BHP : Operational Review for the nine months ended 31 March 2023 - Release

Release Time	IMMEDIATE
Date	21 April 2023
Release Number	9/23

BHP OPERATIONAL REVIEW

FOR THE NINE MONTHS ENDED 31 MARCH 2023

• A colleague, Jody Byrne, tragically was fatally injured in a rail incident in our Port Hedland operations inFebruary.
• Production guidance for the 2023 financial year remains unchanged for iron ore, metallurgical coal andenergy coal. Strong performance means Olympic Dam and Pampa Norte are expected to be toward the upper end of their guidance ranges, while BHP Mitsubishi Alliance (BMA) is expected to be at the bottom of its range.
• Production guidance at Escondida has been lowered to between 1,050 and 1,080 kt (from between 1,080and 1,180 kt). Given the strong performance at the other copper assets, full year total copper production guidance remains unchanged at between 1,635 and 1,825 kt. Full year nickel production has been lowered to between 75 and 85 kt (from between 80 and 90 kt).
• Western Australia Iron Ore (WAIO) achieved record production of 212.6 Mt (100% basis) for the nine monthperiod. Pleasingly, there was no significant damage or reported injuries at our WAIO sites as a result of Tropical Cyclone Ilsa. Our Port Hedland operations were suspended in coordination with the Pilbara Ports Authority.
• Full year unit cost guidance1 remains unchanged from the half year period ended 31 December 2022.Escondida and WAIO are expected to be at the top of their respective ranges.
• On 13 April 2023, shareholders of OZ Minerals Ltd (OZL) voted to approve the scheme of arrangement forBHP to acquire 100 per cent of the shares in OZL. The Scheme became effective on 18 April 2023 and is expected to be implemented on 2 May 2023.
• The South Australian government has granted environmental approval for the next phase of explorationdrilling at Oak Dam.
• BHP has identified a new copper porphyry mineralised system, Ocelot, in the Miami-Globe copperdistrict in Arizona, United States.

BHP Chief Executive Officer, Mike Henry:

"Safety is paramount, and we are deeply saddened by the tragic death of Jody Byrne in an incident at Port Hedland in February. An investigation into the cause of the incident is underway, the findings of which will be shared widely.

"Our WA iron ore business achieved record production, and total copper output for the Group was up for the nine months, while metallurgical coal volumes were down slightly due to significant wet weather. Overall copper production for the year remains on track, however we've reduced production guidance at Escondida and also at Nickel West. We continue to focus on safety, productivity and costs as we navigate ongoing challenges and inflationary impacts.

"Last week, OZ Minerals shareholders voted overwhelmingly in favour of BHP's offer. We are now focused on the safe integration of the two businesses and we look forward to building an internationally competitive copper business in South Australia and incorporating West Musgrave into our nickel options in Western Australia. We are pursuing growth options in copper and nickel globally - we aim to have up to 10 drill rigs on the ground at Oak Dam in South Australia in the next few months and have seen promising results from a potential new copper prospect in Arizona. In Canada, we signed $260 million (CAD) in new contracts with Indigenous suppliers in March, and construction of the Jansen potash project is on track.

"Recent engagements with customers in China and India have reaffirmed our positive outlook for commodity demand, with China's economic rebound and solid momentum in India's steelmaking growth helping to offset the impact of slowing growth in the US, Japan and Europe."

BHP Operational Review for the nine months ended 31 March 2023

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Summary

Operational performance

Production and guidance are summarised below.

			Mar YTD23	Mar Q23	Mar Q23	Previous	Current
	Mar	Mar	vs	vs	vs	FY23	FY23
Production	YTD23	Q23	Mar YTD22	Mar Q22	Dec Q22	guidance	guidance
Copper (kt)	1,240.3	405.9	12%	10%	(4%)	1,635 - 1,825	1,635 - 1,825	Unchanged
Escondida (kt)	762.3	251.6	7%	11%	(2%)	1,080 - 1,180	1,050 - 1,080	Lowered
Pampa Norte (kt)	220.3	73.0	8%	7%	(5%)	240 - 290	240 - 290	Upper end
Olympic Dam (kt)	155.8	51.7	88%	33%	(5%)	195 - 215	195 - 215	Upper end
Antamina (kt)	101.9	29.6	(8%)	(18%)	(16%)	120 - 140	120 - 140	Unchanged
Iron ore (Mt)	191.7	59.8	1%	0%	(11%)	249 - 260	249 - 260
WAIO (Mt)	188.5	58.7	1%	0%	(11%)	246 - 256	246 - 256	Unchanged
WAIO (100% basis) (Mt)	212.6	66.2	1%	(1%)	(11%)	278 - 290	278 - 290	Unchanged
Samarco (Mt)	3.3	1.0	7%	5%	(4%)	3 - 4	3 - 4	Top end
Metallurgical coal - BMA (Mt)	20.5	6.9	(2%)	(13%)	0%	29 - 32	29 - 32
BMA (100% basis) (Mt)	41.1	13.9	(2%)	(13%)	0%	58 - 64	58 - 64	Bottom end
Energy coal - NSWEC (Mt)	9.4	3.9	(4%)	53%	38%	13 - 15	13 - 15	Unchanged
Nickel (kt)	58.0	19.6	0%	5%	11%	80 - 90	75 - 85	Lowered

	Mar YTD23	Mar Q23
Production	(vs Mar YTD22)	(vs Dec Q22)	Mar Q23 vs Dec Q22 commentary
Copper (kt)	1,240.3	405.9	Lower concentrate volumes at Escondida reflect the impact of different ore feed
	12%	(4%)	sources on throughput and recovery performance, and lower volumes at Olympic
			Dam as a result of reduced refinery productivity following the tie-in of minor
			upgrade works.
Iron ore (Mt)	191.7	59.8	Lower volumes at WAIO due to the temporary shutdown of all operations following
	1%	(11%)	the tragic fatality in February, and the planned tie-in activity of the Port
			Debottlenecking Project 1 (PDP1).
Metallurgical coal (Mt)	20.5	6.9	Production in line with the prior period despite continued significant wet weather.
	(2%)	0%
Energy coal (Mt)	9.4	3.9	Higher production following improved weather, labour stability and strip ratios,
	(4%)	38%	and a reduced proportion of washed coal.
Nickel (kt)	58.0	19.6	Higher volumes due to planned maintenance at the smelter and refinery in the
	0%	11%	prior quarter and increased purchases of third party products.

Corporate update

Portfolio

In February, BHP issued US$2.75 billion in senior unsecured bondsin the US market comprising: US$1.0 billion in three-year bonds; US$1.0 billion in five-year bonds; and US$0.75 billion in 10-year bonds with the proceeds intended for general corporate purposes.

On 13 April, BHP announced thatOZ Minerals Ltd (OZL) shareholders approved the scheme of arrangementfor BHP to acquire 100 per cent of the shares in OZL (the Scheme). The Scheme became effective on 18 April 2023 and is expected to be implemented on 2 May 2023. Once effective, the acquisition of OZL and its assets will provide BHP with further exposure to copper, nickel and uranium. OZL's shareholders will be paid total cash consideration of A$28.25 per OZL share, comprising the scheme consideration paid by BHP of A$26.50 for each OZL share held at the scheme record date, which is 24 April 2023, and a fully franked special dividend paid by OZL of A$1.75 for each OZL share held on the special dividend record date, which is 21 April 2023. The cash payment by BHP will be funded using a combination of BHP's existing cash reserves and the proceeds of a debt facility.

BHP Operational Review for the nine months ended 31 March 2023

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Decarbonisation

Throughout the March 2023 quarter we continued to make progress towards our decarbonisation targets and goals and supported efforts to reduce greenhouse gas (GHG) emissions across our value chain. For example:

• BHPsigned an agreement with Hatchto design an electric smelting furnace (ESF) pilot plant to demonstrate a pathway to lower carbon dioxide (CO2) intensity in steel production using iron ore from our WAIO mines. Estimates show that reductions of more than 80 per cent in CO2 emissions intensity are potentially achievable processing Pilbara iron ores through a Direct Reduced Iron (DRI)-ESF pathway, compared to the current industry average using the conventional blast furnace route.
• BHPexpanded its Memorandum of Understanding (MoU) with China's HBIS Group, one of the world's largest steelmakers and a major iron ore customer of BHP, to incorporate a pilot of carbon capture and utilisation technology at HBIS's steel operations in China.
• BHP announced thetrial of Hydrotreated Vegetable Oil (HVO)to power haul trucks and other mining equipment over an initial three-month trial period at the Yandi iron ore operations in Western Australia in collaboration with BP. The HVO has internationally recognised certification as being sourced from more sustainable feedstocks such as waste products.

Copper

Production

			Mar YTD23	Mar Q23	Mar Q23
			vs	vs	vs
	Mar YTD23	Mar Q23	Mar YTD22	Mar Q22	Dec Q22
Copper (kt)	1,240.3	405.9	12%	10%	(4%)
Zinc (t)	86,226	23,612	(10%)	(28%)	(21%)
Uranium (t)	2,593	833	62%	7%	(12%)

Copper - Total copper production increased by 12 per cent to 1,240 kt. Guidance for the 2023 financial year remains unchanged at between 1,635 and 1,825 kt.

Escondida copper production increased by seven per cent to 762 kt primarily due to higher concentrator feed grade of 0.79 per cent, compared to 0.74 per cent in the nine months to March 2022. The positive impact of higher grade was partially offset by the impact of road blockades across Chile in the December 2022 quarter, which reduced availability of some key mine supplies. Full year production has been lowered to between 1,050 and 1,080 kt (from between 1,080 and 1,180 kt) as we manage geotechnical risk in a high grade section of the Escondida pit. This has led to a resequencing of the mine plan, resulting in lower volumes of mined ore and increased processing of lower grade stockpiles through the concentrators. Concentrator feed grade is expected to improve in the June 2023 quarter, compared to the nine months ended March 2023. Medium term guidance of 1.2 Mtpa of copper production on average over the next five years remains unchanged.

Pampa Norte copper production increased by eight per cent to 220 kt as a result of higher concentrator throughput at the Spence Growth Option (SGO). Full year production is expected to be towards the upper end of the guidance range of between 240 and 290 kt. The SGO plant modifications which commenced in August 2022 are planned to be completed in the 2023 calendar year. Expected capital expenditure for the works remains unchanged at approximately US$100 million. Further studies are ongoing for additional capacity uplift at SGO. Cerro Colorado continues to transition towards planned closure at the end of the 2023 calendar year.

Olympic Dam copper production of 156 kt was an increase of 88 per cent on the prior period, primarily as a result of the major smelter maintenance campaign (SCM21) across the December 2021 and March 2022 quarters. Continued strong concentrator and smelter performance has delivered record concentrate smelted for the nine month period. The March 2023 quarter was also a record gold production quarter, contributing to a record nine months for both gold and silver production following the implementation of debottlenecking initiatives in the prior year. Copper production is expected to be towards the upper end of the guidance range for the 2023 financial year at between 195 and 215 kt.

Antamina copper production decreased by eight per cent to 102 kt reflecting expected lower copper feed grades, partially offset by higher throughput. Zinc production was 10 per cent lower at 86 kt reflecting expected lower zinc feed grades, partially offset by higher throughput. Production guidance remains unchanged for the 2023 financial year, with copper production of between 120 and 140 kt, and zinc production of between 115 and 135 kt.

BHP Operational Review for the nine months ended 31 March 2023

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Iron ore

Production

			Mar YTD23	Mar Q23	Mar Q23
			vs	vs	vs
	Mar YTD23	Mar Q23	Mar YTD22	Mar Q22	Dec Q22
Iron ore production (kt)	191,748	59,773	1%	0%	(11%)

Iron ore - Total iron ore production increased by one per cent to 192 Mt. Guidance for the 2023 financial year remains unchanged at between 249 and 260 Mt.

WAIO production increased by one per cent to a nine month record of 188 Mt (213 Mt on a 100 per cent basis), reflecting continued strong supply chain performance, including improved car dumper utilisation and lower COVID-19 related impacts than the prior period. This was partially offset by a 24 hour safety stop across the WAIO business and a further two day suspension of rail operations following the tragic fatality, and the planned tie-in of PDP1, which remains on track to be completed in the 2024 calendar year.

The production ramp up at South Flank remains on track to reach full capacity of 80 Mtpa (100 per cent basis) by the end of the 2024 financial year. Current year performance has contributed to record year to date WAIO lump sales. Additionally, the deployment of autonomous haul trucks is well progressed and is expected to be completed by the end of the 2023 calendar year.

WAIO production guidance for the 2023 financial year remains unchanged at between 246 and 256 Mt (278 and 290 Mt on a 100 per cent basis). There has been no significant damage or reported injuries at our WAIO sites as a result of Tropical Cyclone Ilsa in April 2023. Our Port Hedland operations were suspended in coordination with the Pilbara Ports Authority, but have since ramped up to full capacity. Full year unit cost guidance at WAIO of between $18 and $19 per tonne is expected to be at the top of the range.

Samarco production increased by seven per cent to 3.3 Mt (BHP share), reflecting strong concentrator performance. Production for the 2023 financial year is expected to be at the top of the guidance range of between 3 and 4 Mt (BHP share).

In late March, the Fourth Federal Court in Brazil ordered BHP Brasil and Vale to deposit a total of BRL 10.3 billion (approximately US$1.0 billion, BHP Brasil share) in 10 instalments to be paid every 40 days, with the first instalment due on 20 May. The decision relates to a dispute as to whether certain territories in the State of Espírito Santo were affected by the dam failure. The Fourth Federal Court ordered that the deposit be paid to ensure that funds are available if required for reparation in those territories. BHP Brasil has appealed the decision.

The Group's provisions related to the Samarco dam failure and Germano dam decommissioning are subject to ongoing assessment and totalled US$3.3 billion as at 31 December 2022, including an expected cash outlay for the 2023 calendar year of US$1.95 billion.

There are a number of matters related to the Samarco dam failure which are disclosed as contingent liabilities and given the status of proceedings it is not possible to provide a range of possible outcomes or a reliable estimate of potential future exposures for BHP. Please refer to the financial results for the period ending 31 December 2022 for further information.

BHP Operational Review for the nine months ended 31 March 2023

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Coal

Production

			Mar YTD23	Mar Q23	Mar Q23
			vs	vs	vs
	Mar YTD23	Mar Q23	Mar YTD22	Mar Q22	Dec Q22
Metallurgical coal (kt)	20,543	6,929	(2%)	(13%)	0%
Energy coal (kt)	9,408	3,934	(4%)	53%	38%

Metallurgical coal - BMA production decreased by two per cent to 21 Mt (41 Mt on a 100 per cent basis) as a result of significant wet weather. This was partially offset by continued improvement in underlying truck productivity, in particular at Goonyella and Daunia following the completion of their autonomous fleet transitions, as well as reduced COVID-19 related labour constraints. In the nine months to March 2023, BMA has experienced the highest level of rainfall in the past 10 years, significantly impacting production.2

Full year production is expected to be at the bottom of the guidance range of between 29 and 32 Mt (58 and 64 Mt on a 100 per cent basis), with further wet weather in the June 2023 quarter posing a risk to this outcome. The additional long wall move at Broadmeadow noted in the December 2022 Operational Review is planned to commence in June 2023.

While we will continue to sustain and optimise our existing assets, BMA is not making significant new investments in Queensland given the changes to the royalty regime imposed by the current government which have increased risk and reduced competitiveness of investments in the State.

Energy coal - New South Wales Energy Coal (NSWEC) production decreased by four per cent to 9 Mt reflecting the impacts of the wet weather experienced in the December 2022 half, and the increased proportion of washed coal. This was partially offset by improved stability in labour, particularly reduced absenteeism which impacted stripping performance and mine productivity in the prior period. Higher quality products made up approximately 85 per cent of sales, compared to approximately 90 per cent in the prior period. Production guidance for the 2023 financial year remains unchanged at between 13 and 15 Mt.

Following the NSW Government Directions to local thermal coal producers, NSWEC has started delivering their domestic allocation of 0.175 Mt per quarter from April 2023. The full allocation for the June 2023 quarter has been sold at 100 per cent of the current price cap of A$125 per tonne. The reservation allocation for the 2024 financial year is expected to be 0.7 Mt in line with the Directions.

Other

Nickel production

			Mar YTD23	Mar Q23	Mar Q23
			vs	vs	vs
	Mar YTD23	Mar Q23	Mar YTD22	Mar Q22	Dec Q22
Nickel (kt)	58.0	19.6	0%	5%	11%

Nickel - Nickel West production was in line with the prior period at 58 kt, with the ramp up of the refinery following planned maintenance in the December 2022 quarter offset by the increased proportion of concentrate and matte products.

In March, Nickel West advised one of its third party product providers, Mincor Resources, that it will no longer accept off-specification product containing high levels of arsenic due to the issues with processing this ore. Further, a heavy rain event was experienced at the Mt Keith operations in early April 2023 impacting mine progression. As a result, production guidance for the 2023 financial year has been revised to between 75 and 85 kt (from between 80 and 90 kt).

BHP Operational Review for the nine months ended 31 March 2023

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