consideration to be brought to the
                                            various aspects of the response.
                                            For further information on BHP Billiton's
                                            response to the Samarco dam failure,
                                            refer to section 1.4 of the Annual Report
                                            2016.

External risks                           The diversification of our portfolio of
                                         commodities, geographies and
Risks arise from fluctuations in         currencies is a key strategy for reducing
commodity prices and demand in major     the effects of volatility. Section 1.8.1 of
markets (such as China or Europe) or     the Annual Report 2016 describes
changes in currency exchange rates       external factors and trends affecting our
and actions by governments, including    results and note 21 'Financial risk
new regulations and standards, and       management' to the Financial
political events that impact long-term   Statements in the Annual Report 2016
fiscal stability.                        outlines the Company's financial risk
                                         management strategy, including market,
                                         commodity, and currency risk. The
                                         Financial Risk Management Committee
                                         oversees these risks as described in
                                         sections 2.14 and 2.15 of the Annual
                                         Report 2016. We also engage with
                                         governments and other key
                                         stakeholders to ensure the potential
                                         adverse impacts of proposed fiscal, tax,
                                         resource investment, infrastructure
                                         access, regulatory changes and
                                         evolving international standards are
                                         understood and where possible
                                         mitigated.

Business risks                           Our Geoscience Centre of Excellence
                                         manages governance and technical
Risks include the inherent uncertainty   leadership for Mineral Resource
of identifying and proving reserves,     development and Ore Reserves
adding and divesting assets and          reporting as described in section 6.3.2
managing our capital development         of the Annual Report 2016. Our
projects.                                governance over reporting of Petroleum
                                         reserves is described in section 6.3.1 of
                                         the Annual Report 2016.
                                         We have established investment
                                         approval processes that apply to all
                                         major capital projects and asset
                                         divestment and acquisitions. The
                                         Investment Committee oversees these
                                         as described in sections 2.14 and 2.15
                                         of the Annual Report 2016. Our Project
                                         Management function additionally seeks
                                         to ensure that projects are safe,
                                         predictable and competitive.


Financial risks                            We seek to maintain a strong balance
                                           sheet supported by our portfolio risk
Continued volatility in global financial   management strategy. As part of this
markets may adversely impact future        strategy, the diversification of our
cash flows, our ability to adequately      portfolio reduces overall cash flow
access and source capital from             volatility. Commodity prices and
financial markets and our credit rating.   currency exchange rates are not
Volatility may impact planned              generally hedged, and wherever
expenditures, as well as the ability to    possible we take the prevailing market
recover investments in mining, oil and     price. A trial hedging program for our
gas projects. In addition, the             shale gas operations is an exception
commercial counterparties (customers,      and reflects the inherent differences in
suppliers, contractors and financial       shale gas operations in our portfolio. A
institutions) we transact with may, due    shale gas operation has a short-term
to adverse market conditions, fail to      investment cycle and a price responsive
meet their contractual obligations.        supply base and hedging prices and
                                           input costs can be used to fix
                                           investment returns and manage
                                           volatilities. We use Cash Flow at Risk
                                           analysis to monitor volatilities and key
                                           financial ratios. Credit limits and review
                                           processes are required to be
                                           established for all customers and
                                           financial counterparties. The Financial
                                           Risk Management Committee oversees
                                           these as described in sections 2.14 and
                                           2.15 of the Annual Report 2016. Note
                                           21 'Financial risk management' to the
                                           Financial Statements in the Annual
                                           Report 2016 outlines our financial risk
                                           management strategy.


Operational risks                                We aim to maintain adequate operating
                                                 margins through our strategy to own and
Operating cost pressures and reduced             operate large, long-life, low-cost and
productivity could negatively affect operating   expandable upstream assets.
margins and expansion plans. Non-operated        The organisation's concentrated effort to
assets may not comply with our standards.        reduce operating costs and drive productivity
Unexpected natural and operational               improvements has realised tangible results,
catastrophes may adversely affect our            with a reduction in controllable costs.
operations. Breaches in IT security processes    The capability to sustain productivity
may adversely affect the conduct of our          improvements is being further enhanced
business activities.                             through continued refinements to our
                                                 Operating Model. The Operating Model is
                                                 designed to deliver a simple and scalable
                                                 organisation, providing a competitive
                                                 advantage through defining work, organisation
                                                 and performance measurements. Defined
                                                 global business processes, including 1SAP,
                                                 provide a standardised way of working across
                                                 the organisation. Common processes generate
                                                 useful data and improve operating discipline.
                                                 Global sourcing arrangements have been
                                                 established to ensure continuity of supply and
                                                 competitive costs for key supply inputs. We
                                                 seek to influence the application of our
                                                 standards to non-operated assets.
                                                 By applying our risk management processes,
                                                 we seek to identify catastrophic operational
                                                 risks and implement the critical controls and
                                                 performance requirements to maintain control
                                                 effectiveness. Business continuity plans are
                                                 required to be established to mitigate
                                                 consequences. Consistent with our portfolio
                                                 risk management approach, we continue to be
                                                 largely self-insured for losses arising from
                                                 property damage, business interruption and
                                                 construction.
                                                 From an industrial relations perspective,
                                                 detailed planning is undertaken to support the
                                                 renegotiation of employment agreements and
                                                 is supported by training and access to
                                                 expertise in negotiation and agreement
                                                 making.
                                                 IT security controls to protect IT infrastructure,
                                                 business 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.
                                                 BHP Billiton has identified a number of actions
                                                 that we will take in our management of tailings
                                                 dams and joint venture arrangements. For
                                                 details of those actions refer to section 1.4 of
                                                 the Annual Report 2016.


Sustainability risks                    
                                        Our approach to sustainability risks is
                                        reflected in Our Charter and described
HSEC incidents or accidents may         in section 1.11 of the Annual Report
adversely affect our people or          2016, including a Company-level safety
neighbouring communities, operations    intervention that was initiated in
and reputation or licence to operate.   FY2015. Our Requirements standards
The potential physical impacts and      set out Group-wide HSEC-related
related responses to climate change     performance requirements designed to
may impact the value of our Company,    support effective management control of
our operations and markets.             these risks.
                                        Our approach to corporate planning,
                                        investment decision-making and
                                        portfolio management provides a focus
                                        on the identification, assessment and
                                        management of climate change
                                        risks. We have been applying an
                                        internal price on carbon in our
                                        investment decisions for more than a
                                        decade. Through a comprehensive and
                                        strategic approach to corporate
                                        planning, we work with a broad range of
                                        scenarios to assess our portfolio,
                                        including consideration of a broad range
                                        of potential policy responses to and
                                        impacts from climate change.
                                        Our approach to engagement with
                                        community stakeholders is outlined in
                                        our minimum organisational
                                        requirements for Community.
                                        Operations are also required to
                                        undertake stakeholder identification
                                        analysis, social impact and opportunity
                                        assessments, community perception
                                        surveys and human rights impact
                                        assessments to identify, mitigate or
                                        manage key potential social and human
                                        rights risks.
                                        The Our Requirements for Risk
                                        Management standard provides the
                                        framework for risk management relating
                                        to climate change and material health,
                                        safety, environment and community
                                        risks. Internal audits are conducted to
                                        test compliance with the Our
                                        Requirements standards and action
                                        plans are developed to address any
                                        gaps. Key findings are reported to
                                        senior management and reports are
                                        considered by relevant Board
                                        committees.

                                            Our Code of Business Conduct sets out
                                            requirements related to working with
                                            integrity, including dealings with
                                            government officials and third parties.
                                            Processes and controls are in place for
                                            the internal control over financial
                                            reporting, including under Sarbanes-
                                            Oxley. We have established anti-
                                            corruption, competition and trade
                                            sanctions performance requirements,
                                            which are overseen by the Compliance
                                            functions, as described in section 2.16
                                            of the Annual Report 2016. Additionally,
                                            the Disclosure Committee oversees our
                                            compliance with securities dealing
                                            obligations and continuous and periodic
                                            disclosure obligations as described in
                                            sections 2.14, 2.15 and 2.17 of the
                                            Annual Report 2016.


2. Related party transactions

There have been no related party transactions that have taken place during the year
ended 30 June 2016 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 2016 are set out
in notes 22 ‘Key management personnel’ and 30 ‘Related party transactions’ to the
Financial Statements on pages 194 and 202 of the Annual Report 2016.


3. Directors’ Responsibility Statement

The following statement which was prepared for the purposes of the Annual Report
2016 is repeated here for the purposes of complying with DTR 6.3.5. It relates to and
is extracted from the Annual Report 2016 and is not connected to the extracted and
summarised information presented in this announcement.

“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 5.1 and 5.2 of the Annual Report
       2016, are in accordance with the UK Companies Act 2006 and the Australian
       Corporations Act 2001, including:
       (i)    complying with the applicable Accounting Standards;
       (ii)   giving a true and fair view of the assets, liabilities, financial position
              and profit or loss of each of BHP Billiton Limited, BHP Billiton Plc, the
              BHP Billiton Group and the undertakings included in the consolidation
              taken as a whole as at 30 June 2016 and of their performance for the
              year ended 30 June 2016;

(b)    the financial report also complies with International Financial Reporting
       Standards, as disclosed in section 5.1 of the Annual Report 2016;

(c)      to the best of the Directors’ knowledge, the management report (comprising
         the Strategic Report and Directors’ Report) includes a fair review of the
         development and performance of the business and the financial position of
         the 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.

Signed in accordance with a resolution of the Board of Directors on 8 September
2016, Jac Nasser AO, Chairman and Andrew Mackenzie, Chief Executive Officer.”




Sponsor: UBS South Africa (Pty) Limited




BHP Billiton Plc Registration number 3196209
Registered in England and Wales
Registered Office: Neathouse Place London SW1V 1LH United Kingdom

A member of the BHP Billiton Group which is headquartered in Australia

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