BHP : Operational Review for the year ended 30 June 2023

Release Time	IMMEDIATE
Date	20 July 2023
Release Number	13/23

BHP OPERATIONAL REVIEW

FOR THE YEAR ENDED 30 JUNE 2023

• There were two fatalities during the financial year. We are committed to sharing the learnings fromthese tragic events and remain resolute in our commitment to eliminating fatalities and serious injuries at BHP.
• Full year production guidance was achieved for copper, iron ore, metallurgical coal and energy coal.Nickel achieved revised guidance and finished in line with the lower end of original guidance.
• Annual production records at Western Australia Iron Ore (WAIO) of 285 Mt (100% basis), Spence of 240 kt,and Olympic Dam for both copper of 212 kt and refined gold of 186 troy koz.
• Full year unit cost guidance1 is expected to be achieved at Escondida, WAIO and New South WalesEnergy Coal (NSWEC). BHP Mitsubishi Alliance (BMA) is expected to be marginally above its revised guidance range.
• Average realised prices for copper, iron ore and metallurgical coal products were lower in the 2023financial year compared to the prior year. Nickel prices remained stable, while thermal coal prices were stronger, predominantly in the first half.
• BHP completed the acquisition of OZ Minerals Ltd (OZL) on 2 May 20232.
• BHP has continued to make strong progress at Oak Dam in South Australia. We have defined anExploration Target3 and plan to increase the number of exploration drills from nine to eleven by the end of the 2023 calendar year.
• In Australia, BHP released its sixth Reconciliation Action Plan, which was awarded Elevate status.

BHP Chief Executive Officer, Mike Henry:

"The financial year was marked by the deaths of Jody Byrne and Nathan Scholz. These tragic events underscore the absolute importance of safety and we are resolute in our commitment to eliminating fatalities and serious injuries at BHP.

"BHP finished the year with a strong fourth quarter, increasing annual production across the board and achieving annual records at WAIO, Olympic Dam and Spence. WAIO shipped record volumes on the back of productivity in its supply chain, rail network and car dumpers, while South Flank completed its deployment of autonomous haul trucks in May and is on track to ramp up to full production in the next 12 months. Olympic Dam's improved reliability and productivity delivered record annual output in copper, gold and silver, and the integration of OZ Minerals into our South Australian copper business is expected to lift production to between 310 and 340 kt in FY24. At Escondida, the team managed through operational challenges to deliver solid production and position the asset to increase output further in FY24. Our Queensland coal operations achieved strong underlying performance including the transition to autonomous fleets at Goonyella Riverside and Daunia, offsetting the impact of significant wet weather.

"Inflationary pressures impacted our business in the year, and we remain laser focused on safety and productivity to remain competitive. Competitiveness will be ever more important as we enter the new financial year and at a time when there are new challenges and opportunities to resource development and global economic volatility.

"BHP's portfolio is geared towards high quality steelmaking and growth options in future facing commodities. The Jansen potash project in Canada remains ahead of plan and studies for Stage 2 are progressing. Through the year, BHP made strategic investments and exploration progress in copper and nickel prospects globally, including Kabanga in Tanzania, Oak Dam in Australia, Filo Mining with the Filo del Sol project in Argentina and Chile, and Ocelot in the United States, as well as Serbia and Peru."

BHP Operational Review for the year ended 30 June 2023

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Summary

Operational performance

Production and guidance are summarised below.

			FY23	Jun Q23	Jun Q23
		Jun	vs	vs	vs	FY24	FY24e
Production	FY23	Q23	FY22	Jun Q22	Mar Q23	guidance	vs FY23
Copper (kt)i	1,716.5	476.2	9%	3%	17%	1,720 - 1,910	0% - 11%
Escondida (kt)	1055.3	293.0	5%	1%	16%	1,080 - 1,180	2% - 12%
Pampa Norte (kt)	288.8	68.5	3%	(11%)	(6%)	210 - 250ii	(27%) - (13%)
Copper South Australia (kt)iii	232.4	76.6	68%	38%	48%	310 - 340	33% - 46%
Antamina (kt)	138.4	36.5	(8%)	(8%)	23%	120 - 140	(13%)	- 1%
Carajás (kt)	1.6	1.6	-	-	-	-		-
Iron ore (Mt)	257.0	65.3	1%	2%	9%	254 - 264.5	(1%)	- 3%
WAIO (Mt)	252.5	64.1	1%	1%	9%	250 - 260	(1%)	- 3%
WAIO (100% basis) (Mt)	285.3	72.7	1%	1%	10%	282 - 294	(1%)	- 3%
Samarco (Mt)	4.5	1.2	11%	22%	17%	4 - 4.5	(11%)	- 0%
Metallurgical coal - BMA (Mt)	29.0	8.5	0%	4%	22%	28 - 31	(4%)	- 7%
BMA (100% basis) (Mt)	58.0	17.0	0%	4%	22%	56 - 62	(4%)	- 7%
Energy coal - NSWEC (Mt)	14.2	4.8	3%	22%	21%	13 - 15	(8%)	- 6%
Nickel (kt)	80.0	22.0	4%	17%	12%	77 - 87	(4%)	- 9%

1. Includes contribution of 21.5 kt from operations acquired from OZL2.
2. Production guidance for FY24 is provided for Spence only. Cerro Colorado is expected to produce ~9 kt as it transitions to closure by 31 December 2023.
3. Comprised of Olympic Dam, Prominent Hill and Carrapateena. Refer to the production and sales report for more details.

	FY23	Jun Q23
Production	(vs FY22)	(vs Mar Q23)	Jun Q23 vs Mar Q23 commentary
Copper (kt)	1,716.5	476.2	Higher concentrate volumes at Escondida reflect the higher concentrate feed
	9%	17%	grade of 0.93 per cent, and higher volumes at Copper South Australia resulted in
			a BHP record for quarterly production from the refinery at Olympic Dam, and
			reflect the addition of Prominent Hill and Carrapateena.
Iron ore (Mt)	257.0	65.3	Increased production at WAIO, despite unfavourable impacts from Tropical Cyclone
	1%	9%	Ilsa, due to strong supply chain performance and the prior period impacts from the
			temporary shutdown of operations following the fatality, as well as the tie-in activity
			of the Port Debottlenecking Project 1 (PDP1).
Metallurgical coal (Mt)	29.0	8.5	Increased production driven by increased yield, improved truck productivity and
	0%	22%	favourable weather conditions, partially offset by the commencement of a second
			longwall move at Broadmeadow.
Energy coal (Mt)	14.2	4.8	Higher volumes as a result of additional stripping volumes, decreased proportion
	3%	21%	of washed coal, favourable weather conditions, and improvement in truck
			productivity with record quarterly annualised truck hours.
Nickel (kt)	80.0	22.0	Higher volumes due to improved mining performance at Mt Keith, increased third
	4%	12%	party purchases and inventory drawdowns enabling increased concentrate
			production, partially offset by a heavy rain event in April 2023.

BHP Operational Review for the year ended 30 June 2023

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Summary of disclosures

BHP expects its financial results for the second half of the 2023 financial year to reflect certain items summarised in the table below. The table does not provide a comprehensive list of all items impacting the period. The financial statements are the subject of ongoing work that will not be finalised until the release of the financial results on 22 August 2023. Accordingly, the table below contains preliminary information that is subject to update and finalisation.

	H2 FY23
	impact
Description	US$Mi	Classificationii
For the 2023 financial year, unit costs at Escondida and WAIO are expected to be towards the	-	↑ Operating costs
upper end of guidance ranges, and unit costs at NSWEC are expected to be in line with the
revised guidance range (at guidance exchange rates)
Unit costs at BMA are expected to be marginally above the revised guidance range (at guidance
exchange rates)
Note: Australian dollar and Chilean peso were weaker than guidance rates in the periodiii
Unit costs will not include any costs relating to the review of employee entitlements and
allowances.
Review of employee entitlements and allowances	~280	↑ Operating costs -
		Group and Unallocated
Transaction and integration costs associated with the OZL acquisition	~100 - 150	↑ Operating costs -
		Group and Unallocated
Increase to depreciation and amortisation expense relative to H1 FY23, predominantly at WAIO,	~100 - 200	↑ Depreciation,
and includes the contribution of the OZL assets acquired during the period.		amortisation and
		impairments
The Group's adjusted effective tax rate for the 2023 financial year is expected to be in the lower half	-	Taxation expense
of the guidance range of 30 to 35 per cent
Working capital decrease relating to net price impacts, and provisions relating to employee	950 - 1,050	↑ Operating cash flow
entitlements and allowances
Decrease in cash tax paid relative to H1 FY23	1,600 - 1,700	↑ Operating cash flow
Gross dividends received from equity-accounted investments	~250	↑ Investing cash flow
Capital and exploration spend is expected to be approximately US$7.1 bn, below full year	-	↑ Investing cash flow
guidance of approximately US$7.6 bn, primarily driven by favourable FX
Gross dividends paid to non-controlling interests	~650	↓ Financing cash flow
Payment of the H1 FY23 dividend	~4,600	↓ Financing cash flow
Acquisition of OZL	~6,000	↓ Investing cash flow
Net debt acquired through OZL acquisition	~1,000	↑ Net debt
The Group's net debt balance at 30 June 2023 is expected to be between US$11 and US$11.5 bn	-	Net debt
and is expected to remain towards the upper end of our target range of US$5 to US$15 bn in the
near term
Financial impact on BHP Brasil of the Samarco dam failure	Refer footnoteiv	Exceptional item
The financial impact is expected to primarily relate to amortisation of discounting on the provision
and the impact of foreign exchange
Revaluation of deferred tax balances following the substantive enactment of the	~250 - 300v	Exceptional item
Chilean Royalty Bill

1. Numbers are not tax effected and comparisons are against the 31 December 2022 financial results, unless otherwise noted.
2. There will be a corresponding balance sheet, cash flow and/or income statement impact as relevant, unless otherwise noted.
3. Average exchange rates for FY23 of AUD/USD 0.67 (guidance rate AUD/USD 0.72) and USD/CLP 864 (guidance rate USD/CLP 830).
4. Financial impact is the subject of ongoing work and is not yet finalised. See Iron ore section for further information on Samarco.
5. To reflect an increase to the mining tax rates in Chile.

BHP Operational Review for the year ended 30 June 2023

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Average realised prices

The average realised prices achieved for our major commodities are summarised below.

					FY23	H2 FY23	H2 FY23
Average realised pricesi					vs	vs	vs
H2 FY23	H1 FY23	FY23	FY22	FY22	H2 FY22	H1 FY23
Copper (US$/lb)ii	3.80	3.49	3.65	4.16	(12%)	(5%)	9%
Iron ore (US$/wmt, FOB)	99.88	85.46	92.54	113.10	(18%)	(11%)	17%
Metallurgical coal (US$/t)	273.08	268.73	271.05	347.10	(22%)	(36%)	2%
Hard coking coal (US$/t)iii	276.22	270.65	273.59	366.82	(25%)	(37%)	2%
Weak coking coal (US$/t)iii	250.38	252.12	251.13	296.51	(15%)	(35%)	(1%)
Thermal coal (US$/t)iv	157.21	354.30	236.51	216.78	9%	(48%)	(56%)
Nickel metal (US$/t)	23,652	24,362	24,021	23,275	3%	(14%)	(3%)

1. Based on provisional, unaudited estimates. Prices exclude sales from equity accounted investments, third party product and internal sales, and represent the weighted average of various sales terms (for example: FOB, CIF and CFR), unless otherwise noted. Includes the impact of provisional pricing and finalisation adjustments.
2. Does not include sales from assets acquired through the purchase of OZL.
3. Hard coking coal (HCC) refers generally to those metallurgical coals with a Coke Strength after Reaction (CSR) of 35 and above, which includes coals across the spectrum from Premium Coking to Semi Hard Coking coals, while weak coking coal (WCC) refers generally to those metallurgical coals with a CSR below 35.
4. Export sales only. Includes thermal coal sales from metallurgical coal mines.

The large majority of iron ore shipments were linked to index pricing for the month of shipment, with price differentials predominantly a reflection of market fundamentals and product quality. Iron ore sales for the June 2023 half year were based on an average moisture rate of 6.6 per cent. The large majority of metallurgical coal and energy coal exports were linked to index pricing for the month of scheduled shipment or priced on the spot market at fixed or index-linked prices, with price differentials reflecting product quality. The large majority of copper cathodes sales were linked to index price for quotation periods one month after month of shipment, and three to four months after month of shipment for copper concentrates sales with price differentials applied for location and treatment costs.

At 30 June 2023, the Group had 342 kt of outstanding copper sales that were revalued at a weighted average price of US$3.77 per pound. The final price of these sales will be determined in the 2024 financial year. In addition, 354 kt of copper sales from the 2022 financial year were subject to a finalisation adjustment in the 2023 financial year. The provisional pricing and finalisation adjustments will decrease Underlying EBITDA by US$243 million in the 2023 financial year and are included in the average realised copper price in the above table.

Corporate update

BHP released its sixth Reconciliation Action Planin June 2023, which has been recognised with 'Elevate' status from Reconciliation Australia. Some examples of the commitments made in the plan include increasing Indigenous representation across our Australian workforce to a target of 9.7 per cent by the end of the 2027 financial year, and a target to achieve an A$1.5 billion spend with Traditional Owner and Indigenous businesses in aggregate across our Australian assets.

Portfolio

On 2 May 2023, BHP announced the completion of the OZL acquisition. The acquisition strengthens BHP's portfolio in copper, nickel and uranium and is in line with our strategy to pursue value adding growth in future facing commodities. The cash payment by BHP was funded using a combination of BHP's existing cash reserves and the proceeds of a debt facility.

In June 2023, BHP agreed to invest an additional C$30 million in Filo Mining Corp via a private placement. The proceeds from BHP's investment will be used by Filo for exploration and development of the Filo del Sol project, located in San Juan Province, Argentina and adjacent Region III in Chile, and for working capital and general corporate purposes.

Decarbonisation

In the June 2023 quarter, BHP held a briefing updating on its progress and plansto achieve its medium and long-term operational decarbonisation target and goal and released two Prospects updates on the Pathways to decarbonisation which are available on the BHP website: The many, many roads to Parisand the electric smelting furnace.

BHP Operational Review for the year ended 30 June 2023

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Copper

Production

			FY23	Jun Q23	Jun Q23
			vs	vs	vs
	FY23	Jun Q23	FY22	Jun Q22	Mar Q23
Copper (kt)	1,716.5	476.2	9%	3%	17%
Zinc (t)	125,048	38,822	1%	41%	64%
Uranium (t)	3,406	813	43%	5%	(2%)

Copper - Total copper production increased by nine per cent to 1,717 kt. Production for the 2024 financial year is expected to be between 1,720 and 1,910 kt.

Escondida copper production increased by five per cent to 1,055 kt primarily due to higher concentrator feed grade of 0.82 per cent, compared to 0.78 per cent in the 2022 financial year. The positive impact of the 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 came in at the low end of revised guidance largely as a result of measures implemented to manage geotechnical events in a high grade section of the Escondida pit. These included a resequencing of the mine plan, resulting in lower than anticipated volumes of mined ore and increased processing of lower grade stockpiles through the concentrators. Production is expected to increase to between 1,080 and 1,180 kt for the 2024 financial year and reflects both an expected increase in concentrator feed grade and an expected increase in concentrator throughput compared to the 2023 financial year.

Pampa Norte copper production increased by three per cent to 289 kt including a record 240 kt at Spence and 49 kt at Cerro Colorado. This was largely a result of higher concentrator throughput at the Spence Growth Option (SGO), partially offset by lower production at Cerro Colorado as it transitions towards closure. The concentrator plant modifications, which commenced in August 2022, remain on track to be completed in the 2023 calendar year. Expected capital expenditure for the concentrator modification works remains unchanged at approximately US$100 million. Production for Spence is expected to be between 210 and 250 kt for the 2024 financial year, with planned higher concentrator grade and concentrator throughput but lower stacking grade for cathodes. Cerro Colorado continues to transition towards planned closure by December 2023, with production for the six months until closure expected to be approximately 9 kt. We are continuing to closely monitor previously identified Spence Tailings Storage Facility anomalies.

Following the completion of the acquisition of OZL, we have established the Copper South Australia business. Production from Copper South Australia was 232 kt, comprised of full year production from Olympic Dam of 212 kt and two months of production2 from Prominent Hill and Carrapateena of 8 kt and 12 kt respectively. Olympic Dam delivered record BHP copper production as a result of continued strong concentrator and smelter performance following the major smelter maintenance campaign (SCM21) in the prior year. Record annual gold and silver production was also achieved following the implementation of debottlenecking initiatives in the prior year, 27 per cent higher than the previous gold production record.

Integration activity is underway, including the transfer of small volumes of copper concentrate from Prominent Hill to Olympic Dam for processing. Copper South Australia production of between 310 and 340 kt is expected for the 2024 financial year.

Antamina copper production decreased by eight per cent to 138 kt reflecting the expected lower copper feed grades, partially offset by higher throughput. Zinc production was one per cent higher at 125 kt, reflecting higher throughput. Copper production of 120 to 140 kt and zinc production of between 85 and 105 kt is expected for the 2024 financial year.

Following the acquisition of OZL, Carajás produced 1.6 kt of copper and 1.2 troy koz of gold2.

BHP Operational Review for the year ended 30 June 2023

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