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BHP Annual Financial Report 2018
BHP Billiton Plc
Registration number 3196209
Registered in England and Wales
Share code: BIL
ISIN: GB0000566504
Issued by: BHP Billiton Plc
Date: 18 September 2018
To: London Stock Exchange
JSE Limited
For Release: Immediately
Contact: Helen Ratsey +44 (0) 20 7802 7540
BHP Billiton Plc – Annual Financial Report 2018
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 2018
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-
reports/2018/bhpannualreport2018.pdf
- Sustainability Report 2018
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-
reports/2018/bhpsustainabilityreport2018.pdf
- US Annual Report (Form 20-F)
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-
reports/2018/bhpform20f2018.pdf
- Economic Contribution Report 2018
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-
reports/2018/bhpeconomiccontributionreport2018.pdf
- XML format of the Economic Contribution Report 2018
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-
reports/2018/bhpeconomiccontributionreport2018.xml
- BHP Billiton Plc Notice of Meeting 2018
https://www.bhp.com/-/media/documents/investors/annual-
reports/2018/bhpnoticeofmeetingplc2018.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’s website - bhp.com - or using the web links above.
Sponsor: UBS South Africa (Pty) Limited
Additional Information
The following information is extracted from the Annual Report 2018 (section
references are to sections of the Annual Report) and should be read in conjunction
with BHP’s Results announcement issued on 21 August 2018. Both documents can
be found at bhp.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 2018 in full.
1. Principal risks and uncertainties
1.1 Risk management
Identifying and managing risk and opportunity are central to achieving our strategy
and creating long-term value.
We embed risk management in the critical business activities, functions, processes
and systems of our assets through the following mechanisms:
- Risk assessments – we regularly identify and assess known, new and emerging
risks.
- Risk controls – we put controls in place over material risks and periodically
assess the effectiveness of those controls.
- Risk materiality and tolerability evaluation – we assess the materiality of a risk
based on the degree of financial and non-financial impacts, including health,
safety, environmental, community, reputational and legal impacts. We assess the
tolerability of a risk 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 reputational, legal, business conduct and corruption-related
exposures are managed and legislative compliance is maintained.
For information on our principal risks, refer to section 1.6.4. For information on our risk
management governance, refer to sections 2.13.1 and 2.14.
1.2 Principal risks
Robust risk assessment and viability statement
The Board has carried out a robust assessment of BHP’s principal risks, including
those that could threaten the business model, future performance, solvency or
liquidity.
The Directors have assessed the prospects of BHP over the next three years, taking
into account our current position and principal risks.
The Directors believe a three-year viability assessment period is appropriate for the
following reasons. BHP has a two-year budget, a five-year plan and a longer-term life-
of-asset outlook. We have publicly stated our view that while commodity prices remain
volatile, our short-term outlook is optimistic. Price and exchange rate volatility results
in variability in plans and budgets. A three-year period strikes an appropriate balance
between long-term and short-term influences on performance.
The viability assessment took into account, among other things, BHP’s commodity
price protocols, including low-case prices; the latest funding and liquidity update; the
long-dated maturity profile of BHP’s debt and the maximum debt maturing in any one
year; the Group-level risk profile and the mitigating actions available should particular
risks materialise; the regular Board strategy and portfolio discussions which address
the range of outcomes under the Capital Allocation Framework; the flexibility in BHP’s
capital and exploration expenditure programs under the Capital Allocation Framework;
and the reserve life of BHP’s minerals assets and the reserves-to-production life of
our oil and gas assets.
The Directors’ assessment also took account of additional stress-testing of the
balance sheet against two hypothetical significant risk events: a well blow out in the
Gulf of Mexico and a low-price environment. A further level of robustness is added
given no debt issuance is required in the three-year period and BHP would still have
access to US$6.0 billion of credit through its revolving credit facility. The Directors
were also mindful of the assessment of our portfolio against scenarios as part of BHP’s
corporate planning process to help identify key uncertainties facing the global natural
resources sector.
In making this statement, the Directors considered the divestment of Onshore US. The
Directors have also made certain assumptions regarding the alignment of production,
capital expenditure and operating expenditure with five-year plan forecasts and the
alignment of prices with the cyclical low-price case used in the control stress case for
balance sheet testing.
Taking account of these matters, and BHP’s current position and principal risks, the
Directors have a reasonable expectation that BHP will be able to continue in operation
and meet its liabilities as they fall due.
Risk factors
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 minerals, oil and gas 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 BHP 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 minerals, 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 FY2018 profit after taxation from Continuing
and Discontinued operations of US$163 million and US$46 million, respectively. For
more information in relation to commodity price impacts, refer to section 1.6.2.
Volatility in global economic growth, particularly in developing economies, has the
potential to adversely affect future demand and prices for commodities. Geopolitical
uncertainty and protectionism have the potential to inhibit international trade and
weigh on business confidence, which creates the risk of constraints on our ability to
trade in certain markets and has the potential to increase price volatility. 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 ongoing and
protracted uncertainty surrounding the details of the United Kingdom’s exit from the
European Union, creates the risk that our financial and operating results, including
cash flows and asset values, will be materially and adversely affected by short-term
or long-term volatility 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 our assets are located means
that our assets, earnings and cash flows are influenced by a 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 are 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.
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$22.9 billion (FY2017: US$18.9 billion)
or 52.6 per cent (FY2017: 52.2 per cent) of our revenue in FY2018, on a continuing
operations basis. FY2018 sales into China by commodity included 52 per cent Iron
Ore, 31 per cent Copper, 15 per cent Coal and two 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 materially and adversely
impact our results, including cash flows.
Actions by governments or courts, regulatory change, political events or
alleged compliance breaches in the countries in which we operate or assets
in which we have an interest 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 assets and non-operated joint ventures 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.
Risks in the locations in which we have operated assets and non-operated joint
ventures could include terrorism, civil unrest, judicial activism, regulatory
investigation or inquiry, 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 where our assets are located. If any of
our major operated assets or non-operated joint ventures are affected by one or
more of these risks, it could have a material adverse effect on BHP’s overall
operating results, financial condition and prospects.
Our operated assets and non-operated joint ventures 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. BHP is currently involved
in a number of uncertain tax and royalty matters. For more information, refer to note
5 ‘Income tax expense’ in section 5.
Our business is affected by new and 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, oil and gas projects, the expansion of existing assets and operations and
the performance of our operated assets and non-operated joint ventures. As
regulatory standards and expectations are constantly developing, we may be
exposed to increased regulation and compliance costs to meet new operating and
reporting standards, as well as unforeseen closure and site rehabilitation expenses.
Infrastructure, such as rail, ports, power and water, is critical to our business
operations. We have assets 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 could materially and adversely affect the expansion
of our business and ability of our assets to operate efficiently.
We own assets or interests in countries where land tenure can be uncertain and
disputes may arise in relation to ownership and use, including in respect of
Indigenous rights. 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 can be complex, difficult to
predict and difficult to influence. Potential compliance costs, litigation expenses,
regulatory delays, rehabilitation expenses and operational impacts and costs arising
from government action, court decisions, regulatory change and evolving standards
could materially and adversely affect BHP’s future results, prospects and our
financial condition.
We conduct our business 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, market
manipulation, competition, data protection and privacy, offers of anything of value
to government officials and representatives of state-owned enterprises and
disclosure of state or commercial secrets) may not operate to identify financial
misstatements or prevent potential breaches of law, or of accounting or governance
practice. Our Code of 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.
Business risks
Failure to discover or acquire new resources, maintain reserves or develop
new assets could negatively affect our future results and financial condition
The demand for our products and production from our assets results in existing
reserves being depleted over time. As our revenues and profits are derived from our
minerals, oil and gas assets, 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 assets 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 assets or operations in sufficient
quantities to maintain or grow the current level of our reserves could negatively
affect our future 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, 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. Changes to reserve estimates
could affect our asset carrying values and may also negatively impact our future
financial condition and results.
Potential changes to our portfolio of assets through merger, acquisition and
divestment activity 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:
- loss of value from a poor investment decision;
- loss of potential value from a missed investment opportunity;
- 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 materially and adversely 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 materially 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 ongoing global economic volatility could materially and adversely affect
our future cash flows and ability to access capital from financial markets at
acceptable pricing. If our key financial ratios and credit ratings 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
projects 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 with whom we transact 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 in the context of global financial
markets that remain volatile. We maintain a ‘one book’ approach with commercial
counterparties to make sure all credit exposures are quantified and assessed
consistently. 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 explosives, tyres, mining and mobile equipment, diesel and other
key consumables, may unfavourably impact costs and production at our assets.
These factors could negatively affect our financial condition and results of assets.
Operational risks
Unexpected natural and operational catastrophes may adversely impact our
assets, functions or people
We have 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 fires, explosions or gas
leaks, road and vehicle incidents, port and shipping incidents, aircraft incidents,
underground mine and processing plant fire and explosion, rock fall incidents in
underground mining operations, open-cut pit wall or tailings/waste storage facility
failures, loss of power supply, railroad incidents, loss of well control, environmental
pollution, mechanical critical equipment failures, personnel conveyance equipment
failures in underground operations and cyber or conventional security attacks on
BHP’s infrastructure. If an operational crisis occurs, the failure to provide adequate
communications response to our external stakeholders could result in Group-wide
reputational damage.
Our minerals, oil and gas assets 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 assets
are located in areas subject to cyclones or hurricanes. Our Chilean copper and
Peruvian base metals assets are located in a known earthquake and tsunami zone.
We operate corporate offices and service centres globally. A serious natural, civil
unrest, terror or criminal event in any of these locations could have an impact on
the services provided to the Group and on our people and the community.
Based on our risk management and the limited value of external insurance in the
natural resource sector, our risk financing (insurance) approach is to minimise or
not 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 assets.
Information technology and operational technology services are subject to
cybersecurity risks and threats that may materially affect our business and
reputation
Our strategy of owning and operating large, long-life and low-cost assets is
underpinned by our ability to become fully integrated and highly automated, from
resource to market. Many of our business and operational processes are heavily
dependent on traditional and emerging technologies to improve safety, lower cost
and unlock value.
Increases in the frequency and magnitude of global cyber events pose potential
increased risk of sensitive information being compromised, as well as unplanned
and/or extended outages to our operations or to the transportation of other
infrastructure utilised by our operations. These events may include (but are not
limited to) exploitation of system vulnerabilities, malware, phishing and other
sophisticated cyberattacks, and other incidents (for example, due to human error).
Such events may result in misappropriation of funds, an impact on asset
productivity, adverse impacts to the health and safety of people, environmental
damage, poor product quality, loss of intellectual property, disclosure of
commercially or personally sensitive information, regulatory fines and/or other costs
and reputational damage.
Despite reasonable attempts to protect us from cyber events, we are frequently
subject to targeted and non-targeted cyberattacks and may be vulnerable to these
in the future. In FY2018, there were no cyber events that led to a significant breach
of our business-critical technology environment or a material disclosure of market-
sensitive information.
Our potential liability from litigation and other actions resulting from the
Samarco dam failure is subject to significant uncertainty and cannot be
reliably estimated at this time, but could have a material adverse impact 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 1.8.
The Samarco dam failure and subsequent suspension of Samarco’s mining and
processing operations continue to impact our financial results and will be disclosed
as an exceptional item for the year ended 30 June 2018, as described in section 1.8
and in note 3 ‘Significant events – Samarco dam failure’ in section 5.
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 financial
information relating to Samarco, refer to note 28 ‘Investments accounted for using
the equity method’ in section 5.
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 Samarco, Vale and Fundação Renova.
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.
Among the claims brought against BHP Billiton Brasil was a public civil claim
commenced by the Federal Government of Brazil, the states of Espírito Santo and
Minas Gerais, and certain other public authorities (Brazilian Authorities) on 30
November 2015, seeking the establishment of a fund of up to R$20 billion
(approximately US$5.2 billion) in aggregate for clean-up costs and damages
(R$20bn Public Civil Claim). This claim has now been settled (see below). In
addition, a R$155 billion (approximately US$40 billion) claim has been brought by
the Federal Public Prosecution Service (on 3 May 2016) for reparation,
compensation and moral damages in relation to the Samarco dam failure (R$155bn
Federal Public Prosecution Office claim). For more information on some of the legal
proceedings relating to the Samarco dam failure, refer to section 6.5.
On 2 March 2016, BHP Billiton Brasil, together with Vale and Samarco, entered into
a Framework Agreement with the Brazilian Authorities to establish a foundation
(Fundação Renova) that will develop and execute environmental and socio-
economic programs to remediate and provide compensation for damage caused by
the Samarco dam failure. A committee (Interfederative Committee) comprising
representatives from the Brazilian Federal and State Governments, local
municipalities, environmental agencies, impacted communities and Public Defence
Office oversees the activities of Fundação Renova in order to monitor, guide and
assess the progress of actions agreed in the Framework Agreement.
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 2018, BHP Billiton Brasil’s provision for its obligations under the Framework
Agreement is US$1.3 billion, before tax and after discounting (30 June 2017,
US$1.1 billion).
The measurement of the provision requires the use of significant judgments,
estimates and assumptions and may be affected by, among other factors, potential
changes in scope of work and funding amounts required under the Framework
Agreement, including the impact of decisions of the Interfederative Committee along
with further technical analysis and community participation required under the
Preliminary Agreement (defined below) and Governance Agreement (defined
below), the outcome of the ongoing negotiations with State and Federal
Prosecutors, actual costs incurred in respect of programs delivered, resolution of
uncertainty in respect of operational restart, updates to discount and foreign
exchange rates, resolution of existing and potential legal claims and the status of
the Framework Agreement and the renegotiation process provided in the
Governance Agreement (defined below). As a result, future actual expenditures
may differ from the amounts currently provided and changes to key assumptions
and estimates could result in a material impact on the amount of the provision in
future reporting periods.
On 18 January 2017, BHP Billiton Brasil, together with Vale and Samarco, entered
into a Preliminary Agreement with the Federal Prosecutors’ Office in Brazil, which
outlines the process and timeline for further negotiations towards a settlement
regarding the R$20 billion Public Civil Claim and the R$155 billion Federal Public
Prosecution Office claim.
Under the Preliminary Agreement, BHP Billiton Brasil, Samarco and Vale agreed
interim security (Interim Security) comprising R$1.3 billion (approximately US$335
million) in insurance bonds, R$100 million (approximately US$25 million) in liquid
assets, a charge of R$800 million (approximately US$210 million) over Samarco’s
assets, and R$200 million (approximately US$50 million) to be allocated within the
next four years through existing Framework Agreement programs in the
Municipalities of Barra Longa, Rio Doce, Santa Cruz do Escalvado and Ponte Nova.
On 24 January 2017, BHP Billiton Brasil, Samarco and Vale provided the Interim
Security to the Court, which was to remain in place until the earlier of 30 June 2017
and the date that a final settlement arrangement was agreed between the Federal
Prosecutors, and BHP Billiton Brasil, Vale and Samarco. Following a series of
extensions, the parties reached an agreement in the form of the Governance
Agreement (summarised below).
On 25 June 2018, Samarco, Vale and BHP Billiton Brasil, the other parties to the
Framework Agreement, the Public Prosecutors Office and the Public Defense Office
agreed an arrangement which settles the R$20 billion Public Civil Claim, enhances
community participation in decisions related to the remediation and compensation
programs (Programs) under the Framework Agreement, and establishes a process
to renegotiate those Programs over two years and to progress settlement of the
R$155 billion Federal Public Prosecution Office claim (Governance Agreement).
The Governance Agreement was ratified by the 12th Federal Court of Minas Gerais
on 8 August 2018, settling the R$20 billion Public Civil Claim and suspending the
R$155 billion Federal Public Prosecution Office claim for a period of two years from
the date of ratification.
During the two-year period, the parties will work together to design a single process
for the renegotiation of the Programs and progress settlement of the R$155 billion
Federal Public Prosecution Office claim.
The renegotiation of the Programs will be based on certain agreed principles, such
as full reparation consistent with Brazilian law, the requirement for a technical basis
for any proposed changes, consideration of findings from the socio-economic and
socio-environmental experts appointed by Samarco, Vale and BHP Billiton Brasil,
consideration of findings from experts appointed by the Prosecutors, and
consideration of the feedback from impacted communities. During the renegotiation
period and up until revisions to the Programs are agreed, the Fundação Renova will
continue to implement the Programs in accordance with the terms of the Framework
Agreement and the Governance Agreement.
The Interim Security provided under the Preliminary Agreement is maintained for a
period of 30 months under the Governance Agreement, after which Samarco, Vale
and BHP Billiton Brasil will be required to provide security of an amount equal to
Fundação Renova’s annual budget up to a limit of R$2.2 billion.
As noted above, BHP Billiton Brasil has been named as a defendant in numerous
other lawsuits that are at early stages of proceedings. The lawsuits seek various
remedies, including rehabilitation costs, compensation to injured individuals and
families of the deceased, recovery of personal and property losses and injunctive
relief. In addition, government inquiries and investigations relating to the Samarco
dam failure have been commenced by numerous agencies of the Brazilian
Government and are ongoing, including criminal investigations by the federal and
state police, and by federal prosecutors.
Other lawsuits and investigations are at the early stages of proceedings, including
two shareholder actions filed in Australia against BHP and a Samarco bondholder
action filed in the United States against Samarco, Vale, BHP Billiton Brasil and BHP.
For more information on the shareholder and bondholder actions and other lawsuits
relating to the Samarco dam failure, refer to section 6.5. Additional lawsuits and
government investigations relating to the Samarco dam failure may be brought
against BHP Billiton Brasil and possibly other BHP entities in Brazil or other
jurisdictions.
Given the status of the legal proceedings referred to above, it is not possible to
provide a range of possible outcomes or a reliable estimate of potential future
exposures for BHP, unless otherwise stated. Ultimately, all of these legal matters
could have a material adverse impact on BHP’s business, competitive position, cash
flows, prospects, liquidity and shareholder returns.
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.
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, 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 could materially and adversely impact our
operating margins for an extended period.
Some of our assets, such as those producing copper, are energy or water intensive.
As a result, BHP’s costs and earnings could be materially and adversely affected
by rising costs or 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. Recent changes to labour legislation in Chile
have resulted in the right to have a single negotiating body across different
operations owned by a single company. This change may lead to a higher risk of
operational stoppages that can contribute to an increase in costs and a reduction in
productivity.
More broadly, cost and productivity pressures on BHP 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 assets,
interruptions or delays and could negatively impact our operating margins and
expansion plans.
Non-operated joint ventures have their own management and operating
standards, joint venture partners or other companies managing those non-
operated joint ventures may take action contrary to our standards or fail to
adopt standards equivalent to BHP’s standards, and commercial
counterparties may not comply with our standards
We have interests in assets that are operated and managed by joint venture
partners or by other companies. Those joint venture partners or other companies
have their own management and operating standards, controls and procedures,
including their own health, safety, environment and community (HSEC) standards
and may take action contrary to BHP’s management and operating standards,
controls and procedures. Failure by those joint venture partners or other companies
to adopt equivalent standards, controls and procedures at these non-operated joint
ventures could lead to operational incidents or accidents, materially 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 or other standards we apply causing adverse
reputational and legal impacts.
Sustainability risks
Safety, health, environmental and community impacts, incidents or accidents
may adversely affect our people, assets and reputation or licence to operate
Safety
Potential safety events that may have a material adverse impact on our people,
assets, 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, shipping
or vessel incidents, ground control failures, uncontrolled tailings containment
breaches, well blowouts, explosions or gas leaks and accidents involving
inadequate isolation, working from heights or lifting operations.
Our employees, contractors and third parties may be subjected to safety risks when
travelling to and from sites or while onsite at an asset or corporate office.
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, radiation and mental illness.
Longer-term health impacts may arise due to unanticipated workplace exposures or
historical exposures of our workforce or communities to hazardous substances.
These effects may create future financial compensation obligations, adversely
impact our people, reputation, regulatory approvals or licence to operate and affect
the way we conduct our assets.
Given the global location of our assets, we could be affected by a public health
emergency such as influenza or other infectious disease outbreaks in any of the
regions in which our assets are located.
Environment
Our assets 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, delay or reverse 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, communities, assets, 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 assets.
Climate change
The physical and non-physical impacts of climate change may affect our assets,
productivity and the markets in which we sell our products. This includes acute and
chronic changes in weather patterns, 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. 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, including
from the extraction and combustion of fossil fuels to address the impacts of climate
change. This includes countries where we have assets 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 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 have the
potential to adversely affect our assets 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 as a result of regulatory impacts in the
countries where we do business. These proposed regulatory mechanisms may
adversely affect our assets 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 do business. Examples of this include China, which launched
the world’s largest emissions trading system in 2017, and Australia, where the
Federal Government repealed a carbon tax in 2014 and introduced new legislation
to take its place.
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. The Group’s asset carrying values may be affected
by any resulting adverse impacts to reserve estimates and our inability to make
productive use of such reserves 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 assets may include changes in rainfall
patterns, water shortages, rising sea levels, increased storm intensities and higher
temperatures. These effects could materially and adversely affect the financial
performance of our assets.
Community
Our assets and activities may directly impact communities and also risk the potential
for adverse impacts on human rights or breaches of other international laws or
conventions.
Local communities may become dissatisfied with our operations or oppose our new
development projects, including through legal action, leading to potential schedule
delay, increased costs and reduced production. Community-related risks may
include community protests or civil unrest, adverse human rights impacts,
community health and safety complaints and grievances, shareholder activism and
civil society activism. In extreme cases the risks may affect viability, adversely
impacting our reputation and licence to operate.
Hydraulic fracturing
Our Onshore US assets have involved hydraulic fracturing, which includes using
water, sand and a small amount of chemicals to fracture hydrocarbon-bearing
subsurface rock formations, to allow the 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. For more information, refer to section
7.10.
On 27 July 2018, BHP announced that we had entered into agreements for the sale
of our entire interest in the Eagle Ford, Haynesville, Permian and Fayetteville
Onshore US oil and gas assets. Both sales are subject to the satisfaction of
customary regulatory approvals and conditions precedent. We expect completion of
both transactions to occur by the end of October 2018.
While we have not experienced a material delay or substantially higher operating
costs in our Onshore US assets as a result of current regulatory requirements, we
cannot predict whether additional federal, state or local laws or regulations will be
enacted prior to the completion of the two sale transactions and, if so, what such
actions would require or prohibit. Additional legislation or regulation could subject
those assets to delays and increased costs, or prohibit certain activities prior to
completion of the transactions. Separately, additional legislation or regulation could
impose liabilities on previous owners or operators of properties where hydraulic
fracturing has taken place, which may be applicable to BHP notwithstanding the
subsequent sale of those assets.
Governance and compliance
Our processes are mandated and governed by the global Our Requirements
standards and supporting strategies and frameworks. A failure to maintain effective
global frameworks and associated controls may lead to a major health, safety or
environmental incident.
1.3 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. Principal risks that
could negatively affect our results and performance are described in section 1.6.4.
Our approach to managing these risks is outlined below.
Principal risk area Risk management approach
External risks The diversification of our portfolio of commodities,
Risks arise from fluctuations in markets, geographies and currencies is a key
commodity prices and strategy for reducing the effects of volatility.
demand in major markets (in Section 1.6.1 describes external factors and trends
particular China) or changes in affecting our results and note 20 ‘Financial risk
currency exchange rates and management’ in section 5 outlines BHP’s financial
actions by governments, risk management strategy, including market,
including new regulations and commodity and currency risk. The Financial Risk
standards, alleged Management Committee oversees these risks as
compliance breaches and described in sections 2.14 and 2.15. We also
political events that impact engage with governments and other key
long-term fiscal stability stakeholders to make sure the potential adverse
impacts of proposed fiscal, tax, resource
investment, infrastructure access, regulatory
changes and evolving international standards are
understood and, where possible, mitigated.
Our Code of Conduct sets out requirements related
to working with integrity, including dealings with
government officials and third parties as described
in section 2.16. 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 Ethics and Compliance
function as described in section 1.9.1. 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.
Business risks Our Geoscience and Resource Engineering
Centres of Excellence manage assurance and
Risks include the inherent
technical leadership for Mineral Resource
uncertainty of identifying and
development and Ore Reserves reporting as
proving reserves, adding and
described in section 6.3.2. Our governance over
divesting assets and
reporting of Petroleum reserves is described in
managing our capital
section 6.3.1.
development projects
We have established investment approval
processes that apply to all investment decisions,
including mergers and acquisitions activity. An
Investment Committee oversees these as
described in sections 2.14 and 2.15. We have an
ongoing strategy practice that assesses the
competitive advantage of our business, enables
identification of risks and opportunities for our
portfolio that allows us to challenge bias when
evaluating future growth options and attractive
growth options under a range of divergent future
states. Our Capital Allocation Framework provides
the structure and governance for adding growth
options to our portfolio.
Our global Projects function (through its regional
Project development and delivery teams and the
Projects Centre of Excellence) aims to make sure
projects are safe, predictable and competitive.
We seek to maintain a strong balance sheet,
Financial risks
supported by our portfolio risk management
Continued volatility in global strategy. As part of this strategy, the diversification
financial markets may of our portfolio reduces overall cash flow volatility.
adversely impact future cash Commodity prices and exchange rates are not
flows, our ability to adequately generally hedged, and wherever possible, we take
access and source capital the prevailing market price. We use Cash Flow at
from financial markets and our Risk analysis to monitor volatilities and key
credit rating. Volatility may financial ratios. Credit limits and review controls
impact planned expenditures, are established for all customers and financial
as well as the ability to recover counterparties. The Financial Risk Management
investments in mining, oil and Committee oversees these, as described in
gas projects. In addition, the sections 2.14 and 2.15. Note 20 ‘Financial risk
commercial counterparties management’ in section 5 outlines our financial risk
(customers, suppliers, management strategy.
contractors and financial
institutions) we transact with
may, due to adverse market
conditions, fail to meet their
contractual obligations
Operational risks By applying our risk management processes, we
Unexpected natural and seek to identify catastrophic operational risks and
operational catastrophes may implement the critical controls and performance
adversely affect our assets. requirements to maintain control effectiveness.
Information technology and Business continuity plans and crisis and
operational technology emergency management plans are established to
services are subject to mitigate consequences. Consistent with our
cybersecurity risks and threats portfolio risk management approach, we continue
that may materially affect our to be largely self-insured for losses arising from
business and reputation. Our property damage, business interruption and
potential liabilities from construction.
litigation and other actions
Given we rely heavily on information technology
resulting from the Samarco
and operational technology to operate assets, we
dam failure are subject to
significant uncertainty and employ a number of measures to protect, detect
cannot be reliably estimated at and respond to cyber events. A cyber risk
this time. Operating cost management strategy has been developed to
pressures and reduced address how we maintain the security of our
productivity could negatively technology assets that support our operations
affect operating margins and across the globe. This strategy includes activities
expansion plans. Non- to be undertaken, including employee
operated joint ventures may cybersecurity awareness and training programs,
not comply with our standards monitoring of our enterprise and operational
technology networks, vulnerability identification
and remediation activities, secure-by-design
architecture and processes for the management
of third party technology risks. We have a
dedicated in-house cybersecurity function that
supports business groups, continuously improves
our cyber defence capability and responds to
cyber incidents where required. When incidents
occur, they are investigated through root-cause
analysis and, as required, follow-up actions are
undertaken.
The Board receives periodic updates on cyber
risk management activities, including relevant
information on any significant cyber incidents that
have occurred. In the event of a significant cyber
incident, an incident notification plan is in place to
facilitate timely communication of the incident to
stakeholders, including the Board, Corporate
Affairs, Government Relations and/or Investor
Relations.
The Board continues to oversee the Group’s
response to the tragedy at Samarco, with the work
of the Samarco Sub-Committee having
transitioned to the Risk and Audit Committee, the
Sustainability Committee and the Board, as
appropriate. The Board and its Committees
continue to examine and oversee the progress of
actions in relation to the management of tailings
dams (refer to section 1.8 and the BHP
Sustainability Report 2018 for more information)
and non-operated joint venture arrangements, the
contribution to the Fundação Renova, the
availability of funding to Samarco and continued
negotiations in respect of the framework for the
settlement of the public civil claims.
We aim to maintain adequate operating margins
through our strategic objective to position BHP to
match our values, capabilities and competitive
resources to the evolving needs of markets, to
create sustainable long-term value for
shareholders and other stakeholders.
Our concentrated effort to reduce operating costs
and drive productivity improvements has realised
tangible results, with a reduction in 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 BHP, providing a competitive
advantage through defining work, organisational
and performance measurements. Defined global
business processes, including 1SAP, provide a
standardised way of working across BHP.
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 joint ventures.
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.
Sustainability risks Our approach to sustainability risks is reflected in
HSEC incidents or accidents Our Charter and described in section 1.9. The Our
may adversely affect people or Requirements standards set out Group-wide
neighbouring communities, HSEC-related performance requirements
assets, reputation and our designed to support effective management control
licence to operate. The of these risks. The global HSE planning process
potential physical impacts and and the validation of the Our Requirements
related responses to climate standards identify gaps in these standards, and
change may impact the value inform global improvements to the HSE framework.
of BHP, our assets and
Our approach to corporate planning, investment
markets
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 use a divergent set of
scenarios to assess our portfolio, including
consideration of a broad range of potential policy
responses to and impacts from climate change.
We also track signals across the external
environment to provide timely insights into the
potential impacts on our portfolio.
For more information on the management of
climate change, refer to section 1.9.8.
Our approach to engagement with community
stakeholders is outlined in the Our Requirements
for Communications, Community and External
Engagement standard. We undertake stakeholder
identification and 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, as described in section 1.9.
The Our Requirements for Risk Management
standard provides the framework for risk
management relating to climate change and
material health, safety, environmental and
community risks. We conduct internal audits to test
compliance with the Our Requirements standards
and develop action plans to address any gaps. Key
findings are reported to senior management and
reports are considered by relevant Board
committees.
2. Related party transactions
There have been no related party transactions that have taken place during the year
ended 30 June 2018 that have materially affected the financial position or the
performance of the BHP Group during that period. Details of the related party
transactions that have taken place during the year ended 30 June 2018 are set out
in notes 21 ‘Key management personnel’ and 30 ‘Related party transactions’ to the
Financial Statements set out below.
21 Key management personnel
Key management personnel compensation comprises:
2018 2017 2016
US$ US$ US$
Short-term employee benefits 13,190,838 16,439,948 14,979,983
Post-employment benefits 1,506,108 1,895,828 2,356,594
Share-based payments 13,356,657 13,747,355 16,837,179
Total 28,053,603 32,083,131 34,173,756
Following the dissolution of the Operations Management Committee (OMC) in
FY2018, the Remuneration Committee re-examined the classification of Key
Management Personnel (KMP) for FY2018 and determined that the roles which have
the authority and responsibility for planning, directing and controlling the activities of
BHP are Non-executive Directors, the CEO, the Chief Financial Officer, the President
Operations, Minerals Australia, the President Operations, Minerals Americas, and
the President Operations, Petroleum. The Remuneration Committee also determined
that, effective 1 July 2017 the Chief External Affairs Officer and Chief People Officer
roles are no longer considered KMP.
Transactions and outstanding loans/amounts with key management personnel
There were no purchases by key management personnel from the Group during the
financial year (2017: US$ nil; 2016: US$ nil).
There were no amounts payable by key management personnel at 30 June 2018
(2017: US$ nil; 2016: US$ nil).
There were no loans receivable from or payable to key management personnel at 30
June 2018 (2017: US$ nil; 2016: US$ nil).
Transactions with personally related entities
A number of Directors of the Group hold or have held positions in other companies
(personally related entities) where it is considered they control or significantly
influence the financial or operating policies of those entities. There were no
transactions with those entities and no amounts were owed by the Group to
personally related entities at 30 June 2018 (2017: US$ nil; 2016: US$ nil).
For more information on remuneration and transactions with key management
personnel, refer to section 3.
30 Related party transactions
The Group’s related parties are predominantly subsidiaries, joint operations, joint
ventures and associates and key management personnel of the Group. Disclosures
relating to key management personnel are set out in note 21 'Key management
personnel'. Transactions between each parent company and its subsidiaries are
eliminated on consolidation and are not disclosed in this note.
- All transactions to/ from related parties are made at arm’s length, i.e. at normal
market prices and rates and on normal commercial terms.
- Outstanding balances at year-end are unsecured and settlement occurs in cash.
Loan amounts owing from related parties represent secured loans made to joint
operations, associates and joint ventures under co-funding arrangements. Such
loans are made on an arm’s length basis with interest charged at market rates
and are due to be repaid by 16 August 2022.
- No guarantees are provided or received for any related party receivables or
payables.
- No provision for doubtful debts has been recognised in relation to any
outstanding balances and no expense has been recognised in respect of bad or
doubtful debts due from related parties.
- There were no other related party transactions in the year ended 30 June 2018
(2017: US$ nil), other than those with post-employment benefit plans for the
benefit of Group employees. These are shown in note 24 'Pension and other
post-retirement obligations'.
Transactions with related parties
Further disclosures related to other related party transactions are as follows:
Joint operations Joint ventures Associates
2018 2017 2018 2017 2018 2017
US$M US$M US$M US$M US$M US$M
Sales of goods/services - - - - - -
Purchases of goods/services - - - - 1,358.016 1,052.885
Interest income 1.764 1.850 - - 19.337 34.911
Interest expense - 0.010 - - - 0.006
Dividends received - - - - 693.105 619.894
Net loans made to/(repayments
60.566 (82.701) - - (599.979) (272.276)
from) related parties
Outstanding balances with related parties
Disclosures in respect of amounts owing to/from joint operations represent the
amount that does not eliminate on consolidation.
Joint
Joint ventures Associates
operations
2018 2017 2018 2017 2018 2017
US$M US$M US$M US$M US$M US$M
Trade amounts owing to related parties - - - - 210.716 217.803
Loan amounts owing to related parties 55.667 118.288 - - 4.097 39.097
Trade amounts owing from related
- - - - 3.932 3.083
parties
Loan amounts owing from related
18.089 20.144 - - 12.939 647.918
parties
3. Directors’ Responsibility Statement
The following statement which was prepared for the purposes of the Annual Report
2018 is repeated here for the purposes of complying with DTR 6.3.5. It relates to and
is extracted from the Annual Report 2018 and is not connected to the extracted and
summarised information presented in this announcement.
“In accordance with a resolution of the Directors of BHP Billiton Limited and BHP
Billiton Plc, the Directors declare that:
(a) in the Directors’ opinion and to the best of their knowledge the Financial
Statements and notes, set out in sections 5.1 and 5.2, are in accordance with
the UK Companies Act 2006 and the Australian Corporations Act 2001,
including:
(i) complying with the applicable Accounting Standards;
(ii) giving a true and fair view of the assets, liabilities, financial position and profit
or loss of each of BHP Billiton Limited, BHP Billiton Plc, the Group and the
undertakings included in the consolidation taken as a whole as at 30 June
2018 and of their performance for the year ended 30 June 2018;
(b) the Financial Statements also comply with International Financial Reporting
Standards, as disclosed in section 5.1;
(c) to the best of the Directors’ knowledge, the management report (comprising the
Strategic Report and Directors’ Report) includes a fair review of the
development and performance of the business and the financial position of the
Group and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that the Group
faces;
[Paragraphs related to Australian regulatory requirements have been omitted.]
Signed in accordance with a resolution of the Board of Directors.
Ken MacKenzie, Chairman
Andrew Mackenzie, Chief Executive Officer.
Dated this 6th day of September 2018.”
BHP Billiton Plc Registration number 3196209
LEI 549300C116EOWV835768
Registered in England and Wales
Registered Office: Nova South, 160 Victoria Street, London SW1E 5LB United Kingdom
A member of the BHP Group which is headquartered in Australia
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