UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE FISCAL YEAR ENDED 30 JUNE 20102012
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
¨ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
For the transition period from to
Commission file number: 001-09526 | Commission file number: 001-31714 |
BHP BILLITON LIMITED | BHP BILLITON PLC | |
(ABN 49 004 028 077) |
(REG. NO. 3196209) | |
(Exact name of Registrant as specified in its charter) | (Exact name of Registrant as specified in its charter) |
VICTORIA, AUSTRALIA | ENGLAND AND WALES | |
(Jurisdiction of incorporation or organisation) | (Jurisdiction of incorporation or organisation) |
180 LONSDALE STREET, MELBOURNE, VICTORIA 3000 AUSTRALIA | NEATHOUSE PLACE, VICTORIA, LONDON, UNITED KINGDOM | |
(Address of principal executive offices) | (Address of principal executive offices) |
Securities registered or to be registered pursuant to section 12(b) of the Act.
Title of each class | Name of each exchange on which registered | Title of each class | Name of each exchange on which registered | |||||
American Depositary Shares* | New York Stock Exchange |
| American Depositary Shares* | New York Stock Exchange | ||||
Ordinary Shares** | New York Stock Exchange | Ordinary Shares, nominal
| New York Stock Exchange |
* | Evidenced by American Depositary Receipts. Each American Depositary Receipt represents two ordinary shares of BHP Billiton Limited or BHP Billiton Plc, as the case may be. |
** | Not for trading, but only in connection with the listing of the applicable American Depositary Shares. |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
BHP Billiton Limited | BHP Billiton Plc | |||
Fully Paid Ordinary Shares | 3,358,359,496 | 2,231,121,202 |
BHP Billiton Limited | BHP Billiton Plc | |||
Fully Paid Ordinary Shares | 3,211,691,105 | 2,136,185,454 |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x | Accelerated filer ¨ |
|
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP | International Financial Reporting Standards as issued by the International Accounting Standards Board x | Other ¨ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ Item 18 ¨
If this is an annual report, indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
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10 | 289 | |||||
10.1 | 289 | |||||
10.2 | 294 | |||||
10.3 | 298 | |||||
10.4 | 299 | |||||
11 | 300 | |||||
11.1 | 300 | |||||
11.2 | 300 | |||||
11.3 | 304 | |||||
11.4 | 305 | |||||
11.5 | 307 | |||||
11.6 | 308 | |||||
11.7 | 316 | |||||
318 | ||||||
12 | 322 |
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Form 20-F Cross Reference Table
Item Number | Description | Report section reference | ||
1. | Identity of directors, senior management and advisors | Not applicable | ||
2. | Offer statistics and expected timetable | Not applicable | ||
3. | Key | |||
A | Selected financial information | 1.4.1 | ||
B | Capitalisation and indebtedness | Not applicable | ||
C | Reasons for the offer and use of proceeds | Not applicable | ||
D | Risk factors | 1.5 | ||
4. | Information on the company | |||
A | History and development of the company | 2.2.1, 2.2.2 to 2.2.10, 2.3, | ||
B | Business overview | 1, 2.2 to | ||
C | Organisational structure | |||
D | Property, plant and equipment | 2.1, 2.2.2 to 2.2.10, 2.3, 2.8, | ||
4A. | Unresolved staff comments | None | ||
5. | Operating and financial review and prospects | |||
A | Operating results | 1.5, 2.7, 3.3, 3.4, 3.6 | ||
B | Liquidity and capital resources | 3.7 | ||
C | Research and development, patents and | 2.5, 2.6 and 7.16 | ||
D | Trend information | |||
E | Off-balance sheet arrangements | 3.8 and Notes 21 and 22 to the Financial Statements | ||
F | Tabular disclosure of contractual obligations | 3.8 and Notes 21 | ||
6. | Directors, senior management and employees | |||
A | Directors and senior management | 4.1 and 4.2 | ||
B | Compensation | 6 | ||
C | Board practices | 4.1, 4.2, 5, 6.3 | ||
D | Employees | |||
E | Share ownership | 6, 7.8, 7.20 and 7.21 | ||
7. | Major shareholders and related party transactions | |||
A | Major shareholders | 11.2 | ||
B | Related party transactions | 3.9 and Note 31 to the Financial Statements | ||
C | Interests of experts and counsel | Not applicable | ||
8. | Financial | |||
A | Consolidated statements and other financial information | 8, 9, 11.3 and | ||
B | Significant changes | 3.10 | ||
9. | The offer and listing | |||
A | Offer and listing details | 11.4 | ||
B | Plan of distribution | Not applicable | ||
C | Markets | 11.1 | ||
D | Selling shareholders | Not applicable | ||
E | Dilution | Not applicable | ||
F | Expenses of the issue | Not applicable | ||
10. | Additional Information | |||
A | Share capital | Not applicable | ||
B | Memorandum and articles of association | 2.7.2 and 2.12 |
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Item Number | Description | Report section reference | Description | Report section reference | ||||
E | Dilution | Not applicable | ||||||
F | Expenses of the issue | Not applicable | ||||||
10. | Additional Information | |||||||
A | Share capital | Not applicable | ||||||
B | Memorandum and articles of association | 2.7.3 and 2.13 | ||||||
C | Material contracts | 2.12 | Material contracts | 2.11 | ||||
D | Exchange controls | 2.7.3 | Exchange controls | 2.7.2 | ||||
E | Taxation | 11.5 | Taxation | 11.6 | ||||
F | Dividends and paying agents | Not applicable | Dividends and paying agents | Not applicable | ||||
G | Statement by experts | Not applicable | Statement by experts | Not applicable | ||||
H | Documents on display | 2.13.14 | Documents on display | 2.12.14 | ||||
I | Subsidiary information | 3.9 and Note 25 to the Financial Statements | Subsidiary information | 3.9 and Note 25 to the Financial Statements | ||||
11. | Quantitative and qualitative disclosures about market risk | 3.7.4 and Note 28 to the Financial Statements | Quantitative and qualitative disclosures about market risk | 3.7.4 and Note 28 to the Financial Statements | ||||
12. | Description of securities other than equity securities | Not applicable | Description of securities other than equity securities | |||||
A | Debt Securities | Not Applicable | ||||||
B | Warrants and Rights | Not applicable | ||||||
C | Other Securities | Not applicable | ||||||
D | American Depositary Shares | 11.5 | ||||||
13. | Defaults, dividend arrearages and delinquencies | There have been no defaults, dividend arrearages or delinquencies | Defaults, dividend arrearages and delinquencies | There have been no defaults, dividend arrearages or delinquencies | ||||
14. | Material modifications to the rights of security holders and use of proceeds | There have been no material modifications to the rights of security holders and use of proceeds since our last Annual Report | Material modifications to the rights of security holders and use of proceeds | There have been no material modifications to the rights of security holders and use of proceeds since our last Annual Report | ||||
15. | Controls and procedures | 5.5.1 and 5.13 | Controls and procedures | 5.13.1 | ||||
16. | ||||||||
A | Audit committee financial expert | 4.1 and 5.5.1 | Audit committee financial expert | 4.1 and 5.13.1 | ||||
B | Code of ethics | 5.9 | Code of ethics | 5.16 | ||||
C | Principal accountant fees and services | 5.13.2 and Note 34 to the Financial Statements | Principal accountant fees and services | 5.13.1 and Note 34 to the Financial Statements | ||||
D | Exemptions from the listing standards for audit committees | Not applicable | Exemptions from the listing standards for audit committees | Not applicable | ||||
E | Purchases of equity securities by the issuer and affiliated purchasers | 7.2 | Purchases of equity securities by the issuer and affiliated purchasers | 7.2 | ||||
F | Change in Registrant’s Certifying Accountant | There has been no change of the Registrant’s Certifying Accountant since our last Annual Report | Change in Registrant’s Certifying Accountant | There has been no change of the Registrant’s Certifying Accountant since our last Annual Report | ||||
G | Corporate Governance | 5.11 | Corporate Governance | 5.22 | ||||
H | Mine Safety and Health Administration (MSHA) Disclosure | The information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This item is included in Exhibit 95.1 | ||||||
17. | Financial statements | Not applicable as Item 18 complied with | Financial Statements | Not applicable as Item 18 complied with | ||||
18. | Financial statements | F–1 to F–96, Exhibit 15.1 | Financial Statements | The pages beginning on page F-1 in this Annual Report, Exhibit 15.1 | ||||
19. | Exhibits | 12 | Exhibits | 12 |
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We are the world’s largest diversified naturalBHP Billiton, a leading global resources company.
Our corporate objectivepurpose is to create long-term shareholder value for shareholders through the discovery, acquisition, development and conversionmarketing of natural resources,resources.
Our strategy is to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market.
This strategy means more predictable business performance over time which, in turn, underpins the provisioncreation of innovative customervalue for our shareholders, customers, employees and, market-focused solutions. importantly, the communities in which we operate.
We pursue this objective through our unchanged strategyare among the world’s top producers of investing in ‘tier one’ assets that are large, low-cost and long-life to provide a balanced portfolio of export-oriented commodities:
steelmaking products -major commodities including, iron ore, metallurgical coal, manganese;
non-ferrous products -conventional and non-conventional oil and gas, copper, aluminium, nickel, diamonds, potash;
energy products - petroleum, energy coal, uranium.
We continue to invest in the futurealuminium, manganese, uranium, nickel and have a deep inventory of growth assets.
Our operations and investments are designed to ensure the Group remains stable in the long term and responsive to market volatility in the short term.silver.
The Group is headquartered in Melbourne, Australia, and consists of the BHP Billiton Limited Group and the BHP Billiton Plc Group as a combined enterprise, following the completion of the Dual Listed Company (DLC) merger in June 2001.
BHP Billiton Limited and BHP Billiton Plc have each retained their separate corporate identities and maintained their separate stock exchange listings, but they are operated and managed as if they are a single unified economic entity, with their boards and senior executive management comprising the same people.
BHP Billiton Limited has a primary listing on the Australian Securities Exchange (ASX) in Australia. BHP Billiton Plc has a premium listing on the London Stock Exchange (LSE) in the UKUnited Kingdom and a secondary listing on the Johannesburg Stock Exchange (JSE) in South Africa. In addition, BHP Billiton Limited American Depositary Receipts (ADRs) and BHP Billiton Plc ADRs trade on the New York Stock Exchange (NYSE) in the US.United States.
As at 30 June 2010,2012, we had a market capitalisation of approximately US$165.6160.6 billion. For the year ended 30 June 2010,FY2012, we reported net operating cash flow of US$17.924.4 billion, revenue of US$72.2 billion and profit attributable to shareholders of US$12.7 billion and revenue of US$52.815.4 billion. We have approximately 100,000125,000 employees and contractors working in more than 100 operations in over 25 countries.locations worldwide.
We operate nineeight businesses, called Customer Sector Groups (CSGs), which are aligned with the commodities we extract and market::
Petroleum
Aluminium
• | Aluminium(1) |
Base Metals (including Uranium)
Diamonds and Specialty Products
Stainless Steel Materials
• | Stainless Steel Materials(1) |
Iron Ore
Manganese
Metallurgical Coal
Energy Coal.Coal
(1) | In May 2012, we announced that our Stainless Steel Materials and Aluminium CSGs would consolidate into a single CSG named Aluminium and Nickel. In this Report, Aluminium and Stainless Steel Materials are reported separately. |
Dear Shareholder
The past year was characterised by continued high levels of volatility and uncertainty in the world’s economy.
The debt issues of the Eurozone remain a global concern. European governments continue to take action to address these challenges, but until they are resolved, we expect the political and financial conditions of the region to remain volatile. While there are some signs of improvement in the United States economy, a recovery will only continue provided there are no large external shocks. Furthermore, China and other emerging economies have also seen subdued growth as they face cyclical and structural pressures.
In the midst of these challenges in the global economic environment, I am pleased to report that in a difficult global economic and financial environment, BHP Billiton continuedperformed well this past financial year. BHP Billiton’s Underlying EBIT margin remained at a robust 39 per cent, despite weakness in commodity markets and industry-wide cost pressures. These results were underpinned by the execution of our diversified strategy.
Your Board is confident that our commitment to perform well and strengthened its strategic and financial position.
While the global economic outlook has improved, the recovery remains fragile. Despite a near-term slowinginvest in China, wehigh-return growth opportunities will continue to believe that the fundamentals driving Asian growth are robust. It is clearcreate returns for shareholders. Our largely brownfield projects in execution will continue to the Board that the long-term outlook for BHP Billiton is strong. We have unique assets that are critical to the growth of the world’s developing economies,drive momentum in our major businesses and a geographic and commodity spread that reduces risk and optimises opportunity.
During the year, your Chief Executive, Marius Kloppers, and his team focused on delivering strong production and cost performance as well as investing in new growth opportunities.
Our strategy is clear and remains unchanged since 2001. We focus on large, long-life, low-cost, upstream, high-quality assets, diversified by commodity, geography and markets. This strategy means more predictable business performance over time which, in turn, underpins the creation ofcreate value for our shareholders customers, employeesin the near term. Moreover, the continued urbanisation and importantly,industrialisation of developing economies should support both demand for our products and the long-term growth of our strong pipeline of development projects across diverse commodities and geographies.
Recognising these opportunities, we will continue to prioritise investment where a sustainable competitive advantage exists, including geopolitical and fiscal stability. Our project approvals process will ensure that we allocate capital in a disciplined fashion, while the quality and diversity of our asset portfolio will continue to drive strong returns.
Investing in high-return projects, while maintaining a strong balance sheet, underpins our ability to pay a dividend that grows over time. This financial year our progressive dividend increased to 112 US cents per share. Over the last 10 years, we have returned approximately US$54 billion to shareholders through dividends and share buy-backs. That represents around 30 per cent of the Group’s current market capitalisation. Moreover, our unbroken dividend generates a yield that is well in excess of our peer group.
BHP Billiton also remains committed to making a positive contribution to our communities through capital investment, supporting local industry and creating jobs. Expanding on that commitment, this year we once again contributed one per cent of our pre-tax profit to community programs by voluntarily investing US$214 million. This included a US$65 million contribution to BHP Billiton Sustainable Communities, our UK-based charity, and a US$149 million investment in whichhealth (8 per cent), education and training (18 per cent), community infrastructure (25 per cent) and other initiatives (49 per cent). This was in addition to the US$11.9 billion in taxes and royalties paid to governments in the jurisdictions where we operate.
The executionTragically, this year three of our strategy resulted in a profit from operations, excluding exceptional items, of US$19.7 billion an increase of 8.3 per cent. Net operating cash flows were US$17.9 billion, US$7.7 billion of which was reinvested in new growth projects. In addition, the Board increased dividends by 6.1 per cent to 87 cents per share, in line with our progressive dividend policy.
While the Board is pleased with these results, our progress in the critical area of safety is still below expectation. We continued to reduce the number of workplace injuries, however five peoplecolleagues lost their lives at work. No fatality is acceptable and on behalf of the Board, I offer our operations this year. This is clearly unacceptable and a tragedy forcondolences to their families, friends and colleagues. This is a stark reminder that we must remain vigilant about safety and continue to live our values. Supporting our communities is part ofOur BHP Billiton Charter value of Sustainability, which also includes putting the health and safety of our people first and being environmentally responsible. These are set out inOur Charter, which is the foundation for everything we do at BHP Billiton.
In August 2010, we announced a fully funded takeover of Potash Corporation of Saskatchewan. The proposed acquisition meets our criteria of developing quality long-life assets using our existing mining skillsLastly, it is important to gain a leading position in the growing world market for fertiliser. We are committed to being a strong corporate citizen in Saskatchewan and New Brunswick, Canada, and our intention is to establish a global potash business based in Canada.
Important governance developments occurred in the UK, US and Australia during the year responding to the challenges of the global recession. We support the changes, particularly the emphasis on ensuring Boards comprise Directors with the collective set of essential skills and experience to govern the Group supported by robust succession planning and performance evaluation.
Asnote that as part of our Board succession, Carolyn Hewson and Malcolm Broomhead joinedin June 2012 Mr Pat Davies was appointed to the Board in March 2010. Together they bring deepas a Non-executive Director. Pat’s appointment is a welcome addition to an already strong Board, providing corporate experience in industrialthe natural resources sector across a number of commodities and resource companies, financial markets and investment risk management. During the year, Don Argus, Paul Anderson, Gail de Planque, David Jenkins and David Morgan retired from the Board. We thank each of them for their contribution, particularly former Chairman Don Argus AC.markets.
We have always believed that corporate governance and executive remuneration practices are critical issues for any company and its stakeholders. We support the need for simplified and transparent executive remuneration reporting, and these have been key influences on the structure of our remuneration report this year.
Our Remuneration Committee reviewed the Group’s Long Term Incentive Plan for our most senior executives. The plan was originally introduced in 2004 and, given the changes in the global environment, the Committee believed a review was warranted. We consulted widely with our shareholders as well as governance advisers. As a result,In summary, while we continue to believe thatlive with the duration of our five-year, long-term plan is appropriate. However, we also believe it is important to change some design elements as the plan produced highly leveraged outcomes not reflective of our business strategy. This is a matter on which we will seek shareholder approval.
One thing that has impressed me since the time I started as a Director in 2006 has been the quality of BHP Billiton people throughout the Group. In resources, as in many other industries, results are not only a functionuncertainty of the qualityglobal economic environment, we expect the demand from emerging economies, our disciplined approach to capital management and our value-focused strategy to maintain our momentum in delivering strong results long term for our shareholders. On behalf of the assets butBoard and everyone involved in the quality of the people operating and managing those assets.
Marius is a talented Chief Executive and he has developed a strong and diverse team with a depth of talent to support him. On your behalf, the BoardCompany, I would like to thank everyone involved withyou for your ongoing support of BHP Billiton, as we continue to deliver on our Company for the contribution they have made in this challenging year.
Jac Nasser AO
Finally, since becoming Chairman this year after the retirement of Don Argus, I have had the privilege of meeting many of our institutional and individual shareholders. This is a rewarding part of my role and I look forward to meeting many more of you over the coming years.
1.3 Chief Executive Officer’s Report
Financial year 2010 was a yearI am pleased to report that presented a broad mix of challenges and achievements. Despite continued volatility and ongoing uncertainty across the global economy, BHP Billiton delivered a strongsolid set of results in FY2012 against a backdrop of challenging industry and macro-economic conditions. Our commitment to investing through the cycle allowed us to reach new production records at 10 of our operations and was key to our financial results.
We continue to focus on safety with a commitment to establish best practice in this area. In this regard, our total recordable injury frequency rate declined by six per cent in FY2012. However, despite this rate now being at its lowest level on record, the tragic loss of three colleagues over the past year is a stark reminder of the inherent risks in our industry and the need to relentlessly pursue the elimination of all fatal risks. Any fatality has a devastating effect on family, friends and colleagues, and the impact of this is felt in every corner of this Company. We truly believe that BHP Billiton can be a business that operates free of work-related fatalities, and it is for this reason that fatality prevention remains our number one priority.
From a global perspective, FY2012 was characterised by uncertainty and volatility surrounding the European debt crisis which, in turn, affected global economic growth and the key markets for our products. The resulting weaker commodity prices coupled with stronger producer currencies and capital and operational cost pressures presented challenges for the global mining industry.
In response to the prevailing market conditions, over the past year we have implemented prudent measures that will safely and substantially reduce operational costs and non-essential expenditure across our entire business. FY2013 will see the benefits of these significant cost reduction measures, along with substantial volume growth, flow through to our financial performance.results.
It isDespite the volatility in global economic conditions and commodity prices we have experienced in the past financial year, we see significant opportunity for our consistentCompany in the near term. While we achieved pleasing production results and long-termproduction records at 10 of our operations, three of our key assets operated below capacity in FY2012 due to temporary, one-off issues. This was largely due to industrial action in our Queensland Coal business, shut-ins at our non-operated joint venture fields in the Gulf of Mexico and a temporary decrease in grades at our Escondida copper operation. With these businesses expected to return to full capacity, we are confident we will continue to produce industry leading returns for our shareholders now and into the future.
The diversification of the BHP Billiton portfolio continues to be our defining attribute. The quality of our people, our asset base and our unchanged strategy of focusing on a portfolio ofowning and operating large, long-life, low-cost, expandable, upstream tier one, low-cost assets diversified by commodity, geography and market, and geography that underpinnedtogether with our ability and commitment to overcomeinvesting through the challenges duringcycle and delivering projects on budget and to schedule, is what sets us apart from our peers.
In line with this strategy, over the year. I am encouraged by the Group’s performance, which is testamentnext two years we will continue to invest in and grow our focus on creating shareholder valuebusiness. With 20 major projects currently in execution, these well advanced, low-risk, brownfield projects will deliver substantial volume growth and underpin our industry-leading returns in the long term.
We arefuture. As a leading global resources companyresult of our disciplined investment strategy and our successes and achievements are significant. However, we cannot saycommitment to maintaining our strong balance sheet, we are truly successful until we eliminate fatalitieslargely committed for FY2013 and serious injuriesdo not plan to approve any additional major projects in our workplace. This year we continued to make progressthis period.
We remain confident in reducing the number of injuries, though we did not meet our targets. It is with great sadness that I report to you that five of our colleagues lost their lives at work during the yearlong-term outlook and I personally extend my condolences to the families and friends of those individuals.
This is a stark reminder that we must lead in a way that ensures a safe workplace, and we can only do this by creating operating discipline and simplifying the way we work. Safety starts with strong leadership and I cannot emphasise enough how important this is to me personally and to our Group.
I am pleased to announce that BHP Billiton operations this year delivered solid results, with annual production records achieved in our Iron Ore and Petroleum businesses. In Iron Ore, this marked the tenth consecutive annual production record, and for Petroleum, it was the third consecutive production record. Our long-life, low-cost expandable assets provide our Company with the capacity to continue to deliver and strengthen our position in a range of markets.
By operating at full capacity whenever possible and staying focused on eliminating low value activities, we maintained our low-cost position and our ability to generate robust cash flows.
Of significant note in FY2010 was the move from annually negotiated benchmark prices in metallurgical coal and iron ore to shorter-term reference pricing. We have long advocated a move to a more transparent pricing regime and will actively support the development of a wider traded market in these commodities.
This move brings metallurgical coal and iron ore into line with how the rest of our portfolio is priced globally and moves us closer to achieving our stated objective of market prices for all of our commodities. More broadly, pricesfuture demand for our products, recovered during the year driven by demand in China and restocking in the Organisation for Economic Co-operation and Development (OECD) countries. While government stimulus measures generally supported a gradual return to normalised global trade, the improvement in the developed economies was from a low base.
We believe that the recovery momentum of the major economies will remain uncertain as the impact of fiscal and monetary stimuli fades. Therefore, we are still cautious in our short-term view of the economy.
In the longer term, we are encouraged by the fundamentals underpinning sustained growth in China and India, which will continue to drivebe driven by the urbanisation and industrialisation in the developing world. As current capital commitments reduce, we will allocate future capital to projects that maximise shareholder value and balance both short-term and long-term returns. We are in a strong demandfortunate position, with growth options unparalleled in the global resources industry, and together with our proven strategy, we will continue to deliver sustainable and superior long-term returns for our products. This, along with our strong balance sheet, supports our capacity for future growth. We have extensive experience operating in emerging resource regions and we have the capability to capture additional opportunities as they arise.
Our disciplined approach to capital deployment has enabled BHP Billiton to both invest in the expansion of high-quality assets and further diversify our portfolio by commodity, market and geography, consistent with our unchanged strategy. The acquisition of Athabasca Potash earlier this year ensures our Group has access to more than 14,000 square kilometres of prospective exploration ground in the world-class Saskatchewan potash basin. Our all-cash bid to acquire Potash Corporation of Saskatchewan, the world’s largest integrated fertiliser company and world’s largest producer of potash by capacity, is consistent with our strategy and is a natural fit with BHP Billiton’s greenfield land holdings in Canada. This acquisition represents an acceleration of our entry into the fertiliser industry.
This, plus the delivery of five major capital projects, is evidence of our growth capabilities.
However, we only earn the right to grow this business if we can do it safely, in an environmentally sound manner and in a way that demonstrates our unqualified commitment to working with integrity.Finally, I believe it is worth reiterating that safe growth underpinned by demonstrating our Charter values can only be achieved through leadership commitment and operating discipline. I wantwould like to take this opportunity to sincerely thank our host communities, who continue to support our activities, and our shareholders, customers, suppliers and the many others who help contribute to our success. I would especially like to thank our more than 125,000 employees and contractors around the world. It is their commitment to giving their very best efforts to us each and other stakeholders for their efforts in responding to the accountabilities articulated in our operating model.
Our Company has a clear strategy for growing our value, within a disciplined framework, and using prudent decision-making. Who and what we are todayevery day that is the productcornerstone of the vision and effortssuccess of previous management teams in executing a consistent strategy. It is our responsibility to not only preserve, but enhance and increase the value of that legacy.
Marius Kloppers
Chief Executive Officer
1.4.1 Financial information
Our selected financial information reflects the operations of the BHP Billiton Group, and should be read in conjunction with the 20102012 financial statements, together with the accompanying notes.
We prepare our consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board, and as outlined in note 1 ‘Accounting policies’ to the financial statements in this Annual Report. We publish our consolidated financial statements in US dollars.
2010 | 2009 | 2008 | 2007(a) | 2006(a) | 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||||||||
Consolidated Income Statement (US$M except per share data) | |||||||||||||||||||||||||||||||||||
Revenue | 52,798 | 50,211 | 59,473 | 47,473 | 39,099 | 72,226 | 71,739 | 52,798 | 50,211 | 59,473 | |||||||||||||||||||||||||
Profit from operations | 20,031 | 12,160 | 24,145 | 19,724 | 15,716 | 23,752 | 31,816 | 20,031 | 12,160 | 24,145 | |||||||||||||||||||||||||
Profit attributable to members of BHP Billiton Group | 12,722 | 5,877 | 15,390 | 13,416 | 10,450 | 15,417 | 23,648 | 12,722 | 5,877 | 15,390 | |||||||||||||||||||||||||
Dividends per ordinary share – paid during the period (US cents) | 83.0 | 82.0 | 56.0 | 38.5 | 32.0 | 110.0 | 91.0 | 83.0 | 82.0 | 56.0 | |||||||||||||||||||||||||
Dividends per ordinary share – declared in respect of the period (US cents) | 87.0 | 82.0 | 70.0 | 47.0 | 36.0 | 112.0 | 101.0 | 87.0 | 82.0 | 70.0 | |||||||||||||||||||||||||
Earnings per ordinary share (basic) (US cents) | 228.6 | 105.6 | 275.3 | 229.5 | 173.2 | 289.6 | 429.1 | 228.6 | 105.6 | 275.3 | |||||||||||||||||||||||||
Earnings per ordinary share (diluted) (US cents) | 227.8 | 105.4 | 274.8 | 228.9 | 172.4 | 288.4 | 426.9 | 227.8 | 105.4 | 274.8 | |||||||||||||||||||||||||
Number of ordinary shares (millions) | |||||||||||||||||||||||||||||||||||
- At period end | 5,589 | 5,589 | 5,589 | 5,724 | 5,964 | ||||||||||||||||||||||||||||||
- Weighted average | 5,565 | 5,565 | 5,590 | 5,846 | 6,035 | ||||||||||||||||||||||||||||||
- Diluted | 5,595 | 5,598 | 5,605 | 5,866 | 6,066 | ||||||||||||||||||||||||||||||
– At period end | 5,348 | 5,350 | 5,589 | 5,589 | 5,589 | ||||||||||||||||||||||||||||||
– Weighted average | 5,323 | 5,511 | 5,565 | 5,565 | 5,590 | ||||||||||||||||||||||||||||||
– Diluted | 5,346 | 5,540 | 5,595 | 5,598 | 5,605 | ||||||||||||||||||||||||||||||
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Consolidated Balance Sheet (US$M) | |||||||||||||||||||||||||||||||||||
Total assets | 88,852 | 78,770 | 76,008 | 61,404 | 51,343 | 129,273 | 102,920 | 88,852 | 78,770 | 76,008 | |||||||||||||||||||||||||
Share capital (including share premium) | 2,861 | 2,861 | 2,861 | 2,922 | 3,242 | 2,773 | 2,771 | 2,861 | 2,861 | 2,861 | |||||||||||||||||||||||||
Total equity attributable to members of BHP Billiton Group | 48,525 | 39,954 | 38,335 | 29,667 | 24,218 | 65,870 | 56,762 | 48,525 | 39,954 | 38,335 | |||||||||||||||||||||||||
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Other financial information | |||||||||||||||||||||||||||||||||||
Underlying EBIT (US$M)(c) | 19,719 | 18,214 | 24,282 | 20,067 | 15,277 | ||||||||||||||||||||||||||||||
Net operating cash flow (US$M) | 17,920 | 18,863 | 17,817 | 15,957 | 11,325 | ||||||||||||||||||||||||||||||
Gearing(d) | 6.3 | % | 12.1 | % | 17.8 | % | 25.0 | % | 27.2 | % | |||||||||||||||||||||||||
Underlying EBIT (US$M)(b) | 27,238 | 31,980 | 19,719 | 18,214 | 24,282 | ||||||||||||||||||||||||||||||
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Underlying EBIT margin(b) (c) (e) | 39.4 | % | 47.0 | % | 40.7 | % | 40.1 | % | 47.5 | % | |||||||||||||||||||||||||
Return on capital employed(e) | 23.0 | % | 38.5 | % | 26.4 | % | 24.6 | % | 37.5 | % | |||||||||||||||||||||||||
Net operating cash flow (US$M)(d) | 24,384 | 30,080 | 16,890 | 17,854 | 16,958 | ||||||||||||||||||||||||||||||
Project investment (US$M) | 22,791 | 24,517 | 10,770 | 13,965 | 11,440 | ||||||||||||||||||||||||||||||
Gearing | 26.0 | % | 9.2 | % | 6.3 | % | 12.1 | % | 17.8 | % |
(a) |
The calculation of the number of ordinary shares used in the computation of basic earnings per share is the aggregate of the weighted average number of ordinary shares outstanding during the period of BHP Billiton Limited and BHP Billiton Plc after deduction of the weighted average number of shares held by the Billiton share repurchase scheme and the Billiton Employee Share Ownership Plan Trust and the BHP Bonus Equity Plan Trust and adjusting for the BHP Billiton Limited bonus share issue. Included in the calculation of fully diluted earnings per share are shares contingently issuable under Employee Share Ownership Plans. |
Underlying EBIT is |
Underlying EBIT margin excludes third party product. |
(d) | On 1 July 2010, the Group adopted the policy of classifying exploration cash flows which are not recognised as assets as Net operating cash flows. Previously such cash flows were classified as net investing cash flows. The change in policy arose from amendments to IAS7/AASB7 ‘Cash Flows’. Comparative figures have been restated. |
(e) | Underlying EBIT margin and Return on capital employed are non-IFRS measures. See section |
1.4.2 Operational information
Our Board and Group Management Committee (GMC) monitor a range of financial and operational performance indicators, reported on a monthly basis, to measure performance over time. We also monitor a comprehensive set of health, safety, environment and community (HSEC) contribution indicators.
FY2010 | FY2009 | FY2008 | |||||
People and Licence to operate – Health, safety, environment and community | |||||||
Total Recordable Injury Frequency (TRIF)(a) | 5.3 | 5.6 | 5.9 | ||||
Community investment (US$M)(a) (b) | 200.5 | 197.8 | (b) | 141.0 | |||
Production(c) | |||||||
Total Petroleum Production (million barrels of oil equivalent) | 158.56 | 137.97 | 130.07 | ||||
Alumina (‘000 tonnes) | 3,841 | 4,396 | 4,554 | ||||
Aluminium (‘000 tonnes) | 1,241 | 1,233 | 1,298 | ||||
Copper cathode and concentrate (‘000 tonnes) | 1,075.2 | 1,207.1 | 1,375.5 | ||||
Nickel (‘000 tonnes) | 176.2 | 173.1 | 167.9 | ||||
Iron ore (‘000 tonnes) | 124,962 | 114,415 | 112,260 | ||||
Metallurgical coal (‘000 tonnes) | 37,381 | 36,416 | 35,193 | ||||
Manganese alloys (‘000 tonnes) | 583 | 513 | 775 | ||||
Manganese ores (‘000 tonnes) | 6,124 | 4,475 | 6,575 | ||||
Energy coal (‘000 tonnes) | 66,131 | 66,401 | 80,868 |
2012 | 2011 | 2010 | ||||||||||
Health, safety, environment and community | ||||||||||||
Total recordable injury frequency (TRIF) | 4.7 | 5.0 | 5.3 | |||||||||
Community investment (US$M) | 214.1 | 195.5 | 200.5 | |||||||||
Production(a) | ||||||||||||
Total Petroleum production (million barrels of oil equivalent) | 222.3 | 159.4 | 158.6 | |||||||||
Alumina (’000 tonnes) | 4,152 | 4,010 | 3,841 | |||||||||
Aluminium (’000 tonnes) | 1,153 | 1,246 | 1,241 | |||||||||
Copper cathode and concentrate (’000 tonnes) | 1,094.5 | 1,139.4 | 1,075.2 | |||||||||
Nickel (’000 tonnes) | 157.9 | 152.7 | 176.2 | |||||||||
Iron ore (’000 tonnes) | 159,478 | 134,406 | 124,962 | |||||||||
Manganese alloys (’000 tonnes) | 602 | 753 | 583 | |||||||||
Manganese ores (’000 tonnes) | 7,931 | 7,093 | 6,124 | |||||||||
Metallurgical coal (’000 tonnes) | 33,230 | 32,678 | 37,381 | |||||||||
Energy coal (’000 tonnes) | 71,111 | 69,500 | 66,131 |
(a) |
Further details appear in section 2.3 of this Report. |
1.5.1 Risk factors
We believe that, because of the international scope of our operations and the industries in which we are engaged, there are numerous factors which may have an effect on our results and operations. The following describes the material risks that could affect the BHP Billiton Group.
External risks
Fluctuations in commodity prices and impacts of theongoing global financial crisiseconomic volatility may negatively impactaffect our results
The prices we obtain for our oil, gas, minerals and other commodities are determined by, or linked to, prices in world markets, which have historically been subject to substantial variations. The Group’svolatility. Our usual policy is to sell itsour products at the prevailing market prices. The diversity provided by the Group’sour broad portfolio of commodities maydoes not fully insulate the effects of price changes. Fluctuations in commodity prices can occur due to sustained price shifts reflecting underlying global economic and geopolitical factors, industry demand and supply balances, product substitution and national tariffs. The ongoing effects ofglobal economic volatility following the global financial crisisand European sovereign debt crises has impactednegatively affected commodity marketsmarket prices and demand. Sales into European countries generated US$8.4 billion (FY2011: US$9.4 billion), or 11.6 per cent (FY2011: 13.1 per cent), of our revenue in terms of lower prices, reduced demand and increased price volatility.the year ended 30 June 2012. The ongoing uncertainty and impact on global economic growth, particularly in the developed economies, may impactadversely affect future demand and prices for commodities. The influence of hedge and other financial investment funds participating in commodity markets has increased in recent years, contributing to higher levels of price volatility. The impact of potential longer-term sustained price shifts and shorter-term price volatility creates the risk that our financial and operating results and asset values will be materially and adversely affected by unforeseen declines in the prevailing prices of our products.
We seek to maintain a solid ‘A’ credit rating as part of our strategy. Notwithstanding our financial and capital management programs the ongoing effects of the global financial crisis may impact our future cash flows, ability to adequately access and source capital from financial markets and our credit rating.
Our profitsfinancial results may be negatively affected by currency exchange rate fluctuations
Our assets, earnings and cash flows are influenced by a wide variety of currencies due to the geographic diversity of the countries in which we operate. Fluctuations in the exchange rates of those currencies may have a significant impact on our financial results. The US dollar is the currency in which the majority of our sales are denominated. Operating costs are influenced by the currencies of those countries where our mines and processing plants are located and also by those currencies in which the costs of imported equipment and services are determined. The Australian dollar, South African rand, Chilean peso, Brazilian real and US dollar are the most important currencies influencing our operating costs. The appreciation in recent years of currencies in which the majority of our operating costs are incurred, (in particular the Australian dollar, if sustained relative to US dollar denominated commodity prices), has and may continue to adversely impact our profit margins. Given the dominant role of the US currency in our affairs, the US dollar is the currency in which we present financial performance. It is also the natural currency for borrowing and holding surplus cash. We do not generally believe that active currency hedging provides long-term benefits to our shareholders. We mayFrom time to time, we consider currency protection measures appropriate in specific commercial circumstances, subject to strict limits established by our Board. Therefore, in any particular year, currency fluctuations may have a significant impact on our financial results.results may be negatively affected by currency exchange rate fluctuations.
The commercial counterparties we transact withReduction in Chinese demand may not meet their obligations and negatively impact our results
The Chinese market has become a significant source of global demand for commodities. In CY2011, China represented 61 per cent of global seaborne iron ore demand, 39 per cent of copper demand, 40 per cent of nickel demand, 43 per cent of aluminium demand, 48 per cent of energy coal demand and 10 per cent of oil demand. China’s demand for these commodities has been driving global materials demand and price increases over the past decade. Sales into China generated US$21.6 billion (FY2011: US$20.3 billion), or 29.9 per cent (FY2011: 28.2 per cent), of our revenue in the year ended 30 June 2012. A slowing in China’s economic growth could result in lower prices and demand for our products and negatively impact our results.
In response to its increased demand for commodities, China is increasingly seeking strategic self-sufficiency in key commodities, including investments in existing businesses or new developments in other countries. These investments may adversely impact future commodity demand and supply balances and prices.
Actions by governments or political events in the countries in which we operate could have a negative impact on our business
We commercially contracthave operations in many countries around the globe, which have varying degrees of political and commercial stability. We operate in emerging markets, which may involve additional risks that could have an adverse impact upon the profitability of an operation. These risks could include terrorism, civil unrest, nationalisation, renegotiation or nullification of existing contracts, leases, permits or other agreements, restrictions on repatriation of earnings or capital and changes in laws and policy, as well as other unforeseeable risks. Risks relating to bribery and corruption, including possible delays or disruption resulting from a refusal to make so-called facilitation payments, may be prevalent in some of the countries in which we operate. If any of our major projects are affected by one or more of these risks, it could have a negative effect on the operations in those countries, as well as the Group’s overall operating results and financial condition.
Our operations are based on material long-term investments that anticipate long-term fiscal stability. Following the global financial and European sovereign debt crises, some governments face increased debt and funding obligations and have sought additional sources of revenue and economic rent by increasing rates of taxation, royalties or resource rent taxes such as the Minerals Resource Rent Tax (MRRT) and Petroleum Resource Rent Tax (PRRT) extension in Australia. These may continue to levels that are globally uncompetitive to the resource industry. Such taxes may negatively impact the financial results of existing businesses and reduce the anticipated future returns and overall level of prospective investment in those countries.
The Australian Government through the Business Tax Working Group is considering measures to reform tax law to provide relief for certain industry sectors. The basis of any law change is a revenue neutral outcome and as such, it is possible the mining and petroleum industries may be negatively impacted by disproportionately funding any measures that may eventually become law. The Business Tax Working Group will make its recommendations to the Australian government by the end of CY2012, with any potential law change happening thereafter.
Our business could be adversely affected by new government regulations, such as controls on imports, exports and prices. Increasing requirements relating to regulatory, environmental and social approvals can potentially result in significant delays in construction and may adversely affect the economics of new mining and oil and gas projects, the expansion of existing operations and results of our operations.
We have oil and gas operations located in the Gulf of Mexico region of the United States. In October 2010, the United States Government lifted the deepwater drilling moratorium in the Gulf of Mexico initially put in place in May 2010 in response to the oil spill from BP’s Macondo well. Although the moratorium was lifted, and BHP Billiton was among the first to return to drilling in the Gulf of Mexico, the industry now faces more stringent permitting requirements. Delays or additional costs may occur in receiving future permits for deepwater drilling activities in the Gulf of Mexico.
Infrastructure, such as rail, ports, power and water, is critical to our business operations. We have operations or potential development projects in countries where government provided infrastructure or regulatory regimes for access to infrastructure, including our own privately operated infrastructure, may be inadequate or uncertain. These may adversely impact the efficient operations and expansion of our businesses.
On 30 June 2010, the Australian Competition Tribunal granted declaration of BHP Billiton’s Goldsworthy rail line, but rejected the application for declaration of our Newman rail line under Part IIIA of the Trade Practices Act. Following the Tribunal’s decision, access seekers may now negotiate for access to the Goldsworthy railway. These negotiations, and the availability and terms of access, are governed by the Part IIIA statutory framework, and either the access seeker or BHP Billiton can refer disputed matters to the Australian Competition and Consumer Commission for arbitration. The outcome of this process will govern whether access will be provided and on what terms.
We operate in several countries where ownership of land is uncertain and where disputes may arise in relation to ownership. In Australia, the Native Title Act (1993) provides for the establishment and recognition of native title under certain circumstances. In South Africa, the Extension of Security of Tenure Act (1997) and the Restitution of Land Rights Act (1994) provide for various landholding rights. Such legislation could negatively affect new or existing projects.
Our Cerro Matoso Operation in Colombia operates under mining concessions that are due to expire on 30 September 2012 and we have applied, in accordance with the law and its contracts, for an extension of these mining concessions. If this extension is not granted, Cerro Matoso has an underlying agreement with the Colombian Government that grants it rights to continue mining and producing through to 2029 under a lease arrangement, with a large numberfurther extension of commercial15 years possible. While our operating rights are maintained, there is no established precedent in Colombia for bringing a reversion of title under contract and financial counterparties including customers, suppliers,therefore the situation remains uncertain.
These regulations are complex, difficult to predict and financial institutions. The global financial crisis has placed strains on global financial markets, reduced liquidityoutside of our control and impacted business conditions generally. Our existing counterparty credit controls may not prevent a material loss due to credit exposure to a major customer or financial counterparty. In addition, customers, suppliers, contractors or joint venture partners may fail to perform against existing contracts and obligations. Non-supply of key inputs or equipment may unfavourably impact our operations. Reduced liquidity and available sources of capital in financial markets may impact the cost and ability to fund planned investments. These factors could negatively affect our financial conditionbusiness and results of operations.results.
Business risks
Failure to discover new reserves, maintain or enhance existing reserves or develop new operations could negatively affect our future results and financial condition
The increased demand for our products and increased production rates from our operations in recent years has resultedresults in existing reserves being depleted at an accelerated rate.over time. As our revenues and profits are related toderived from our oil and gas and minerals operations, our results and financial conditionscondition are directly related to the success of our exploration and acquisition efforts, and our ability to replace existing reserves. Exploration activity occurs adjacent to established operations and in new regions, in developed and less developed countries. These activities may increase land tenure, infrastructure and related political risks. A failure in our ability to discover new reserves, enhance existing reserves or develop new operations in sufficient quantities to maintain or grow the current level of our reserves could negatively affect our results, financial condition and prospects.
Future deterioration in commodities pricing may make drilling some acreage and existing reserves uneconomic. Our actual drilling activities and future drilling budget will depend on drilling results, commodity prices, drilling and production costs, availability of drilling services and equipment, lease expirations, gathering system pipeline transportation and other infrastructure constraints, regulatory approvals and other factors.
There are numerous uncertainties inherent in estimating ore and oil and gas reserves, and geological, technical and economic assumptions that are valid at the time of estimation may change significantly when new information becomes available. The impacts of theuncertain global financial crisisoutlook may impactaffect economic assumptions related to reserve recovery and require reserve restatements. Reserve restatements could negatively affect our reputation, results financial condition and prospects.
Reduction in Chinese demand may negatively impact our results
The Chinese market has become a significant source of global demand for commodities. In CY2009, China represented 56 per cent of global seaborne iron ore demand, 36 per cent of copper demand, 35 per cent of nickel demand, 39 per cent of aluminium demand, 42 per cent of energy coal demand and nine per cent of oil demand. China’s demand for these commodities has been driving global materials demand over the past decade.
The strong economic growth and infrastructure development in China of recent years has been tempered by the global financial crisis. Sales into China generated US$13.2 billion (FY2009: US$9.9 billion), or 25.1 per cent (FY2009: 19.7 per cent), of our revenue in the year ended 30 June 2010. A slowing in China’s economic growth could result in lower prices and demand for our products and therefore reduce our revenues.
In response to its increased demand for commodities, China is increasingly seeking strategic self-sufficiency in key commodities, including investments in existing businesses or new developments in other countries. These investments may adversely impact future commodity demand and supply balances and prices.
Actions by governments or political events in the countries in which we operate could have a negative impact on our business
We have operations in many countries around the globe, some of which have varying degrees of political and commercial stability. We operate in emerging markets, which may involve additional risks that could have an adverse impact upon the profitability of an operation. These risks could include terrorism, civil unrest, nationalisation, renegotiation or nullification of existing contracts, leases, permits or other agreements, and changes in laws and policy, as well as other unforeseeable risks. Risks relating to bribery and corruption may be prevalent in some of the countries in which we operate. If one or more of these risks occurs at one of our major projects, it could have a negative effect on the operations in those countries, as well as the Group’s overall operating results and financial condition.
Our operations are based on material long term investments that anticipate long term fiscal stability. Following the global financial crisis some governments face increased debt and funding obligations and may seek additional sources of revenue and economic rent by increasing rates of taxation, royalties or resource rent taxes to levels that are globally uncompetitive to the resource industry. Such taxes may negatively impact the financial results of existing businesses and reduce the anticipated future returns and overall level of prospective investment in those countries.
On 2 May 2010, the Australian Government proposed a Resource Super Profits Tax at a rate of 40 per cent on profits made from the extraction of non-renewable resources. Subsequently, on 2 July 2010, this proposal was amended to a Minerals Resource Rent Tax (MRRT), at a rate of 30 per cent (with a 25 per cent extraction allowance – effectively resulted in a 22.5 per cent additional tax on profits) for iron ore and coal, while the current Petroleum Resource Rent Tax (PRRT) will be extended to all Australian oil and gas projects, including the North West Shelf. Legislation is proposed to be introduced into parliament in late CY2011, and then for the commencement date of the new tax regime to be 1 July 2012. The MRRT would operate in parallel with State and Territory royalty regimes, and those royalties in place or scheduled at 2 May 2010 would be creditable against the MRRT. The proposed MRRT would increase the effective tax rate of Australian coal and iron ore operations and the North West Shelf project. This could have a negative effect on the operating results of the Group’s Australian operations. The MRRT is subject to passing by the Australian Parliament and may differ (wholly or in part) in its final form.
With the objective of raising more funds to face the reconstruction following the recent earthquake in Chile, the Chilean Government announced on 16 April 2010 an intention to increase the Corporate Income Tax rate (First Category Tax –FCT) as well as changing the Mining Tax in exchange for extending the tax invariability period available to investors, from 2017 currently in place for an extra eight years to 2025. The current draft legislation proposes a temporary increase of the FCT rate for two years (2010-2011) with the change in the Mining Tax regime having been removed from the current proposed bill. Any potential tax changes in the future if implemented may impact our financial results from Chilean operations.
Our business could be adversely affected by new government regulation, such as controls on imports, exports and prices. Increasing requirements relating to regulatory, environmental and social approvals can potentially result in significant delays in construction and may adversely impact upon the economics of new mining and oil and gas projects, the expansion of existing operations and results of our operations.
Infrastructure, such as rail, ports, power and water, is critical to our business operations. We have operations or potential development projects in countries where government provided infrastructure or regulatory regimes for access to infrastructure, including our own privately operated infrastructure, may be inadequate or uncertain. These may adversely impact the efficient operations and expansion of our businesses. On 30 June 2010, the Australian Competition Tribunal granted declaration of BHP Billiton’s Goldsworthy rail line, but rejected the application for declaration of its Newman rail line under Part IIIA of the Trade Practices Act. Following the tribunal’s decision, access seekers may now negotiate for access to the Goldsworthy railway. These negotiations, and the availability and terms of access, would be governed by the Part IIIA statutory framework, and either the access seeker or BHP Billiton could refer disputed matters to the ACCC for arbitration. The outcome of this process would govern whether access would be provided and on what terms.
In South Africa, the Mineral and Petroleum Resources Development Act (2002) (MPRDA) came into effect on 1 May 2004. The law provides for the conversion of existing mining rights (so called ‘Old Order Rights’) to rights under the new regime (‘New Order Rights’) subject to certain undertakings to be made by the company applying for such conversion. The Mining Charter requires that mining companies achieve 15 per cent ownership by historically disadvantaged South Africans of South African mining assets by 1 May 2009 and 26 per cent ownership by 1 May 2014. If we are unable to convert our South African mining rights in accordance with the MPRDA and the Mining Charter, we could lose some of those rights. Where New Order Rights are obtained under the MPRDA, these rights may not be equivalent to the Old Order Rights in terms of duration, renewal, rights and obligations.
In May 2010, in response to the oil spill from BP’s Macondo well, the United States Government announced a deepwater drilling moratorium in the Gulf of Mexico. There is uncertainty as to potential new permitting requirements that may be imposed on deepwater drilling. Our business could be adversely affected by the moratorium and any new regulatory requirements.
We operate in several countries where ownership of land is uncertain and where disputes may arise in relation to ownership. In Australia, the Native Title Act (1993) provides for the establishment and recognition of native title under certain circumstances. In South Africa, the Extension of Security of Tenure Act (1997) and the Restitution of Land Rights Act (1994) provide for various landholding rights. Such legislation could negatively affect new or existing projects.
We may not be able to successfully complete acquisitions or integrate our acquired businesses
We have grown our business in part through acquisitions. We expect that some of our future growth will stem from acquisitions. There are numerous risks encountered in business combinations. These include adverse regulatory conditions and obligations, commercial objectives not achieved due to minority interests, unforeseen liabilities arising from the acquired businesses, retention of key staff, sales revenues and the operational performance not meeting our expectations, anticipated synergies and cost savings being delayed or not being achieved, uncertainty in sales proceeds from planned divestments, and planned expansionacquisition projects arebeing cancelled, delayed or costcosting more than anticipated. These factors could negatively affect our future results and financial conditioncondition.
We may not be able to attract and resultsretain the necessary people
Our existing operations and especially our pipeline of operations.development projects in regions of numerous large projects, such as Western Australia, Queensland and the United States, if activated, require many highly skilled staff with relevant industry and technical experience. In the competitive labour markets that exist in these regions, the inability of the Group to attract and retain such people may adversely impact our ability to complete projects under development on time and budget or successfully respond to new development opportunities. The lack of short- and long-term suitable accommodation in regional centres and townships adjacent to development projects and community reactions to development and potential workforce fly in, fly out arrangements may impact costs and the ability to optimise construction and operating workforces. Skills shortages in engineering, technical service, construction and maintenance may adversely impact the cost and schedule of current development projects, the cost and efficiency of existing operations and our ability to execute on development opportunities.
Increased costs and schedule delays may adversely affect our development projects
Although we devote significant time and resources to our project planning, approval and review process, and have established a number of project hubs to provide continuity to capital programs, we may underestimate the cost or time required to complete a project. In addition, we may fail to manage projects as effectively as we anticipate and unforeseen challenges may emerge.
Any of these may result in increased capital costs and schedule delays at our development projects, adversely affecting our development projects and impacting anticipated financial returns.
Financial risks
If our liquidity and cash flow deteriorate significantly it could adversely affect our ability to fund our major capital programs
We seek to maintain a solid ‘A’ credit rating as part of our strategy; however, fluctuations in commodity prices and the ongoing global economic volatility, and European sovereign debt crises, may continue to adversely impact our future cash flows and ability to access capital from financial markets at acceptable pricing. Despite our portfolio risk management strategies and monitoring of cash flow volatility, if our key financial ratios and credit rating were 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 programmes could be adversely affected.
We may not recover our investments in mining and oil and gas projects
Our operationsstrategy is to maintain an asset portfolio diversified by commodity, geography and market. Despite the benefits arising from this diversification, one or more of our assets may be impacted by changed market or industry structures, commodity prices, technical operating difficulties, inability to recover our mineral, oil or gas reserves and increased operating cost levels. These may impact the ability for assetscause us to fail to recover their historicalall or a portion of our investment in mining and oil and gas projects and may require financial write-downs adversely impacting our financial results.
Our non-controlled assetsThe commercial counterparties we transact with may not comply withmeet their obligations which may negatively impact our standardsresults
SomeWe contract with a large number of our assetscommercial and financial counterparties, including customers, suppliers and financial institutions. The ongoing global economic volatility and European sovereign debt crises have placed strains on global financial markets, reduced liquidity and adversely affected business conditions generally. We maintain a ‘one book’ approach with commercial counterparties to ensure that all credit exposures are controlled and managed by joint venture partnersquantified.
Our existing counterparty credit controls may not prevent a material loss due to credit exposure to a major customer or by other companies. Somefinancial counterparty. In addition, customers, suppliers, contractors or joint venture partners may have divergent business objectives whichfail to perform against existing contracts and obligations. Non-supply of key inputs, such as tyres, mining and mobile equipment and other key consumables, may unfavourably impact business and financial results. Management of our non-controlled assets may not comply with our management and operating standards, controls and procedures (including health, safety, and environment). Failure to adopt equivalent standards, controls and procedures at these assets could lead to higher costs and reduced production at our operations. These factors could negatively affect our financial condition and adversely impact our results and reputation.of operations.
Operational risks
Operating cost pressures, reduced productivity and labour shortages could negatively impact our operating margins and expansion plans
Increasing cost pressures and shortages in skilled personnel, contractors, materials and supplies that are required as critical inputs to our existing operations and planned developments have occurred and may continue to occur across the resources industry. As the prices for our products are determined by the global commodity markets in which we operate, we maydo not generally have the ability to offset these operating cost increases resulting inthrough corresponding price increases, which can adversely affect our operating margins being reduced.margins. Notwithstanding our efforts to reduce costs and a number of key cost inputs being commodity price-linked, the inability to reduce costs and a timing lag may adversely impact our operating margins for an extended period.
Changing industrial relations legislation such asOur Australian-based operations may continue to be affected by the Australian Fair Work Act 2009 as labour agreements expire and businesses are required to negotiate labour agreements with unions. In some instances labour unions are pursuing claims in the bargaining process about union access and involvement in some areas of operational decision-making. These claims may impact workforceadversely affect workplace flexibility, productivity and costs. Labour unions may seek to pursue claims under the new framework. Industrial action may impactin pursuit of claims associated with the bargaining process has occurred in some businesses, in particular our operations resultingBHP Billiton Mitsubishi Alliance coal operation in lost productionQueensland, Australia, and revenues. Since the introductionis likely to continue to occur as unions press for new claims as part of the Australian Fair Work Act in 2009, increasing occurrences of low-level industrial activity have been experienced across many Australian assets. The additional claims relate to increased access and coverage as provided by the legislation. If this activity continues, some negative productivity impacts may result.negotiation process.
A number of our operations, such as aluminium and copper, are energy or water intensive and, as a result, the Group’s costs and earnings could be adversely affected by rising costs or by supply interruptions. These could include the unavailability of energy, fuel or water due to a variety of reasons, including fluctuations in climate, significant increases in costs, inadequate infrastructure capacity, interruptions in supply due to equipment failure or other causes and the inability to extend supply contracts on economical terms.
These factors could lead to increased operating costs at existing operations.operations and could negatively impact our operating margins and expansion plans.
Unexpected natural and operational catastrophes may adversely impact our operations
We operate extractive, processing and logistical operations in many geographic locations both onshore and offshore. Our operational processes may be subject to operational accidents such as port and shipping incidents, underground mine and processing plant fire and explosion, open-cut pit wall failures, loss of power supply, railroad incidents, loss of well control, environmental pollution and mechanical critical equipment failures. Our key port facilities are located at Port Hedland and Hay Point in Australia. We have 13 underground mines, including seven underground coal mines. Our operations may also be subject to unexpected natural catastrophes such as earthquakes, flood, hurricanes and tsunamis. Our Western Australia Iron Ore, Queensland coal and Gulf of Mexico oil and gas operations are located in areas subject to cyclones or hurricanes. Our Chilean copper operations are located in a known earthquake and tsunami zone. Based on our claims, insurance premiums and loss experience, our risk management approach is not to purchase insurance for property damage, business interruption and construction related risk exposures. Existing business continuity plans may not provide protection for all of the costs that arise from such events. The impact of these events could lead to disruptions in production, increased costs and loss of facilities more than offsetting premiums saved, which would adversely affect our financial results and prospects. Third party claims arising from these events may exceed the limit of liability insurance policies we have in place.
IncreasedOur non-controlled assets may not comply with our standards
Some of our assets are controlled and managed by joint venture partners or by other companies. Management of our non-controlled assets may not comply with our management and operating standards, controls and procedures (including our HSEC standards). Failure to adopt equivalent standards, controls and procedures at these assets could lead to higher costs and schedule delays mayreduced production and adversely impact our development projectsresults and reputation.
Breaches in our information technology security processes may adversely impact the conduct of our business activities
Although we devote significant timeWe maintain global information technology (IT) and resourcescommunication networks and applications to support our business activities. Our extensive IT infrastructure and network may experience service outages that may adversely impact the conduct of our business activities. IT security processes protecting these systems are in place and subject to regular monitoring and assessment, and are included as part of the review of internal control over financial reporting. These security processes may not prevent future malicious action or fraud by individuals, groups or organisations resulting in the corruption of operating systems, theft of commercially sensitive data, including commercial price outlooks, mergers and acquisitions and divestment transactions, misappropriation of funds and disruptions to our project planning, approval and review process, we may underestimate the cost or time required to complete a project. In addition, we may fail to manage projects as effectively as we anticipate, and unforeseen challenges may emerge. Any of these may result in increased capital costs and schedule delays at our development projects impacting anticipated financial returns.business operations.
Sustainability risks
Health, safety, environmental and community exposuresHSEC impacts, incidents or accidents and related regulations may impactadversely affect our people, operations and reputation negativelyor licence to operate
We are a major producer of carbon-related products such as energy and metallurgical coal, oil, gas, and liquefied natural gas. Our oil and gas operations are both onshore and offshore.
The nature of the industries in which we operate means that many of our activities are highly regulated by health, safety and environmental laws. As regulatory standards and expectations are constantly developing, we may be exposed to increased litigation, compliance costs and unforeseen environmental rehabilitation expenses.
Potential health, safety environmental and community events that may materiallyhave a material adverse impact on our operations include rockfallfire, explosion or rock fall incidents in underground mining operations, personnel conveyance equipment failures in underground operations, aircraft incidents, incidents involving light vehicle incidents,vehicles and mining mobile equipment, ground control failures, well blowouts, explosions or gas leaks, isolation, working from heights or lifting operations.
Environmental incidents involving mobile equipment,that have the potential to create a material impact include uncontrolled tailings breaches, subsidence from mining activities, escape of polluting substances, community protestsand uncontrolled releases of hydrocarbons.
Our operations by their nature have the potential to impact biodiversity, water resources and related ecosystem services. Changes in scientific understanding of these impacts, regulatory requirements or civil unrest.
Longer-term health impactsstakeholder expectations may arise due to unanticipated workplace exposures by employeesprevent or site contractors. These effects may create future financial compensation obligations.delay project approvals and result in increased costs for mitigation, offsets or compensatory actions.
We provide for operational closure and site rehabilitation. Our operating and closed facilities are required to have closure plans. Changes in regulatory or community expectations may result in the relevant plans not being adequate. This may impact financial provisioning and costs at the affected operations.
We contribute to the communities in which we operate by providing skilled employment opportunities, salaries and wages, taxes and royalties and community development programs, including a commitment to one per cent of pre-tax profits invested in community programs. Notwithstanding these actions, local communities may become dissatisfied with the impact of our operations or oppose our new development projects, including through litigation, potentially affecting costs and production, and in extreme cases viability. Community related risks may include community protests or civil unrest, delays to proposed developments and inadvertent breaches of human rights or other international laws or conventions.
Health risks faced include fatigue and occupational exposure to noise, silica, manganese, diesel exhaust particulate, fluorides, coal tar pitch, nickel and sulphuric acid mist. Longer-term health impacts may arise due to unanticipated workplace exposures or historical exposures to hazardous substances by employees or site contractors. These effects may create future financial compensation obligations.
We invest in workplace and community health programs, where indicated by risk assessment. However, infectious diseases such as HIV and malaria may have a material adverse impact upon our workers or on our communities, primarily in Africa. Because we operate globally, we may be affected by potential pandemic influenza outbreaks, such as A(H1N1) and avian flu, in any of the regions in which we operate.
Legislation requiring manufacturers, importers and downstream users of chemical substances, including metals and minerals, to establish that the substances can be used without negatively affecting health or the environment may impact our operations and markets. These potential compliance costs, litigation expenses, regulatory delays, rehabilitation expenses and operational costs could negatively affect our financial results.
During FY2011, BHP Billiton acquired Chesapeake Energy Corporation’s interests in the Fayetteville Operation in the United States, and in August 2011, acquired Petrohawk Energy Corporation, a US shale development company. Both businesses include operations that involve hydraulic fracturing, an essential and common practice in the oil and gas industry to stimulate production of natural gas and oil from dense subsurface rock formations. Hydraulic fracturing involves using water, sand and a small amount of chemicals to fracture the hydrocarbon-bearing rock formation to allow flow of hydrocarbons into the wellbore. We may continue to be exposed to increased operational costs dueroutinely apply hydraulic fracturing techniques in our drilling and completion programs.
Increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition to oil and gas production activities using hydraulic fracturing techniques, including regulations that could impose more stringent permitting, public disclosure and well construction requirements on hydraulic fracturing operations. Additional legislation or regulation could also lead to operational delays or increased operating costs in the production of oil and natural gas, including from the developing shale plays, or could make it more difficult to perform hydraulic fracturing. The adoption of any federal, state or local laws or the implementation of regulations regarding hydraulic fracturing could potentially cause a decrease in the completion of new oil and gas wells, increased compliance costs and lost time, associated withand potential class action claims, all of which could adversely affect our business.
Due to the HIV/AIDS and malaria infection rate mainly withinnature of our African workforce. Because we operate globally, we may be affected by potential pandemic influenza outbreaks, such as A(H1N1) and avian flu, in any of the regions in which we operate.
Despite our best efforts and best intentions, there remains a risk that health, safety, environmental and/or communityoperations HSEC incidents or accidents and related regulations may occur that may negatively impactadversely affect our reputation or licence to operate.
Unexpected natural and operational catastrophes may adversely impact our operations
We operate extractive, processing and logistical operations in many geographic locations both onshore and offshore. Our operational processes may be subject to operational accidents such as port and shipping incidents, fire and explosion, pitwall failures, loss of power supply, railroad incidents, loss of well control, environmental pollution and mechanical failures. Our operations and geographic locations may also be subject to unexpected natural catastrophes such as earthquakes, flood, hurricanes and tsunamis. Based on our claims, insurance premiums and loss experience, our risk management approach is to maintain self-insurance for property damage and business interruption related risk exposures. Existing business continuity plans may not provide protection for all of the costs that arise from such events. The impact of these events could lead to disruptions in production and loss of facilities more than offsetting premiums saved and adversely affect our financial results and prospects. Third party claims arising from these events may also exceed the limit of liability insurance policies we have in place.
Climate change and greenhouse effects may adversely impact our operations and markets
Carbon basedCarbon-based energy is a significant input in a number of the Group’s mining and processing operations and we have significant sales of carbon basedcarbon-based energy products.
A number of governments or governmental bodies have introduced or are contemplating regulatory change in response to the impacts of climate change. TheUnder the December 1997 Kyoto Protocol2009 Copenhagen Accord, developed countries established a set ofindividual greenhouse gas emission targets for developedand developing countries that have ratified the Protocol.established national mitigation actions. The European Union Emissions Trading System (EU ETS), which came into effect on 1 January 2005, has had an impact on greenhouse gas and energy-intensive businesses based in the EU. Our Petroleum assets in the UKUnited Kingdom are currently subject to the EU ETS, as are our EU based customers. Elsewhere, there is current and emerging climate change regulation that will affect energy prices, demand and margins for carbon intensive products. The Australian Government’s plan of action on climate change, which commenced on 1 July 2012, includes the introduction of a nationalfixed price on carbon emissions and converting to an emissions trading scheme by 2013after three years, and a mandatory renewable energy target of 20 per cent by the year 2020. From a medium to long-term perspective, we are likely to see some changes in the cost position of our greenhouse-gas-intensive assets and energy-intensive
assets as a result of regulatory impacts in the countries in which we operate. These proposed regulatory mechanisms may impact our operations directly or indirectly viathrough our suppliers and customers. Inconsistency of regulations particularly between developed and developing countries may also change the competitive position of some of our assets. Assessments of the potential impact of future climate change regulation are uncertain given the wide scope of potential regulatory change in the many countries in which we operate. The South African Government plans to introduce a carbon tax beginning in 2013, however the details are not yet finalised. Carbon pricing has also been discussed as part of a broader tax reform package in Chile.
The physical impacts of climate change on our operations are highly uncertain and will be particular to the geographic circumstances. These may include changes in rainfall patterns, water shortages, rising sea levels, increased storm intensities and higher average temperature levels. These effects may adversely impact the productivity and financial performance of our operations.
Our human resource talent pool may not be adequate to support our growth
Our existing operations and especially our pipeline of development projects in regions of numerous large projects, such as Western Australia, when activated, require many highly skilled staff with relevant industry and technical experience. In such a competitive environment, the inability of the Group and industry to attract and retain such people may adversely impact our ability to adequately meet demand in projects. Skills shortages in engineering, technical service, construction and maintenance may impact activities. These shortages may adversely impact the cost and schedule of development projects and the cost and efficiency of existing operations.
Breaches in our information technology (IT) security processes may adversely impact the conduct of our business activities
We maintain global IT and communication networks and applications to support our business activities. IT security processes protecting these systems are in place and subject to assessment as part of the review of internal control over financial reporting. These processes may not prevent future malicious action or fraud by individuals or groups, resulting in the corruption of operating systems, theft of commercially sensitive data, misappropriation of funds and disruptions to our business operations.
A breach inof our governance processes may lead to regulatory penalties and loss of reputation
We operate in a global environment straddling multiple jurisdictions and complex regulatory frameworks. Our governance and compliance processes, which include the review of internal control over financial reporting and specific internal controls in relation to offers of things of value to government officials and representatives of state owned enterprises, may not prevent future potential breaches of law, accounting or governance practice. OurThe BHP BillitonCode of Business Conduct, anti-briberytogether with our mandatory policies, such as the anti-corruption and corruption, andthe anti-trust standardspolicies, may not prevent instances of fraudulent behaviour and dishonesty nor guarantee compliance with legal or regulatory requirements. This may lead to regulatory fines, litigation, loss of operating licences or reputational damage.
1.5.2 Approach to risk management
We believe that the identification and management of risk is central to achieving our corporate purpose of creating long-term shareholder value.
Our approach to risk recognises that it will manifest itself in many forms and has the potential to impact our health and safety, environment, community, reputation, regulatory, market and financial performance and, thereby, the achievement of our corporate purpose.
By understanding and managing risk, we provide greater certainty and confidence for our shareholders, employees, customers, suppliers, and for the communities in which we operate. Successful risk management can be a source of competitive advantage.
Risks faced by the Group are managed on an enterprise-wide basis. The natural diversification in the Group’s portfolio of commodities, geographies, currencies, assets and liabilities is a key element in our risk management approach.
Risk management is embedded in our critical business activities, functions and processes. Materiality and our tolerance for risk are key considerations in our decision-making.
Risk issues are identified, analysed and assessed in a consistent manner. Performance requirements exist for the identification, assessment, control and monitoring of material risk issues that could threaten our corporate purpose and business plans. These include:
The potential for impacts on the achievement of our corporate purpose and business plans is identified through risk assessments using approved materiality and tolerability criteria. The severity of any risk event is assessed according to a matrix that describes the degree of harm, injury or loss from the most severe impact associated with that risk event, assuming reasonable effectiveness of reputation.controls.
A risk assessment (risk identification, risk analysis and risk evaluation) is conducted for material risk issues.
Risk controls are designed, implemented, operated and assessed to produce a residual risk that is tolerable. Performance standards are established for critical controls over material risks with supporting monitoring and verification processes.
The Group has established processes that apply when entering or commencing new activities in higher governance risk countries. Risk assessments and a supporting risk management plan are required to ensure that potential reputation, legal, business conduct and corruption-related exposures are tolerable and legislative compliance is maintained, including relevant anti-corruption legislation and the application of any sanctions or trade embargos.
Our risk management governance approach is described in sections 5.13.1 and 5.14.
1.5.3 Management of principal risks
The scope of our operations and the number of industries in which we operate and engage mean that a range of factors may impact our results. Material risks that could negatively affect our results and performance are described in section 1.5.1 of this Report. Our approach to managing these risks is outlined below.
Principal risk area | Risk management approach | |
External risks | ||
Risks arise from fluctuations in commodity prices and currency exchange rates, demand changes in major markets (such as China or Europe) or actions by governments and political events that impact long-term fiscal stability. | The diversification of our portfolio of commodities, geographies and currencies is a key strategy for reducing volatility. Section 3.4 describes external factors and trends affecting our results and Note 28 to the financial statements outlines the Group’s financial risk management strategy, including market, commodity, and currency risk. The Financial Risk Management Committee oversees these as described in section 5.15. We engage with governments and other key stakeholders to ensure the potential impacts of proposed fiscal, tax, resource investment, infrastructure access and regulatory changes are understood and where possible mitigated. | |
Business risks | ||
Our continued growth creates risks related to identifying and proving reserves, integrating newly acquired businesses, managing our capital development projects and attracting and retaining the people necessary to support our growth. | We support our growth strategy through minerals and petroleum exploration programs which are focused on identifying and capturing new world-class projects supported by exploration activity adjacent to existing operations. The Group Resource and Business Optimisation function provides governance and technical leadership for resource development and Ore Reserves reporting as described in section 2.13.2 Reserves and Resources and section 2.6 Group Resources and Business Optimisation. Our Petroleum reserves are described in section 2.13.1. |
Principal risk area | Risk management approach | |
We have established investment processes and tollgates that apply to all major capital and mergers and acquisitions projects. The Investment Committee oversees these as described in section 5.15. The Project Management function additionally ensures that the optimum framework and capabilities are in place to deliver safe, predictable and competitive projects. Additionally we have established project hubs as operating centres for the study and execution of a pipeline of major capital projects using a program management approach. Group-wide human resource processes are established covering recruitment planning, diversity, remuneration, development and mobility of staff to ensure we continue to maintain a strong diversified global talent pool. | ||
Financial risks | ||
Continued volatility in global financial markets may adversely impact future cash flows, the ability to adequately access and source capital from financial markets and our credit rating. This may impact planned expenditures as well as the ability to recover investments in mining and oil and gas projects. In addition, the commercial counterparties (customers, suppliers and financial institutions) we transact with may, due to adverse market conditions, not meet their obligations. | We seek to maintain a solid ‘A’ credit rating, supported by our portfolio risk management strategy. As part of this strategy, commodity prices and currency exchange rates are not hedged and, wherever possible we take the prevailing market price, which serves to mitigate counterparty performance risk. We use cash flow at risk analysis to monitor volatilities and key financial ratios. Credit limits and review processes are established for all customers and financial counterparties. The Financial Risk Management Committee oversees these as described in section 5.15. Note 28 to the financial statements outlines our financial risk management strategy. | |
Operational risks | ||
Operating cost pressures, reduced productivity and labour shortages could negatively impact operating margins and expansion plans. Non-controlled assets may not comply with our standards. Unexpected natural and operational catastrophes may adversely impact our operations. Breaches in information technology (IT) security processes may adversely impact the conduct of our business activities. | We seek to ensure that adequate operating margins are maintained through our strategy to own and operate large, long-life, low-cost and expandable upstream assets. We have implemented an Operating Model designed to deliver a simple and scalable organisation, providing a competitive advantage through defining work, organisation and performance measurement. Defined global business processes, including 1SAP, provide a standardised way of working across the organisation. Common processes generate reliable data and improve operating discipline. Global sourcing arrangements have been established to ensure continuity of supply and competitive costs for key supply inputs. We seek to influence non-controlled assets to apply to our standards. |
Principal risk area | Risk management approach | |
Through the application of our risk management processes, we identify material catastrophic operational risks and implement the critical controls and performance requirements to maintain control effectiveness. Business continuity plans are established to mitigate consequences. Consistent with our portfolio risk management approach, we continue to be largely self-insured for losses arising from property damage, business interruption and construction. We maintain appropriate IT security devices, perimeter monitoring and mobile device protective measures. Security crisis management, incident management and service continuity and disaster recovery plans are established. | ||
Sustainability risks | ||
HSEC incidents or accidents and related regulations may adversely affect our people, operations and reputation or licence to operate. The potential physical impacts and related government regulatory responses to climate change and greenhouse effects may adversely impact our operations and markets. Given that we operate in a challenging global environment straddling multiple jurisdictions, a breach of our governance processes may lead to regulatory penalties and loss of reputation. | Our approach to sustainability risks is reflected inOur BHP Billiton Charter and described in section 2.8. A comprehensive set of Group Level Documents (GLD) set out Group-wide HSEC-related performance requirements to ensure effective management control of these risks. TheBHP Billiton Code of Business Conduct sets out requirements related to working with integrity including dealings with government officials and third parties. Processes and controls are in place for the financial control over financial reporting, including under Sarbanes-Oxley. We have established anti-corruption and anti-trust related performance requirements overseen by the Legal and Compliance function. The Disclosure Committee oversees our compliance with securities dealing obligations and continuous and periodic disclosure obligations. |
1.6 Forward looking statements
This Annual Report contains forward looking statements, including statements regarding:
estimated reserves
trends in commodity prices and currency exchange rates;
demand for commoditiescommodities;
plans, strategies and objectives of managementmanagement;
closure or divestment of certain operations or facilities (including associated costs);
anticipated production or construction commencement dates
expected costs or production outputdates;
capital costs and scheduling;
operating costs and shortages of materials and skilled employees;
anticipated productive lives of projects, mines and facilitiesfacilities;
provisions and contingent liabilities.liabilities;
tax and regulatory developments.
Forward looking statements can be identified by the use of terminology such as ‘intend’, ‘aim’, ‘project’, ‘anticipate’, ‘estimate’, ‘plan’, ‘believe’, ‘expect’, ‘may’, ‘should’, ‘will’, ‘continue’ or similar words. These statements discuss future expectations concerning the results of operations or financial condition, or provide other forward looking statements.
These forward looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this Annual Report.release. Readers are cautioned not to put undue reliance on forward looking statements.
For example, our future revenues from our operations, projects or mines described in this Annual Report will be based, in part, upon the market price of the minerals, metals or petroleum products produced, which may vary significantly from current levels. These variations, if materially adverse, may affect the timing or the feasibility of the development of a particular project, the expansion of certain facilities or mines, or the continuation of existing operations.
Other factors that may affect the actual construction or production commencement dates, costs or production output and anticipated lives of operations, mines or facilities include our ability to profitably produce and transport the minerals, petroleum and/or metals extracted to applicable markets; the impact of foreign currency exchange rates on the market prices of the minerals, petroleum or metals we produce; activities of government authorities in some of the countries where we are exploring or developing these projects, facilities or mines, including increases in taxes, changes in environmental and other regulations and political uncertainty; labour unrest; and other factors identified in the description of the risk factors above.described in section 1.5.1.
We cannot assure you that our estimated economically recoverable reserve figures, closure or divestment of such operations or facilities, including associated costs, actual production or commencement dates, cost or production output or anticipated lives of the projects, mines and facilities discussed in this Annual Report, will not differ materially from the statements contained in this Annual Report.
Except as required by applicable regulations or by law, the Group does not undertake any obligation to publicly update or review any forward looking statements, whether as a result of new information or future events.
Projects and exploration activities are not shown on this map.
Locations are current at 10 September 2012.
Petroleum
Ref | Country | Asset | Description | Ownership | Country | Fields | Description | Ownership | |||||||||||
1 | Algeria | Ohanet | Joint operator with Sonatrach of wet gas development | 45 | % | Algeria | ROD Integrated Development (a) | Onshore oil production | 38 | % | |||||||||
2 | Algeria | ROD Integrated Development | Onshore oil development (non-operated) | 38 | % | Australia | Bass Strait (a) | Offshore Victoria oil, condensate, LPG, natural gas and ethane production | 50 | % | |||||||||
3 | Australia | BassStrait | Producer of oil, condensate, LPG, natural gas and ethane (non-operated) | 50 | % | Australia | Minerva | Offshore Victoria natural gas and condensate production | 90 | % | |||||||||
4 | Australia | Minerva | Operator of Minerva gas field development in the Otway Basin of Victoria | 90 | % | Australia | North West Shelf(a) | Offshore Western Australia oil, condensate, LPG, natural gas and LNG production | 8.3 – 16.7 | % | |||||||||
5 | Australia | North West Shelf | One of Australia’s largest resource projects, producing liquids, LNG and domestic gas (non-operated) | 8.33 – 16.67 | % | Australia | Pyrenees | Offshore Western Australia oil production | 40 – 71.4 | % | |||||||||
6 | Australia | Pyrenees | Operator of Pyrenees floating, production, storage and offloading vessel, which produces oil in Western Australia | 71.43 | % | Australia | Stybarrow | Offshore Western Australia oil and gas production | 50 | % | |||||||||
7 | Australia | Stybarrow | Operator of Stybarrow floating, production, storage and offloading vessel, which produces oil in Western Australia | 50 | % | Pakistan | Zamzama | Onshore natural gas and condensate production | 38.5 | % | |||||||||
8 | Pakistan | Zamzama | Operator of onshore gas development in Sindh province | 38.5 | % | Trinidad and Tobago | Angostura | Offshore oil and natural gas production | 45 | % | |||||||||
9 | Trinidad and Tobago | Angostura | Operator of oil field located offshore east Trinidad | 45 | % | UK | Bruce/Keith/ Liverpool Bay | Offshore North Sea and Irish Sea oil and natural gas production - Bruce (a) 16% - Keith 31.8% - Liverpool Bay 46.1% | |||||||||||
10 | UK | Bruce/Keith | Oil and gas production in the UK North Sea | Bruce – 16 Keith – 31.83 | % % | US | Gulf of Mexico | Offshore oil, LPG and natural gas production from several fields - Atlantis(a) 44% - Neptune 35% - Genesis(a) 5% - Shenzi 44% - Mad Dog(a) 23.9% | |||||||||||
11 | UK | Liverpool Bay | Operator of oil and gas developments in the Irish Sea | 46.1 | % | US | Onshore US | Onshore shale gas and liquids in Arkansas, Louisiana and Texas - Eagle Ford - Haynesville - Fayetteville - Permian | <1 – 100 | % | |||||||||
Aluminium (b)
| Aluminium (b)
|
| |||||||||||||||||
Ref | Country | Asset | Description | Ownership | |||||||||||||||
12 | US | Gulf of Mexico | Interests in several producing assets, including deepwater oil and gas production at: - Atlantis (44%) - Shenzi (44%) - Mad Dog (23.9%) - Neptune (35%)
Additional other interests in producing assets and a significant exploration acreage position (4.95–100%) | 4.95 – 100 | % | Australia | Worsley | Integrated alumina refinery and bauxite mine in Western Australia | 86 | % | |||||||||
13 | Brazil | Alumar(a) | Integrated alumina refinery and aluminium smelter | 36 – 40 | % | ||||||||||||||
14 | Brazil | Mineração Rio do Norte (a) | An open-cut bauxite mine | 14.8 | % | ||||||||||||||
15 | Mozambique | Mozal | An aluminium smelter, located near Maputo | 47.1 | % | ||||||||||||||
16 | South Africa | Aluminium South Africa | Hillside and Bayside aluminium smelters, located at Richards Bay | 100 | % |
Aluminium
Ref | Country | Asset | Description | Ownership | |||||
13 | Australia | Worsley | Integrated alumina refinery and bauxite mine in Western Australia | 86 | % | ||||
14 | Brazil | Alumar | Integrated alumina refinery and aluminium smelter | 36–40 | % | ||||
15 | Brazil | MRN | Bauxite mine | 14.8 | % | ||||
16 | Mozambique | Mozal | Aluminium smelter near Maputo | 47.1 | % | ||||
17 | SouthAfrica | Aluminium South Africa | Two aluminium smelters at Richards Bay | 100 | % |
Base Metals
Ref | Country | Asset | Description | Ownership | |||||
18 | Australia | Cannington | Silver, lead and zinc mine in northwest Queensland | 100 | % | ||||
19 | Chile | Pampa Norte | Integration of Cerro Colorado and Spence open-cut mines producing copper cathode in Atacama Desert, northern Chile | 100 | % | ||||
20 | Chile | Escondida | The world’s largest copper mine, located in northern Chile | 57.5 | % | ||||
21 | Peru | Antamina | Copper and zinc mine located in the Andes, north-central Peru | 33.75 | % | ||||
22 | US | Pinto Valley | Copper mine located in State of Arizona | 100 | % |
UraniumStainless Steel Materials(a)(b)
Ref | Country | Asset | Description | Ownership | |||||
23 | Australia | Olympic Dam | The largest poly-metallic ore body in the world and Australia’s biggest underground mine, producing uranium, copper and gold | 100 | % |
Ref Country Asset Description Ownership 17 18 Integrated laterite ferronickel mining and smelting operation in northern Colombia Base Metals Ref Country Asset Description Ownership 19 20 21 22 23 Uranium(c) Ref Country Asset Description Ownership 24 Olympic Dam Diamonds and Specialty Products Ref Country Asset Description Ownership 25 Iron Ore Ref Country Asset Description Ownership 26 27Diamonds and Specialty Products Australia Nickel West Mt Keith and Leinster nickel-sulphide mines, Kalgoorlie nickel smelter, Kambalda nickel concentrator and the Kwinana nickel refinery 100 % Colombia Cerro Matoso 99.9 % Australia Cannington Underground silver, lead and zinc mine, located in northwest Queensland 100 % Chile Pampa Norte Cerro Colorado and Spence open-cut mines producing copper cathode in the Atacama Desert, northern Chile 100 % Chile Escondida Comprises the world’s largest copper mine, concentrators and solvent extraction plants and port operations 57.5 % Peru Antamina (a) A joint venture open-cut copper and zinc mine, located in the Andes north-central Peru 33.8 % US Base Metals North America Includes the Pinto Valley open-cut copper mine, located in Arizona 100 % Australia Large poly-metallic orebody and the world’s largest uranium deposit, producing copper, uranium, gold and silver 100 % Canada EKATI Diamond Mine Open-cut and underground diamond mines, located in the Northwest Territories of Canada 80 % Australia Western Australia Iron Ore Integrated iron ore mines (Area C, Jimblebar, Yandi, Newman and Yarrie), and rail and port operations in the Pilbara region of Western Australia 85 – 100 % Brazil Samarco (a) Open-cut mine that produces iron ore pellets 50 %
Ref | Country | Asset | Description | Ownership | |||||
24 | Canada | EKATI | Diamond mines in the Northwest Territories of Canada | 80 | % | ||||
25 | South Africa | Richards Bay Minerals | Integrated titanium smelter and mineral sands mine | 37 | % |
Stainless Steel Materials
Ref | Country | Asset | Description | Ownership | |||||
26 | Australia | Nickel West | Sulphide nickel assets including Mt Keith and Leinster nickel operations, Kalgoorlie nickel smelter and Kambalda nickel concentrator and the Kwinana nickel refinery | 100 | % | ||||
27 | Colombia | Cerro Matoso | Integrated laterite ferronickel mining and smelting complex in northern Colombia | 99.94 | % |
Iron Ore
Ref | Country | Asset | Description | Ownership | |||||
28 | Australia | Western Australia Iron Ore | Integrated iron ore mines, rail and port operations in the Pilbara | 85–100 | % | ||||
29 | Brazil | Samarco | An efficient low-cost producer of iron ore pellets in southeast Brazil | 50 | % |
Manganese
Ref | Country | Asset | Description | Ownership | |||||
30 | Australia | GEMCO | Producer of manganese ore in the Northern Territory | 60 | % | ||||
31 | Australia | TEMCO | Producer of manganese alloys in Tasmania | 60 | % | ||||
32 | South Africa | Samancor Manganese | Integrated producer of manganese ore (Hotazel Manganese Mines) and alloy (Metalloys) | 60 | % |
Manganese
|
| |||||||||
Ref | Country | Asset | Description | Ownership | ||||||
28 | Australia | Manganese Australia | Producer of manganese ore at GEMCO in the Northern Territory and manganese alloys at TEMCO in Tasmania | 60 | % | |||||
29 | South Africa | Manganese South Africa | Mamatwan open-cut and Wessels underground manganese mines and the Metalloys manganese alloy plant | 44.4 – 60 | % |
Metallurgical Coal
Ref | Country | Asset | Description | Ownership | |||||
33 | Australia | Illawarra Coal | Underground coal mines (West Cliff, Dendrobium, Appin) in southern NSW, with access to rail and port facilities | 100 | % | ||||
34 | Australia | BHP Billiton Mitsubishi Alliance | Integrated mine, rail and port operations, including a loading terminal at Hay Point, in the Bowen Basin, Central Queensland | 50 | % | ||||
35 | Australia | BHP Mitsui Coal | Two open-cut coal mines in the Bowen Basin, Central Queensland | 80 | % |
Ref Country Asset Description Ownership 30 Illawarra Coal 31 32 Australia Energy Coal Ref Country Asset Description Ownership 33 34 35 36 BHP Billiton principal office locations Ref Country Location Office 37 38 39 40 Aluminium (b) and Stainless Steel Materials (b) Head Offices Iron Ore Head Office 41 42 43 44Energy Coal Australia Underground coal mines (West Cliff, Dendrobium, Appin) in southern New South Wales, with access to rail and port facilities 100 % Australia BHP Billiton Mitsubishi Alliance Saraji, Goonyella Riverside, Peak Downs, Norwich Park, Gregory Crinum, Blackwater and Broadmeadow open-cut and underground mines in the Queensland Bowen Basin and Hay Point Coal Terminal 50 % BHP Billiton Mitsui Coal South Walker Creek and Poitrel open-cut coal mines in the Queensland Bowen Basin 80 % Australia New South Wales Energy Coal Mt Arthur Coal open-cut mine 100 % Colombia Cerrejón(a) An open-cut coal mine, with integrated rail and port operations 33.3 % South Africa Energy Coal South Africa Khutala, Middelburg, Klipspruit, Wolvekrans open-cut and underground mines and coal processing operations 50 – 100 % US New Mexico Coal Navajo open-cut and San Juan underground mines 100 % Australia Adelaide Uranium Head Office Australia Brisbane Metallurgical Coal Head Office Australia Melbourne Global Headquarters Australia Perth Australia Sydney Energy Coal Head Office Canada Saskatoon Diamonds and Specialty Products Head Office Chile Santiago Base Metals Head Office Malaysia Kuala Lumpur Global Shared Services Centre
Ref | Country | Asset | Description | Ownership | |||||
36 | Australia | NSW Energy Coal | Open-cut coal mine that supplies thermal coal to export markets and for domestic electricity generation | 100 | % | ||||
37 | Colombia | Cerrejón | Largest thermal coal exporter in Colombia, with integrated rail and port facilities | 33.3 | % | ||||
38 | South Africa | BHP Billiton Energy Coal South Africa | One of the largest producers and exporters of thermal coal in South Africa | 50–100 | % | ||||
39 | US | New Mexico Coal | Two mines in New Mexico supplying energy coal to adjacent power stations | 100 | % |
BHP Billiton office locations
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(a) |
(b) | Aluminium and Stainless Steel Materials form the Aluminium and Nickel Customer Sector Group. |
(c) | Uranium is part of the Base Metals Customer Sector Group. |
Percentage ownership figures have been rounded to one decimal place.
2.2.1 History and development
Since 29 June 2001, we have operated under a Dual Listed Company (DLC) structure. Under the DLC structure, the two parent companies, BHP Billiton Limited (formerly BHP Limited and before that The Broken Hill Proprietary Company Limited) and BHP Billiton Plc (formerly Billiton Plc) operate as a single economic entity, run by a unified Board and management team. More details of the DLC structure are located under section 2.112.10 of this Report.
BHP Billiton Limited was incorporated in 1885 and is registered in Australia with ABN 49 004 028 077. BHP Billiton Plc was incorporated in 1996 and is registered in England and Wales with registration number 3196209. Successive predecessor entities to BHP Billiton Plc have operated since 1860.
The registered office of BHP Billiton Limited is 180 Lonsdale Street, Melbourne, Victoria 3000, Australia, and its telephone number is 1300 55 47 57 (within Australia) or +61 3 9609 3333 (outside Australia). The registered office of BHP Billiton Plc is Neathouse Place, London SW1V 1BH, UK,United Kingdom, and its telephone number is +44 20 7802 4000. Our agent for service in the United States is Earl K. MooreMaria Isabel Reuter at 1360 Post Oak Boulevard, Suite 150, Houston, TX 77056.
2.2.2 Petroleum Customer Sector Group
Our Petroleum CSGCustomer Sector Group (CSG) comprises a base of large, long-life, low unit cost productiononshore and offshore operations that are located in six countries throughout the world. We pursueexplore for significant upstream opportunities around the world.
Petroleum continues to invest through economic cycles and maintains a long-term view. The acquisition of Petrohawk Energy Corporation was completed in FY2012 at a purchase price of US$12.0 billion, excluding the assumption of net debt of US$3.8 billion, and provided us with multiple optionsoperating positions in the Eagle Ford, Haynesville and Permian fields in the United States. Combined with our interests in the Fayetteville field, acquired from Chesapeake Energy Corporation in the third quarter of FY2011, oil and gas operations in these fields constitute our Onshore US business. We will continue to evaluate other commercial opportunities for growth, to ensure continued success.including through acquisitions, in the future.
During FY2010, Petroleum delivered its third consecutive annualFY2012, total production recordincreased by realising 158.5640 per cent from the prior year to 222.3 million barrels of oil equivalent following(MMboe). Production from our Onshore US business, strong uptime performance from existing operated assets and the successful deliveryfirst full year of production from the Angostura gas facility (Trinidad and Tobago) largely offset reduced production caused by maintenance activity and adverse weather at our non-operated offshore Gulf of Mexico, United States, and North West Shelf, Australia, fields and natural field decline at our operated Pyrenees facility.
We remain committed to organic growth opportunities through exploration, using the latest seismic and geophysical technology to locate new resources and yield results. In FY2012, we executed a series of growth projectsmajor international drilling campaign focused on proven basins in Southeast Asia, Western Australia and the Gulf of Mexico and Australia. The Pyrenees facility (Australia) was brought on stream on schedule during the third quarter FY2010 and our deepwater Shenzi field (US) performed at or above design capacity during the year. We also realised strong reservoir performance from Atlantis North (US). All three factors plus strong base operating uptime worldwide contributed to a 27 per cent increase in high margin crude oil and condensate production over the previous year. This was accomplished while keeping our unit operating cost below US$6 per barrel.Mexico.
Production in FY2010 from our Gulf of Mexico projects has not been materially impacted by events following the oil spill from BP’s Macondo well. However, our current understanding of the Gulf of Mexico drilling moratorium, updated by the US Department of the Interior on 12 July 2010, indicates that it will be extremely unlikely for any new producing wells to commence drilling until at least very late in CY2010 which is expected to have a significant impact on FY2011 production.
We continue to invest in our business through economic cycles and maintain a long-term view. Our consistently strong project execution over the past four years has led us to successfully deliver four major operated projects, the latest one being the Pyrenees floating production storage and offtake facility offshore Western Australia. Combined with Shenzi and Neptune in the deepwater Gulf of Mexico and Stybarrow in Western Australia, we have proven our ability to safely deliver large, technically-challenging projects in diverse and challenging environments.
Our financial strength allows us to continue to aggressively pursue exploration opportunities around the globe. Our focus is on capturing and operating large acreage positions in areas that are material to BHP Billiton. Over the past four years, we have substantially grown our captured acreage position and commenced one of the most aggressive drilling campaigns in the Group’s history that will continue into the coming years.
Information on Petroleum operations
The following table contains additional details of our production operations. This table should be read in conjunction with the production (see section 2.3.1) and reserve tables (see section 2.14.1).
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Our production assetsoperations are as follows:
Bass Strait
Together with our 50–5050-50 joint venture partner, Esso Australia a(a subsidiary of ExxonMobil,ExxonMobil), we have been producing oil and gas from Bass Strait, off the south-eastern coast of the Australian mainland,Australia, for over 40 years, having participated in the original discovery of hydrocarbons there in 1965. We dispatch the majority of our Bass Strait crude oil and condensate production to refineries along the east coast of Australia. Gas is piped ashoreonshore to our Longford processing facility, from wherewhich we sell our production to domestic distributors under contracts with periodic price reviews.
North West Shelf
We are a domestic gas joint venture participant in the North West Shelf Project in Western Australia. The North West Shelf Project was developed in phases: the domestic gas phase which supplies gas to the Western Australian domestic market mainly under long-term contracts, and a series of LNGliquefied natural gas (LNG) expansion phases which supplysupplying LNG to buyers in Japan, Korea and China under a series of long-term contracts. The North West Shelf Projectproject also produces LPG and condensate.
We are also a joint venture participant in four nearby oil fields. Both the North West Shelf gas and oil ventures are operated by Woodside Petroleum Ltd.Woodside.
Australia Operatedoperated
We are the operator ofoperate two oil fields offshore Western Australia and one gas field in Victoria.
The Pyrenees asset came on line in the third quarter FY2010 and is an oil development which consists of three fields, two of which (Crosby Stickle and Ravensworth)Stickle) are located offshore Western Australia.in blocks WA-42-L (71.43 per cent interest), while the third (Ravensworth) straddles blocks WA-42-L and WA-43-L (40 per cent interest). The project uses a floating production storage and offtakeFPSO facility.
The Stybarrow assetoperation (50 per cent BHP Billiton share) is an oil development located offshore Western Australia. The project uses a floating production storage and offtakeFPSO facility.
The Minerva assetoperation (90 per cent BHP Billiton share) is a gas field located offshore Victoria. The assetoperation consists of two subsea producing wells which pipe gas onshore to a processing plant. The gas is delivered into a pipeline and sold domestically.
Gulf of Mexico
We operate threetwo fields in the Gulf of Mexico (Neptune Shenzi and consolidated operations in the West Cameron area),Shenzi) and hold non-operating interests in a further three fields (Atlantis, Mad Dog and Genesis). We divested our interest in the West Cameron and Starlifter areas in June 2012. We also own 25 per cent and 22 per cent, respectively, of the companies that own and operate the Caesar oil pipeline and the Cleopatra gas pipeline which transport oil and gas from the Green Canyon area, where a number of our fields are located, to connecting pipelines that transport product to the mainland. We deliver our oil production to refineries along the Gulf Coast of the United States.
Onshore US
We operate in four shale fields located onshore in the United States – Fayetteville, Eagle Ford, Haynesville and Permian.
The combined leasehold acreage of the Onshore US fields is approximately 1.6 million net acres in the states of Texas, Louisiana and Arkansas. Our ownership interests range from less than one per cent to 100 per cent. Working interest will change due to events such as a party’s non consent election, or through farm-ins and farm-outs with other parties.
In FY2012, the Onshore US business delivered 6.9 million barrels of crude oil and condensates, 448 billion cubic feet of natural gas and 4.0 million barrels of natural gas liquids. Our Onshore US total production increased by 80 MMboe from 6 MMboe in FY2011 to 86 MMboe in FY2012, which more than accounted for the 63 MMboe increase in total production.
Due to the low price of US natural gas in FY2012, the capital expenditure in the Onshore US business in the second half of the financial year was focused on the liquids-rich Eagle Ford and Permian fields, both in Texas. Consequently, we reduced the development of the dry gas assets in the Haynesville and Fayetteville fields in the second half of FY2012. The mix of liquids and gas development opportunities in all four fields provides us with the flexibility to adjust our onshore development program towards those operations with the highest return on investment.
Liverpool Bay and Bruce/Keith
The Liverpool Bay, United Kingdom, integrated development consists of sixfive producing offshore gas and oil fields in the Irish Sea, the Point of Ayr onshore processing plant in Northnorth Wales, and associated infrastructure. We deliver all of the Liverpool Bay gas by pipeline to E.ON’s Connah’s Quay power station.
We own 46.1 per cent of and operate Liverpool Bay. We also hold a 16 per cent non-operating interest in the Bruce oil and gas field in the North Sea and operate the Keith field (31.83 per cent share), a subsea tie-back, which is processed via the Bruce platform facilities.
Algeria
Our Algerian assetsoperations comprise our effective 45 per cent interest in the Ohanet wet gas development and our effective 38 per cent interest in the ROD Integrated Development, which consists of six satellite oil fields that pump oil back to a dedicated processing train. We exited our effective 45 per cent interest in the Ohanet wet gas development in October 2011.
Our interest in ROD is subject to a contractual determination to ensure interest from participating association leases is accurately reflected. Future redetermination of our interest may be possible under certain conditions.
Trinidad and Tobago
The Greater Angostura project is an integrated oil and gas development located offshore east Trinidad. We operate the field and have a 45 per cent interest in the production sharing contract for the project. Gas sales from the gas export platform commenced in May 2011.
Zamzama
We hold a 38.5 per cent working interest in and operate the Zamzama gas project in Sindh province of Pakistan. Both gas and condensate are sold domestically.
Information on Petroleum operations
The following table contains additional details of our production operations. This table should be read in conjunction with the production (see section 2.3.1) and reserve tables (see section 2.13.1).
Operation & | Product | Ownership | Operator | Title, Leases or Options | Nominal Production | Facilities, Use & Condition | ||||||
Australia Bass Strait | ||||||||||||
Offshore Victoria | Oil and gas | BHP Billiton 50% Esso Australia (Exxon Mobil subsidiary) 50% Oil Basins Ltd 2.5% royalty interest in 19 production licences | Esso Australia | 20 production licences and 2 retention leases issued by Australian Government Expire between 2016 and end of life of field One production licence held with Santos Ltd | Oil: 200 Mbbl/d Gas: 1,075 MMcf/d LPG: 5,150 tpd Ethane: 850 tpd | 20 producing fields with 21 offshore developments (14 steel jacket platforms, 3 subsea developments, 2 steel gravity based mono towers, 2 concrete gravity based platforms) Onshore infrastructure: Longford Facility (3 gas plants, liquid processing facilities) Interconnecting pipelines Long Island Point LPG and oil storage facilities Ethane pipeline | ||||||
North West Shelf | ||||||||||||
Offshore Western Australia North Rankin, Goodwyn, Perseus, Echo-Yodel, Angel, Searipple fields | Domestic gas, LPG, condensate, LNG | North West Shelf Project is an unincorporated JV BHP Billiton: 8.33% of original domestic gas JV, will progressively increase to 16.67% 16.67% of Incremental Pipeline Gas (IPG) domestic gas JV 16.67% of original LNG JV 12.5% of China LNG JV 16.67% of LPG JV Approximately 15% of current condensate production | Woodside Petroleum Ltd | 9 production licences issued by Australian Government 6 expire in 2022 and 3 expire 5 years from end of production | North Rankin A platform: 2,300 MMcf/d gas 60 Mbbl/d condensate Goodwyn A platform: 1,450 MMcf/d gas 110 Mbbl/d condensate Angel platform: 960 MMcf/d gas 50 Mbbl/d condensate Withnell Bay gas plant: 600 MMcf/d gas 5-train LNG plant: 45,000 tpd LNG | Production from North Rankin and Perseus processed through North Rankin A platform Production from Goodwyn, Searipple and Echo-Yodel processed through Goodwyn A platform 4 subsea wells in Perseus field tied into Goodwyn A platform Production from Angel field processed through Angel platform | ||||||
Operation & | Product | Ownership | Operator | Title, Leases or Options | Nominal Production | Facilities, Use & Condition | ||||||
Other participants: subsidiaries of Woodside Energy, Chevron, BP, Shell, Mitsubishi/Mitsui and China National Offshore Oil Corporation | Onshore gas treatment plant at Withnell Bay processes gas for domestic market 5-train LNG plant | |||||||||||
North West Shelf | ||||||||||||
Offshore Western Australia Wanaea, Cossack, Lambert and Hermes fields | Oil | BHP Billiton 16.67% Woodside Energy 33.34%, BP, Chevron, Japan Australia LNG (MIMI) 16.67% each | Woodside Petroleum Ltd | 3 production licences issued by Australian Government. 2 expire in 2014 and 2018. The third production licence, WA-9-L, expired in 2012 and was recently renewed for a period of 21 years and will expire in 2033 | Production capacity: 60 Mbbl/d Storage capacity: 1 MMbbl | Floating production storage and off-take unit | ||||||
Minerva | ||||||||||||
Offshore Victoria Gas plant located approximately 4 km inland from Port Campbell | Gas and condensate | BHP Billiton 90% Santos (BOL) 10% | BHP Billiton | Production licence issued by Australian Government expires 5 years after production ceases | 150 TJ/d gas 600 bbl/d condensate | 2 well completions Single flow line transports gas to onshore gas processing facility | ||||||
Stybarrow | ||||||||||||
Offshore Western Australia Stybarrow and Eskdale fields | Oil and gas | BHP Billiton 50% Woodside Energy 50% | BHP Billiton | Production licence issued by Australian Government expires 5 years after production ceases | Production: 80 Mbbl/d oil Storage: 900 Mbbl | 10 subsea well completions (6 producers, 3 water injectors, 1 gas injector) Gas production is reinjected | ||||||
Pyrenees | ||||||||||||
Offshore Western Australia Crosby and Stickle Ravensworth fields | Oil | WA-42-L permit: BHP Billiton 71.43% Apache PVG 28.57% WA-43-L permit: BHP Billiton 40% Apache Permits 31.5% Inpex Alpha 28.5% | BHP Billiton | Production licence issued by Australian Government expires 5 years after production ceases | Production: 96 Mbbl/d oil Storage: 920 Mbbl | 18 subsea well completions (14 producers, 3 water injectors, 1 gas injector), FPSO WA-42-L production commenced third quarter of FY2010 WA-43-L production commenced first quarter of FY2011 |
Operation & | Product | Ownership | Operator | Title, Leases or Options | Nominal Production | Facilities, Use & Condition | ||||||
US Onshore US | ||||||||||||
Fayetteville –Arkansas Eagle Ford – South Texas Haynesville – Northern Louisiana and East Texas Permian – West Texas | Oil, condensate, gas and NGL | BHP Billiton working interest in leases range from <1% to 100%. BHP Billiton average working interest: Operated wells – 69.5% Non-operated wells – 12.5% Largest partners include Southwestern Energy, XTO Energy and Chesapeake Energy. | BHP Billiton – 1,905 wells Partners – 4,032 wells | We currently own leasehold interests in approximately 1.6 million net acres Fayetteville – 487,000 acres Eagle Ford – 341,000 acres Haynesville – 268,000 acres Permian – 433,000 acres Other – 76,000 acres Leases associated with producing wells remain in place as long as oil and gas is produced in paying quantities | Maximum net daily production (1) achieved during FY2012 1,455 MMcf/d gas 29 Mbbl/d oil and condensate 17 Mbbl/d NGL | Fayetteville – producing gas wells with associated pipeline and compression infrastructure Eagle Ford – producing oil and gas wells and associated pipeline and compression facilities Haynesville – producing gas wells with a pipeline network operated by a third party Permian – oil and gas wells with associated pipelines and compression facilities under construction All production from Onshore US fields is transported to various intrastate and interstate pipelines through multiple interconnects | ||||||
(1) Capacity varies due to additional wells and pipelines. |
Operation & | Product | Ownership | Operator | Title, Leases or Options | Nominal Production | Facilities, Use & Condition | ||||||
Neptune | ||||||||||||
(Green Canyon 613) | ||||||||||||
Offshore Deepwater Gulf of Mexico (1,300 m) | Oil and gas | BHP Billiton 35% Marathon Oil 30% Woodside Energy 20% Maxus US Exploration 15% | BHP Billiton | Lease from US Government as long as oil and gas produced in paying quantities | 50 Mbbl/d oil 50 MMcf/d gas | Permanently moored tension-leg platform (TLP) | ||||||
Shenzi | ||||||||||||
(Green Canyon 653) | ||||||||||||
Offshore Deepwater Gulf of Mexico (1,310 m) | Oil and gas | BHP Billiton 44% Hess Corporation 28% Repsol 28% | BHP Billiton | Lease from US Government as long as oil and gas produced in paying quantities | 100 Mbbl/d oil 50 MMcf/d gas | Stand-alone TLP Genghis Khan field (part of same geological structure) tied back to Marco Polo TLP | ||||||
Atlantis | ||||||||||||
(Green Canyon 743) | ||||||||||||
Offshore Deepwater Gulf of Mexico (2,155 m) | Oil and gas | BHP Billiton 44% BP 56% | BP | Lease from US Government as long as oil and gas produced in paying quantities | 200 Mbbl/d oil 180 MMcf/d gas | Permanently moored semi-submersible platform | ||||||
Mad Dog | ||||||||||||
(Green Canyon 782) | ||||||||||||
Offshore Deepwater Gulf of Mexico (1,310 m) | Oil and gas | BHP Billiton 23.9% BP 60.5% Chevron 15.6% | BP | Lease from US Government as long as oil and gas produced in paying quantities | 80 Mbbl/d oil 60 MMcf/d gas | Permanently moored integrated truss spar, facilities for simultaneous production and drilling operations | ||||||
Genesis | ||||||||||||
(Green Canyon 205) | ||||||||||||
Offshore Deepwater Gulf of Mexico (approximately 790 m) | Oil and gas | BHP Billiton 4.95% Chevron 56.67% ExxonMobil 38.38% | Chevron | Lease from US Government as long as oil and gas produced in paying quantities | 55 Mbbl/d oil 72 MMcf/d gas | Floating cylindrical hull (spar) moored to seabed with integrated drilling facilities |
Operation & | Product | Ownership | Operator | Title, Leases or Options | Nominal Production | Facilities, Use & Condition | ||||||
Other | ||||||||||||
Liverpool Bay | ||||||||||||
Offshore northwest England, Irish Sea Douglas and Douglas West oil fields, Hamilton, Hamilton North gas fields, Lennox oil and gas field | Oil and gas | BHP Billiton 46.1% ENI 53.9% | BHP Billiton | 3 production licences issued by UK Government expire 2016, 2025 and 2027 | 308 MMcf/d gas 70 Mbbl/d oil and condensate | Integrated development of 5 producing fields Oil treated at Douglas complex then piped to oil storage barge for export by tankers Gas processed at Douglas complex then piped by subsea pipeline to Point of Ayr gas terminal for further processing | ||||||
Bruce/Keith | ||||||||||||
Offshore North Sea, UK | Oil and gas | Bruce: BHP Billiton 16% BP 37% Total 43.25% Marubeni 3.75% Keith: BHP Billiton 31.83% BP 34.84% Total 25% Marubeni 8.33% | Keith – BHP Billiton Bruce – BP | 3 production licences issued by UK Government expire 2015, 2018 and 2046 | 920 MMcf/d gas | Integrated oil and gas platform Keith developed as tie-back to Bruce facilities | ||||||
ROD | ||||||||||||
Integrated Development | ||||||||||||
Onshore Berkine Basin, 900 km southeast of Algiers, Algeria | Oil | BHP Billiton 45% interest in 401a/402a production sharing contract ENI 55% BHP Billiton effective 38% interest in ROD unitised integrated development ENI 62% | Joint Sonatrach/ENI entity | Production sharing contract with Sonatrach (title holder) Expires 2016 with option for two 5-year extensions under certain conditions | Approximately 80 Mbbl/d oil | Development and production of 6 oil fields 2 largest fields (ROD and SFNE) extend into neighbouring blocks 403a, 403d Production through dedicated processing train on block 403 | ||||||
Operation & | Product | Ownership | Operator | Title, Leases or Options | Nominal Production | Facilities, Use & Condition | ||||||
Greater Angostura | ||||||||||||
Offshore Trinidad and Tobago | Oil and gas | BHP Billiton 45% Total 30% Chaoyang 25% | BHP Billiton | Production sharing contract with Trinidad and Tobago Government entitles us to operate Greater Angostura until 2021 | 100 Mbbl/d oil 280 MMcf/d gas | Integrated oil and gas development: central processing platform connected to the Kairi-2 platform and gas export platform with 3 satellite wellhead protector platforms and flow lines Oil pipeline from processing platform to storage and export at Guayaguayare Gas supplied to Trinidad and Tobago domestic markets | ||||||
Zamzama | ||||||||||||
Onshore Sindh Province, Pakistan | Gas and condensate | BHP Billiton 38.5% ENI Pakistan 17.75% PKP Exploration 9.375% PKP Exploration 2 9.375% Government Holdings 25% | BHP Billiton | 20-year development and production lease from Pakistan Government expires 2022 (option to extend 5 years) | 500 MMcf/d gas 3,350 bbl/d condensate | 8 production wells, 4 process trains 2 front end compression trains | ||||||
Development projects
Australia
North West Shelf North Rankin gas compression project
The North West Shelf gas compression project was approved by the Board in March 2008 to recover remaining lower pressure gas from the North Rankin and Perseus gas fields. The project consists of a new gas compression platform, North Rankin B, capable of processing 2,500 million cubic feet per day (MMcf/d) of gas, which will be constructed adjacent to the existing North Rankin A platform, 135 kilometres offshore from Karratha on the northwest coast of Western Australia. The two platforms will be connected by a 100 metre long bridge and operate as a single facility. We own a 16.67 per cent share in the project and our development costs are approximately US$850 million, of which US$561 million was incurred as of 30 June 2012. First gas production is expected in CY2013. This project is operated by Woodside with an equally shared interest between Woodside, BHP Billiton, BP, Chevron, MIMI and Shell.
Bass Strait Kipper gas field development
Initial development of the Kipper gas field in the Gippsland Basin located offshore Victoria was approved by the Board in December 2007. A supplemental approval of the development was granted in January 2011. The first phase of the project includes two new subsea wells, three new pipelines and platform modifications to supply 10 thousand barrels of condensate per day (Mbbl/d) and 80 (MMcf/d) of gas. Gas and liquids will be processed via the existing Gippsland Basin joint venture facilities. Our share of development costs is approximately US$900 million, of which US$832 million was incurred as of 30 June 2012. Facilities are expected to be ready in CY2012 with first production pending resolution of mercury content. Additional treatment facilities will be required onshore due to mercury containment within the gas. The mercury issue will be undertaken as a separate project. The Kipper gas field development is comprised of the Kipper Unit Joint Venture and the Gippsland Basin Joint Venture. We own a 32.5 per cent interest in the Kipper Unit Joint Venture, with Esso Australia and Santos owning the remaining 67.5 per cent. We own a 50 per cent interest in the Gippsland Basin Joint Venture with Esso Australia owning the remaining 50 per cent.
Bass Strait Turrum field development
Further expansion of the Gippsland Basin facilities is underway following approval by the Board in July 2008 of the full field development of the Turrum oil and gas field. A supplemental approval of the development was obtained in January 2011. The project consists of a new platform, Marlin B, linked by a bridge to the existing Marlin A platform. The Turrum field, which has a capacity of 11 Mbbl/d of oil and 200 MMcf/d of gas, is located 42 kilometres from shore in approximately 60 metres of water. Our share of development costs is approximately US$1.4 billion, of which US$941 million was incurred as of 30 June 2012. Initial production is targeted for CY2013. The Turrum field development operates under the Gippsland Basin Joint Venture in which we own a 50 per cent interest with Esso Australia owning the remaining 50 per cent.
Macedon
Macedon is a domestic gas development in Western Australia. The project will consist of a 200 MMcf/d stand alone gas plant, four subsea production wells, a 90 kilometre, 20 inch wet gas pipeline and a 67 kilometre, 2 inch sales gas pipeline. In August 2010, the project was approved at an investment level of US$1.1 billion (BHP Billiton share) of which US$770 million was incurred as of 30 June 2012. Execution phase work is on track with first gas production expected in CY2013. We are the operator with a 71.43 per cent interest and Apache PVG Pty Ltd holds the remaining 28.57 per cent interest.
United States
Onshore US
BHP Billiton’s Onshore US capital program in FY2012 was US$3.3 billion, primarily related to drilling and completion activities at the Fayetteville, Haynesville and Eagle Ford fields and the installation of approximately 500 kilometres of pipeline infrastructure and additional gas processing facilities. In FY2012, 190 wells were completed in Onshore US. Drilling in the Permian Basin was primarily exploration and appraisal in FY2012.
Due to the low US natural gas price in FY2012, the majority of drilling and completion activity in Onshore US was directed towards the liquids rich Eagle Ford and Permian fields. At the end of FY2012, over 80 per cent of drilling activity was focused on these areas and Onshore US liquids production had risen to more than 40 thousand barrels per day.
BHP Billiton’s Onshore US capital expenditure in FY2013 is expected to rise to US$4.0 billion and the program will include drilling and completion, gas processing facilities and pipeline infrastructure. The majority of the activity will focus on the liquids-rich Eagle Ford and Permian fields. Development of these liquids rich fields complements our traditional project pipeline. Development plans will remain flexible and aligned with the external environment.
Exploration and appraisal
We focus on capturing and operating large acreage positions primarily in areas that are in proven hydrocarbon basins. We have exploration interests around the world, particularly in the Gulf of Mexico, Australia and the South China Sea. During FY2012, our gross expenditure on exploration was US$1.4 billion, of which US$674 million was expensed. Our major exploration interests are as follows:
Australia
We have a 55 per cent interest in WA-351-P and in March 2012 we drilled the Tallaganda-1 exploration well. The well encountered hydrocarbons. The well has been plugged and abandoned and is being evaluated to determine development potential.
The North Scarborough-1 well was spud in January 2012 in permit WA-346-P. The well encountered hydrocarbons. The well was plugged and abandoned and is being evaluated to determine development potential. We own a 100 per cent working interest in the permit.
The Argus-2 appraisal well was spud in June 2011 in the AC/RL8 retention lease over the Argus gas field. The well failed to reach the primary objective and was temporarily plugged and abandoned in September 2011. Woodside Browse Pty Ltd operates the AC/RL8 retention lease with a 60 per cent interest while we hold the remaining 40 per cent.
We have a 16.67 per cent interest in the North West Shelf Project with Woodside as Operator. In August 2011, the Seraph-1 well was drilled. It has been plugged and abandoned and expensed as a dry hole. In November 2011, the Tidepole East-1 well was drilled and hydrocarbons were encountered. It has been plugged and abandoned and is being evaluated to determine development potential.
In July 2012, we acquired an additional 6.5 per cent interest in block WA-335-P offshore Western Australia from Apache, taking our total participating interest to 52.5 per cent. We have exercised our right to assume operatorship from Apache (28.6 per cent). Kufpec holds the remaining 18.9 per cent.
In June 2012, we farmed into block WA-389-P in the Northern Carnarvon basin. We acquired a 40 per cent interest, while Woodside (Operator) owns 25 per cent and Cue Energy Resources owns 35 per cent. The Banambu Deep-1 exploration well was spud in May 2012. The well was plugged and abandoned and expensed as a dry hole.
In May 2012, we were awarded three exploration permits following our bids in the October 2011 Gazettal round WA-469-P, WA-470-P, and WA-475-P offshore Western Australia. The minimum exploration program for blocks WA-469-P and WA-470-P includes the acquisition and processing of 3D seismic data. The minimum exploration program for block WA-475-P includes the acquisition and processing of 3D seismic data and the drilling of two exploration wells.
United States
Onshore US
BHP Billiton’s Onshore US exploration and appraisal program in FY2012 was US$392 million, primarily focused on the Permian Basin and included land acquisitions and the drilling and completion of seven exploration wells. Initial results from the Permian Basin exploration and appraisal program were positive, with four of the seven exploration wells proving to be productive.
Deep Blue – Green Canyon 723
We owned a 31.9 per cent interest in the Deep Blue prospect located in the Green Canyon area. Partners in the well were Noble (33.8 per cent), Statoil (15.6 per cent), Samson (9.3 per cent) and Murphy (9.3 per cent). The Deep Blue exploration well-1 was drilled in November 2009 and concluded in May 2010. The well’s original hole was drilled to a total depth of 9,962 metres and encountered hydrocarbons. Sidetrack drilling started in May and was suspended in June 2010 due to the Gulf of Mexico drilling moratorium issued by the US Government. The moratorium was lifted in October 2010 and the sidetrack well recommenced drilling in August 2011. The sidetrack encountered a non-commercial quantity of hydrocarbons and as a result the well was plugged and abandoned and the block relinquished.
Gunflint – Mississippi Canyon 948
In June 2011, we entered into a Participation Agreement with the Gunflint partnership by consolidating our block (MC 992) with four other blocks in the area. The agreement provided us with an 11.2 per cent interest in the Gunflint prospect with Noble serving as the operator. Our partners include Noble (26.05 per cent), BP (31.50 per cent), Samson (16 per cent) and Marathon (15.25 per cent). The Mississippi Canyon 948 appraisal well was spud in December 2011. The well was plugged and abandoned and the well results are being evaluated.
Ness Deep – Green Canyon 507
In May 2012, we entered into the Ness Deep prospect by consolidating the interest in our block (Green Canyon 463) with the interest in our partner’s block (Green Canyon 507). We acquired operatorship of the prospect with a 50 per cent interest. The remaining 50 per cent interest is held by our partner Hess. The Green Canyon 507 Ness Deep exploration well spud in June 2012, and is in progress.
Knotty Head
The Knotty Head project is currently in the earliest phase of project development. The development assumptions for this project consist of a joint wet tree TLP development, production and water injection wells. The operator is Nexen and we hold a 25 per cent interest.
Atlantis East – Green Canyon 700
The Atlantis East appraisal well was spud in April 2012 and is currently drilling. BP operates the well with a 56 per cent interest, while we hold the remaining 44 per cent. Once the appraisal well has been drilled, a reasonable assessment of commercial hydrocarbon potential will be performed.
Mad Dog North – Green Canyon 738
The Mad Dog North appraisal well (GC 738) was spud in June 2011. The appraisal program was operated by BHP Billiton using the Transocean Development Driller 1 rig in 1,362 metres of water. Partners in the well are BP (60.5 per cent) and Chevron (15.6 per cent). BHP Billiton’s interest is 23.9 per cent. The primary objective of the program was to evaluate fully the structure on the northern flank of Mad Dog field. The Mad Dog North appraisal well penetrations confirm the existence of economically recoverable hydrocarbons. Additional work is ongoing to better define the recoverable volumes and development options.
Other
Colombia
In September 2008, we entered into a technical evaluation of hydrocarbon potential in Block 5 in the Llanos basin onshore Colombia. We operate the project and hold a 71.4 per cent working interest in the joint venture, with SK Energy Co holding the remaining 28.6 per cent interest. The minimum work program includes the acquisition of 1,000 kilometres of 2D seismic plus the drilling of five stratigraphic wells. The airborne survey was completed in January 2010, and 621 kilometres of 2D seismic were acquired from December 2010 to May 2011. In addition, four stratigraphic wells were drilled. Technical analysis and discussions with commercial partners and the Colombian Government continue.
India
In December 2008, we signed production sharing contracts covering seven blocks located offshore India. We hold a 26 per cent interest in the blocks. Our partner, GVK, holds the remaining 74 per cent interest in the blocks. The minimum exploration program includes the acquisition and processing of 2D seismic data across the seven blocks and a small 3D seismic acquisition in one block. We have a partner option to increase our interest to 50 per cent prior to drilling the first well or within six months of completing final seismic data interpretation.
In June 2010, we signed production sharing contracts covering an additional three blocks located offshore India. We hold a 100 per cent interest in the blocks. The minimum work program associated with the three blocks includes the acquisition and processing of 2D and 3D seismic data.
We are the operator of all 10 blocks and have met the commitment for acquiring the 2D seismic in all blocks. 2D seismic processing is nearly complete, and we are currently interpreting the processed seismic data. The 3D seismic acquisition, processing and interpretation, which will complete the committed exploration work program, will be planned once the 2D seismic data interpretation is completed. Our offshore India blocks are impacted by an access issue related to delays in receiving permits from the Ministry of Defence for the Government of India to conduct necessary exploration activities. BHP Billton and GVK have claimed force majeure as a result of these delays. Discussions aimed at resolving the access issue are ongoing with the Government of India.
Malaysia
In March 2007, we were awarded offshore Blocks N and Q in Malaysia with a 60 per cent interest and operatorship. Petronas Carigali holds the remaining 40 per cent. The minimum exploration program includes the acquisition and processing of seismic data across the two blocks and the drilling of four Block N exploration wells within the first seven years. The initial seismic acquisition program commenced in June 2008 and was completed in September 2008 for both blocks. Additional seismic acquisition and processing for Block Q is planned for completion by March 2013. The first exploration well was drilled in February 2010 and was plugged, abandoned and expensed as a dry hole. Drilling of the second exploration well was completed in February 2012 and was plugged, abandoned and expensed as a dry hole.
Philippines
In November 2009, we acquired a 75 per cent interest in Service Contract 59, located offshore Philippines and we assumed operatorship in April 2010. PNOC Exploration Corp owns the remaining 25 per cent interest. As part of the minimum work program, the joint venture completed the acquisition and processing of a 2D seismic survey in April 2010. A 3D seismic acquisition program was completed in January 2011. In addition a 2D seismic acquisition was completed in December 2011 with processing currently ongoing. The remaining obligations on the current work program require us to drill one exploration well prior to January 2014.
In May 2011, we exercised an option to farm-in to the fourth sub phase Service Contract 55, located offshore Philippines to acquire a 60 per cent working interest. In January 2012, the Philippines Department of Energy approved our farm-in and granted us operatorship of the block. The remaining interest is divided between Otto Energy, at 33.18 per cent interest, and Trans-Asia, at 6.82 per cent interest. For the current sub phase a 3D seismic acquisition has been completed in 2011, and we have a one well commitment that is required to be drilled by August 2013.
In August 2009, we exercised our option with partner Mitra Energy (25 per cent) to acquire a 25 per cent non-operating interest in Service Contract 56 located offshore Philippines. ExxonMobil was operator and held the remaining 50 per cent interest in the block. The joint venture completed drilling the first exploration well in December 2009, and the second exploration well in February 2010. Both wells were expensed as dry holes. The drilling of these wells fulfilled our minimum work commitment against the service contract. We exited the block in November 2011 and reassigned our working interest back to Mitra Energy.
Vietnam
In October 2009, we became operator of Vietnam Blocks 28 and 29/03 located approximately 200 kilometres offshore southern Vietnam. We had a 50 per cent interest in each of the blocks, with Mitra Energy holding the remaining 50 per cent. The minimum work program for the first sub-phase included 2D seismic data and two wells. We also acquired and processed 3D data. The first exploration well was drilled in May 2011 while drilling of the second well commenced in June 2011. Both wells were plugged, abandoned and expensed as dry holes in FY2011. We have exited these two Vietnam blocks and transferred operatorship to Mitra Energy in July 2012.
Brunei
In September 2010, we entered into a Deed of Amendment with respect to Block CA1 (formerly Block J) following the settlement of the maritime dispute between Brunei and Malaysia. We own a 22.5 per cent interest in the block, with the residual interests held by Total Deep Offshore Borneo (54 per cent and operator), Hess (Borneo Block CA1) Ltd (13.5 per cent), Petronas Carigali (five per cent) and Canam Brunei Oil Ltd (Murphy Oil) (five per cent). The minimum work obligation includes the drilling of seven exploration wells. Julong Center began drilling in September 2011 and was plugged, abandoned and expensed as a dry hole. Julong East began drilling in January 2012 and encountered hydrocarbons. Jagus East began drilling in April 2012 and encountered hydrocarbons. Both wells have been plugged and abandoned and the well results are being evaluated to determine development potential.
South Africa
In September 2010, we entered into exploration agreements for two blocks offshore South Africa. We own and operate a 60 per cent interest in Block 3A/4A, and a 90 per cent interest in Block 3B/4B. The remaining interest in Block 3A/4A is held by PetroSA (30 per cent) and Sasol Petroleum International (10 per cent). Global Offshore Oil Exploration South Africa holds a 10 per cent interest in Block 3B/4B. The minimum work program includes the drilling of one exploration well within each block.
Trinidad and Tobago
The Greater Angostura project is an integrated oil and gas development located offshore east Trinidad. We are the operator of the field and have a 45 per cent interest in the production sharing contract for the project.
Zamzama
We hold a 38.5 per cent working interest in and operate the Zamzama gas project in Sindh province of Pakistan. Both gas and condensate are sold domestically.
Development projects
Australia
North West Shelf North Rankin gas compression project
In March 2008, the Board approved the North West Shelf gas compression project to recover remaining lower pressure gas from the North Rankin and Perseus gas fields. A new gas compression platform, North Rankin B, capable of processing 2,500 million cubic feet of gas per day will be constructed adjacent to the existing North Rankin A platform, 135 kilometres offshore from Karratha on the northwest coast of Western Australia. The two platforms will be connected by a 100 metre long bridge and operate as a single facility. Our 16.67 per cent share of development costs is approximately US$850 million, of which US$257 million was incurred as of 30 June 2010. First gas is expected in 2012.
North West Shelf Cossack, Wanaea, Lambert, Hermes (CWLH) life extension
In December 2008, approval was announced to undertake a redevelopment project to replace and refurbish CWLH facilities because the existing operation had performed above expectation and had an expected field life much longer than originally planned. The project consists of the replacement of the existing Cossack Pioneer floating production storage and offtake vessel and selected refurbishment of existing subsea infrastructure and the existing riser turret mooring. Our 16.67 per cent share of the cost is approximately US$245 million, of which US$111 million was incurred as of 30 June 2010. First production through the redeveloped facilities is expected in CY2011.
Bass Strait Kipper gas field development
Initial development of the Kipper gas field in the Gippsland Basin located offshore Victoria was approved by the Board in December 2007. The first phase of the project includes two new subsea wells, three new pipelines and platform modifications to supply 10 thousand barrels of condensate per day and 80 million cubic feet of gas per day. Gas and liquids will be processed via the existing Gippsland Basin joint venture facilities. Our share of development costs is approximately US$500 million, of which US$216 million was incurred as of 30 June 2010. The initial production target date is CY2011. The schedule and budget are currently under review following advice from the operator.
We own a 32.5 per cent interest in the Kipper UnitGreater Angostura Joint Venture with Esso Australia and Santos owning the remaining 67.5 per cent. We own a 50 per cent interest in the Gippsland Basin joint venture.
Bass Strait Turrum field development
Further expansion of the Gippsland Basin facilities is underway with the Board approving the full field development of the Turrum oil and gas field in July 2008. The project consists of a new platform, Marlin B, linked by a bridge to the existing Marlin A platform. The Turrum field, which has a capacity of 11 thousand barrels of oil per day and 200 million cubic feet of gas per day, is located 42 kilometres from shore in approximately 60 metres of water. Our share of development costs is approximately US$625 million, of which US$270 million was incurred as of 30 June 2010. The initial production target date is CY2011. The schedule and budget are currently under review following advice from the operator.
Other
Greater Angostura Phase 2
In September 2008, we announced the signing of a gas sales contract with the National Gas Company of Trinidad and Tobago Limited (NGC) for the purchase of gas from the second phase of the Greater Angostura field. In August 2008, we sanctioned an investment of approximately US$400 million (US$180 million our share, of which US$117 million was incurred as of 30 June 2010) to construct and install a new gas export platform alongside the Company’s existing facilities within the Greater Angostura Field. Fabrication of the 280 million cubic feet per day facility started in February 2009 and is expected to be online during CY2011.
The development also includes modifications to the existing Greater Angostura facilities and the installation of a new flowline. NGC will take delivery of the gas at the new gas export platform and will transport it in their proposed 36 inch diameter Northeastern Offshore Pipeline to Trinidad and a 12 inch diameter Tobago pipeline.
The Greater Angostura field includes oil and gas discoveries at Aripo, Kairi and Canteen. We hold a 45 per cent interest in the joint venture. Other partners are Total (30 per cent interest) and Chaoyang Petroleum (BVI) Limited (25 per cent interest), a consortium between CNOOC and Sinopec.
Exploration and appraisal
We focus on capturing and operating large acreage positions in areas that are material to. In July 2011, the Group. We have exploration interests throughout the world, particularly in the Gulf of Mexico, Australia, South East Asia, and Latin America. During the year, our gross expenditure on exploration was US$817 million, of which US$563 million was expensed. Our major exploration interests are as follows:
Australia
We have a 50 per cent interest in the Gippsland Basin joint venture with Esso Australia Ltd. Operations for the South East Remora-1 wildcat well commenced in December 2009 and the well encountered a hydrocarbon-bearing interval. The well has been plugged and abandoned and continues to be evaluated for development potential.
In October 2009, exploration block WA-346-P was renewed for an additional five years following the expiry of the initial six-year term. WA-346-P contains the existing Thebe and Jupiter gas fields and the northern portion of the Scarborough gas field. The work program in the five year term includes one exploration well as well as continued evaluation of the development potential of the existing discoveries. We operate WA-346-P and hold a 100 per cent interest.
Exploration block WA-351-P, located on the Exmouth Plateau south of Scarborough, was also renewed in June 2010 for an additional five years following the initial six-year term. The work program includes one exploration well and geological and geophysical studies within the five-year term. We operate WA-351-P and hold a 55 per cent interest with Tap Oil (25 per cent) and Roc Oil (20 per cent) holding the remainder.
In June 2009, we farmed into block WA-335-P to the south of WA-351-P, acquiring 30 per cent equity from the joint venture partners Apache (45.5 per cent) and Kufpec (24.5 per cent). A 3D seismic survey covering all of block WA-335-P has commenced.
In August 2009, Woodside Browse Pty Ltd farmed into the AC/RL8 retention lease over the Argus gas field, acquiring a 43.33 per cent working interest from us. Woodside subsequently acquired Petronas’ equity in the block, taking their interest to 60 per cent with BHP Billiton retaining a 40 per cent interest.
United States
Knotty Head - Green Canyon 512
We currently own a 25 per cent interest in the Knotty Head prospect, located in Green Canyon Block 512. Partners in the field are Nexen (25 per cent), Unocal (25 per cent) and Statoil (25 per cent). Knotty Head appraisal well-2 was drilled in October 2009 and concluded in March 2010. The appraisalCanteen North 1 well was drilled to a total of 33,227 feet measured depth or 32,446 feet true vertical depth and evaluatedwithin the western portion of the block. Development options for the field are currently being evaluated.
Deep Blue - - Green Canyon 723
We currently own a 31.875 per cent interest in the Deep Blue prospect located in the Green Canyonproducing Block 2c area. Partners in theThe well are Noble (33.75 per cent), Statoil (15.625 per cent), Samson (9.375 per cent) and Murphy (9.375 per cent). Deep Blue exploration well-1 was drilled in November 2009 and concluded in May 2010. The sidetrack drilling started in May and was suspended in June 2010 due to the Gulf of Mexico drilling moratorium issued by the US Federal Government. The Green Canyon 723 #1 original hole drilled to a total depth of 32,684 feet measured depth and encountered hydrocarbons. The forward plan is to complete the sidetrack operations once the moratorium is lifted. There is insufficient information to confirm the extent of hydrocarbons until drilling operations have been completed.
Gulf of Mexico - Other
We drilled the Double Mountain (70 per cent interest) and Firefox (50 per cent interest) exploration wells which were completed in April 2010. Both wells were plugged and abandoned and expensed as dry holes.
Other
Canada
In January 2010, we were awarded two offshore non-operated licenses in the Laurentian Basin, Newfoundland, Canada - E.L. 1118 (45 per cent interest) and E.L. 1119 (36 per cent interest). ConocoPhillips Canada Resources Corp. is the operator and holds the balance of the interests.
In April 2010, the East Wolverine well was plugged and abandoned and expensed as a dry hole. We had 45 per cent interest with ConocoPhillips holding the remaining 55 per cent. In June 2010, we and ConocoPhillips relinquished our interest in Laurentian Basin Newfoundland Licenses E.L. 1081R, 1082R, 1086R and 1087R and also relinquished interest in Laurentian Basin St. Pierre-et-Miquelon (SPM) exploration permit and pending SPM Langlade permit application.
Colombia
In April 2006, we entered into two Exploration and Production Contracts for the Fuerte Norte and Fuerte Sur blocks located offshore Colombia. We held a 75 per cent operating interest in each block with Ecopetrol holding the remaining 25 per cent. The joint venture has completed acquisition and processing of 3D seismic over the area as part of the Phase 2 work program commitment. In October 2009, we elected not to enter into Phase 3 of Fuerte Norte and Fuerte Sur projects and transferred all of our interest to Ecopetrol in December 2009.
In September 2008, we entered into a technical evaluation assignment for the evaluation of hydrocarbons in Block 5 in the Llanos basin onshore Colombia. We are the operator of the project and hold a 71.4 per cent working interest in the joint venture, with SK Energy Co holding the remaining 28.6 per cent interest. The minimum work program includes the acquisition of 1,000 kilometres of 2D seismic plus the drilling of five stratigraphic wells. The airborne survey was completed in January 2010, and plans to complete the 2D seismic drilling program are currently underway.
Falkland Islands
In December 2007, we farmed into Northern and Southern area licences offshore the Falkland Islands. We acquired a 51 per cent interest from our joint venture partner Falkland Oil and Gas Limited and assumed operatorship in January 2008. The minimum exploration work program includes drilling two wells in the first phase by the end of 2010. Site surveys on both blocks were completed in 2009. The first exploration well began drilling in June 2010 and was plugged and abandoned and expensed as a dry hole in July 2010.
India
In December 2008, we were awarded seven offshore blocks in India. We are the operator of all seven blocks, each with its own production sharing contract.abandoned. The minimum exploration program includes the acquisition and processing of 2D seismic data across the seven blocks. We currently own a 26 per cent interest in all seven blocks, with our partner GVK holding the remaining 74 per cent. In June 2010, we were awarded three additional offshore blocks. The minimum work program associated with the three blocks includes the acquisition and processing of 2D and 3D seismic data. We hold a 100 per cent interest in each of these three blocks.
Malaysia
In March 2007, we were awarded offshore Blocks N and Q in Malaysia with a 60 per cent interest and operatorship, with Petronas Carigali holding the residual 40 per cent. The minimum exploration program includes the acquisition and processing of seismic data across the two blocks and the drilling of four exploration wells within the first seven years. The initial seismic acquisition program commenced in June 2008 and was completed in September 2008. The first exploration well was drilled in February 2010 and was plugged, abandoned and expensed as a dry hole.
Philippines
In November 2009, we acquired a 75 per cent interest in Service Contract 59, located offshore Philippines and assumed operatorship in April 2010. PNOC Exploration Corp owns the remaining 25 per cent interest. As part of the minimum work program, the joint venture completed the acquisition and processing of a 2D seismic survey in April 2010. Plans to complete a 3D seismic survey are currently underway.
In August 2009, we exercised our option with partner Mitra Energy (25 per cent) to acquire a 25 per cent non-operating interest in Service Contract 56 located offshore Philippines. The joint venture completed drilling of the first exploration well in December 2009, and the second consecutive well was completed in February 2010. Both wells were expensed as dry holes. Thefault block is operated by ExxonMobil (50 per cent).being evaluated to determine development potential.
Vietnam
In October 2009, we became operator of Vietnam Blocks 28 and 29/03 that are located approximately 200 kilometres offshore southern Vietnam. We have a 50 per cent interest in each of the blocks, with Mitra Energy holding the remaining 50 per cent. The minimum work program for the first sub-phase includes 2D seismic data and two wells. In addition to the 2D seismic data requirement, we acquired and processed 3D data.
Present Activities
Drilling
The number of wells in the process of being drilled (including temporarily suspended wells and excluding wells drilled and completed in FY2012) as of 30 June 20102012 was as follows:
Exploratory Wells | Development Wells | Total | Exploratory wells | Development Wells | Total | |||||||||||||||||||||||||||||||
Gross | Net (a) | Gross | Net (a) | Gross | Net (a) | Gross | Net (1) | Gross | Net (1) | Gross | Net (1) | |||||||||||||||||||||||||
Australia | – | – | 3 | 2 | 3 | 2 | – | – | – | – | – | – | ||||||||||||||||||||||||
United States | 1 | – | 6 | 2 | 7 | 2 | 4 | 2 | 305 | 136 | 309 | 138 | ||||||||||||||||||||||||
Other | 1 | 1 | – | – | 1 | 1 | – | – | 1 | 1 | 1 | 1 | ||||||||||||||||||||||||
Total(b) | 2 | 1 | 9 | 4 | 11 | 5 | ||||||||||||||||||||||||||||||
Total | 4 | 2 | 306 | 137 | 310 | 139 |
Represents our share of the gross well count. |
Other significant activities
Australia
AustraliaBrowse
Browse
The Browse LNG Development comprises the development of the Torosa, Brecknock and Calliance gas fields, which were discovered in 1971, 1979, and 2000, respectively. The fields are located approximately 270 kilometres from the Kimberley coast and 440 kilometres north-northwest of Broome, Western Australia in water depths ranging from 30up to 800 metres. Retention Leases were renewed during FY2010. Evaluation of an LNG plant located at James Price Point in the Kimberley areain-place resources continues together with definition of Western Australia is underway in additionthe on and offshore facilities required to the upstream development. extract hydrocarbons and produce and export LNG.
Woodside is the operator and we currently own 8.33 per cent inof the East Browse resources and 20 per cent inof West Browse; however, the partnership is currently working to align the equity interests for the overall development.Browse.
MacedonLongford
The Macedon project is inLongford Gas Conditioning Plant (LGCP) Project will enable the final stagesproduction of evaluationTurrum reserves plus the production of Kipper and is a lean dry gas field that is ideally placed to meet growing Western Australian domestic gas demand.other undeveloped high carbon dioxide content hydrocarbons. The project scope includes a carbon dioxide extraction facility, brownfield tie-ins, an electrical upgrade, and multiple supporting utilities. Esso is scheduled to meetthe operator of LGCP owning a market window governed by the end of existing gas supply contracts and the start of supply from green field LNG projects.
The Macedon field was discovered in 1992. The field lies in Production Licence WA-42L. We are operator with a 71.4350 per cent shareinterest and Apache Northwest Pty Ltd holds a 28.57BHP Billiton owns the remaining 50 per cent share.cent.
Scarborough
The developmentDevelopment planning for the large Scarborough gasfieldgas field offshore Western Australia is in progress. DevelopmentWe continue to evaluate development options are being evaluated for ana LNG plant and offshore production facilities. Esso is the operator of the WA-1-R lease and we hold a 50 per cent working interest. We alsoare the operator and have a 100 per cent working interest in the WA-346-P block.
United StatesGreater Western Flank-A
The Greater Western Flank-A (GWF-A) gas project was approved by the Board in November 2011 to recover gas from the near field Goodwyn H and Tidepole fields. The project consists of a five well subsea tie-back of the
Goodwyn H and Tidepole fields to the Goodwyn A platform. The Goodwyn A platform is located in 130 metres of water, approximately 130 kilometres offshore from Karratha on the northwest coast of Australia. The development is estimated to have the potential to provide gross sales of 30 MMboe (BHP Billiton share), including condensate and liquefied gas. Woodside is the operator and we own a 16.67 per cent share.
NWS Other – (Persephone/Greater Western Flank ‘2’)
Planning is underway for the development of the Persephone field and Greater Western Flank ‘2’. The Persephone field is located near existing NWS infrastructure, approximately eight kilometres northeast of the North Rankin A platform. Greater Western Flank ‘2’ represents the second phase of development of the core Greater Western Flank fields, behind the GWF-A development, which are located to the southwest of the existing Goodwyn A platform. Woodside is the operator and we own a 16.67 per cent share of both Persephone and Greater Western Flank ‘2’.
United States
Shenzi Water Injection
The Shenzi Water Injection program includes drilling and completion of five water injection wells and provides facilities to inject up to 125 thousand barrelsMbbl/d of water per day at 7,000 psi.pounds per square inch (psi). The Shenzi Water Injection program was approved as part of the original sanctioned Shenzi project which began producingproduction in 2009 and is intended to supplement aquifer pressure for additional recovery. To date, Water Injector (WI) #1 has been drilled and completed and WI #2 has been drilled. Planning for the completion of WI #2 and drilling of WI #3 is underway.
Atlantis South Water Injection
The Atlantis South Water Injection project which is in the execution phase and involves drilling four subsea water injectors, tying them into the existing infrastructure and commissioning the 75 thousand barrelsMbbl/d of water per day injection facilities. This water injection project mitigates natural production decline due to low aquifer pressure which could result in a swift production decline.pressure. BP is the operator and we hold a 44 per cent working interest.
Atlantis North Phase 2B
The Atlantis North Flank began production in July 2009; and the North Phase 2B is a brownfield capital investment program being developed to improve production rates. Phase 2B includes a three well program and associated subsea infrastructure. As with the original Atlantis North project, BP is the operator, and we hold a 44 per cent working interest.
Mad Dog Phase 2
In April 2012, we announced approval for US$708 million (BHP Billiton share) in pre-commitment funding for the Mad Dog Phase 2 project. The Mad Dog Phase 2 project is in response to the successful Mad Dog South appraisal well, which confirmed significant resourcehydrocarbons in the southern portion of the Mad Dog field. We are workingMad Dog Phase 2 will be a spar development with our partners inall subsea production and injection wells and includes water injection capability to provide support to the project to select the optimum concept for development.
Other
Zamzama Front End Compression
Zamzama Front End Compression is a brownfield project which allows for the additional drawdowneast, west and south of the reservoir, adding reserves and extending the plateau. Development is currently underway.
Delivery Commitmentscommitments
We have delivery commitments of natural gas and LNG of approximately 2,5943,286 billion cubic feet through 2031 (67(72 per cent Australia and 3328 per cent Other) and crude, condensate and NGL commitments of 33.3532.7 million barrels through 2011 (72 per cent Australia, 272023 (94 per cent United States, five per cent Australia, and 1one per cent Other). We have sufficient proved reserves and production capacity to fulfil these delivery commitments. Further information can be found in Section 2.14.1.section 2.13.1.
2.2.3 Aluminium Customer Sector Group
Our Aluminium businessCSG is a portfolio of assets at three stages of the aluminium value chain: we minemining bauxite, we refinerefining bauxite into alumina, and we smeltsmelting alumina into aluminium metal. We are the world’s seventh-largesteighth-largest producer of aluminium, with total production in FY2010FY2012 of 1.2 million tonnes (Mt) of aluminium. We also produced 13.9 million tonnes12.8 Mt of bauxite and 3.8 million tonnes4.2 Mt of alumina.
During FY2010, 52FY2012, we consumed 34 per cent of our alumina production was used in our aluminium smelters and we sold the balance to other smelters. Our alumina sales are a mixture of long-term contract sales at London Metal Exchange (LME)-linkedLME-linked prices and spot sales at negotiated prices. Prices for our aluminium sales are generally linked to prevailing LME prices.
As with our other businesses, our strategy with bauxite and aluminaBoddington/Worsley
Boddington/Worsley is to own large, low-cost assets that provide good returns through the investment cycle and provide us with options for brownfield development. With aluminium smelters, where the availability and cost of power are critical, our investment decisions have been driven in part by the availability of stranded power generation capacity.
We have interests in onean integrated bauxite mining/alumina refining asset:
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operation. The Boddington bauxite mine in Western Australia supplies bauxite ore via a 51 kilometre long conveyor to the Worsley alumina refinery via a 62-kilometre long conveying system. We own 86 per cent of the mine and the refinery. It is our sole integrated bauxite mining/alumina refining asset. Worsley, is one of the largest and lowest-cost refineries in the world, and is currently undergoingin the ramp-up phase of a major expansion (see Development projects below). Our share of Worsley’s FY2010FY2012 production was 3.054 million tonnes2.9 Mt of alumina. Worsley’s export customers include our own Hillside, Bayside and Mozal smelters in southern Africa. Boddington has a reserve life of 23.9 years at current production rates. We own 86 per cent of the mine and the refinery.18 years.
Kaaimangrasie/ Klaverblad/Caramacca/Coermotibo/ParanamMineração Rio do Norte
On 31 July 2009, we executed transaction agreements to pass all of our 45 per cent interest in the Suriname bauxite and alumina joint venture that comprised bauxite mines in the Kaaimangrasie, Klaverblad, Caramacca and Coermotibo areas of Suriname and the nearby Paranam alumina refinery to Suralco effective on that date. Our share of Paranam’s FY2010 production to the date of sale was 78,000 tonnes of alumina.
We also own 14.8 per cent of Mineração Rio do Norte (MRN), which owns and operates a large bauxite mine in Brazil.
We have interests in the Alumar
Alumar is an integrated alumina refinery/aluminium smelter and three stand-alone aluminium smelters:
Alumar
smelter. We own 36 per cent of the Alumar refinery and 40 per cent of the smelter. Alcoa operates both facilities. The operations, and their integrated port facility, are located at São Luís in the Maranhão province of Brazil. Alumar sources bauxite from MRN. During FY2010,FY2012, approximately 4627 per cent of Alumar’s alumina production was used to feed the smelter, while the remainder was exported. Our share of Alumar’s FY2010FY2012 saleable production was 709,000 tonnes1,235 kilotonnes (kt) of alumina and 174,000 tonnes170 kt of aluminium. The Alumar refinery completed a significant expansion in October 2009.
Hillside and Bayside
Our Hillside and Bayside smelters are located at Richards Bay, South Africa. Hillside’s capacity of approximately 715,000 tonnes715 kilotonnes per annum (ktpa) makes it the largest aluminium smelter in the southern hemisphere and it is onehemisphere. Following the mothballing of the most efficient.potlines B and C in support of a national energy conservation scheme, Bayside has areduced smelting capacity ofto approximately 96,000 tonnes per annum, but it also uses its own aluminium and liquid aluminium from95 ktpa since 2009. Hillside to produce various slab products. Both operations importimports alumina predominantly from our Worsley refineryrefinery. Both Hillside and Bayside source power from Eskom, the South African state utility, under long-term contracts with prices linked to the LME price of aluminium except(except for Hillside Potline 3, the price of which is linked to the South African and US producer price indices.
In January 2008, Eskom determined that it had insufficient power to meet the national demand in South Africa, and mandated an emergency 10 per cent reduction in power consumption by many large industrial users, including BHP Billiton. Although our contracts with Eskom specify that power supply to our aluminium smelters can only be interrupted approximately one per centindices). Potline capacity was impacted as a result of the time per calendar year, we have respected the emergency situation faced by the country and reduced our demand by the requested 10 per cent. To achieve thisa major unplanned outage in the most economically efficient way, we have mothballed the B and C potlines at Bayside, reducing production there by approximately 90,400 tonnes per annum. Across both South African smelters, associated production losses were approximately 86,000 tonnes per annum.March 2012 quarter.
Mozal
We own 47.1 per cent of and operate the Mozal aluminium smelter in Mozambique, which has a total capacity of approximately 563,000 tonnes per annum.563 ktpa. Mozal sources power generated by Hydro Cahora Basa via Motraco, a transmission joint venture between Eskom and the national electricity utilities of Mozambique and Swaziland. Our share of Mozal’s FY2010FY2012 production was 259,000 tonnes.264 kt.
Information on the Aluminium CSG’s bauxite mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production (see section 2.3.2) and reserve tables (see section 2.14.2)2.13.2).
| Means of | Ownership | Operator | Title, Leases or | History |
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Power
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Bauxite | ||||||||||||||||
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Boddington, 123 km southeast of | Public road Ore transported to Worsley alumina refinery by a 62 km conveyor | BHP Billiton 86% Sojitz Alumina 4% Japan Alumina Associates 10% Ownership structure of operator as per Worsley JV | BHP Billiton Worsley, Alumina Pty Ltd | Mining leases from Western Australia Government expire over the period 2014–2032, all with 21-year renewal available 2 sub-leases from Alcoa of Australia |
Significantly extended 2000 |
Surficial gibbsite-rich lateritic weathering of Darling Range rocks |
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Mineração Rio do Norte |
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Porto Trombetas, Pará, Brazil | Sealed road and rail connects mine area with Porto Trombetas village, accessed by air or river | BHP Billiton 14.8% Alcoa and affiliates 18.2% Vale 40% Rio Tinto Alcan 12% Votorantim 10% Hydro 5% | MRN | Mining rights granted by Brazilian Government until reserves exhausted | Production commenced 1979 Expanded 2003 | Open-cut
Lateritic
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Crushing facilities, long distance conveyors, Nominal capacity: 18 mtpa washed bauxite Village and airport Drying and ship loading facilities
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Information on the Aluminium CSG’s aluminium smelters and alumina refineries
Refinery or Processing Plant | Location | Ownership |
| Title, Leases or Options | Product | Nominal | Power Source | |||||||
alumina | ||||||||||||||
Hillside | ||||||||||||||
Aluminium smelter | Richards Bay, 200 km north of Durban, KwaZulu-Natal province, South Africa | 100% | BHP Billiton | Freehold title to property, plant, equipment Leases over harbour facilities |
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Bayside | ||||||||||||||
Aluminium smelter | Richards Bay, 200 km north of Durban, South Africa | 100% | BHP Billiton | Freehold title to property, plant, equipment | Primary aluminium, slab products | 95 ktpa primary aluminium on remaining Potline A | Eskom, under long-term contract Contract price linked to LME aluminium price | |||||||
Mozal | ||||||||||||||
Aluminium smelter | 17 km from Maputo, Mozambique | BHP Billiton 47.1% Mitsubishi 25% Industrial Development Corporation of South Africa Ltd 24% Mozambique Government 3.9% | BHP Billiton | 50-year government concession to use the land Renewable for 50 years | Standard aluminium ingots | 563 ktpa | Motraco | |||||||
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| 55 km northeast of Bunbury, Western Australia | BHP Billiton 86% Sojitz Alumina 4% Japan Alumina Associates 10% Ownership structure of operator as per Worsley JV |
BHP Billiton Worsley Alumina Pty Ltd |
21-year renewal |
| JV owned on-site coal power station, | ||||||||
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plant | ||||||||||||||
Alumar | ||||||||||||||
Alumina refinery and aluminium smelter | São |
Alcoa 60%
Alcoa
| All assets held freehold | Alumina and aluminium |
| Electronorte (Brazilian public power generation |
Development projects
Worsley Efficiency and Growth Projectproject
In May 2008, we announced the Board’s approval forof an expansion project to liftincrease the capacity of the Worsley refinery from 3.5 million tonnes per annum (mtpa) of alumina to 4.6 million tonnes per annummtpa (100 per cent capacity) of alumina through expanded mining operations at Boddington, additional refinery capacity and upgraded port facilities. A supplementary approval of the development was obtained in June 2011. The expansion project, iswith a budgeted to costcapital expenditure of US$1.93.0 billion, (our share), withachieved first production anticipated in first halfMarch 2012 and full production is on track to be achieved within the original ramp up schedule of CY201112–16 months from March 2012. The operations are well placed to achieve a smooth ramp-up due to the extensive commissioning and with mechanical completionoperating planning that has been put in place. Worsley is already one of the most efficient and productive alumina refineries in the second halfworld and its unit cash costs are expected to benefit from the increased scale of CY2011. To date we have spent US$1.2 billion.production.
Guinea Alumina
We have a one-third interest in a joint venture that is undergoinghas undertaken a feasibility study into the construction of a 10 million tonnes per annummtpa bauxite mine, an alumina refinery with processing capacity exceeding 3.3 million tonnes per annummtpa and associated infrastructure approximately 110 kilometres from the port of Kamsar in Guinea. We are seeking to exit the project.
2.2.4 Base Metals Customer Sector Group
Our Base Metals CSG is one of the world’s toppremier producers of copper, silver, lead and uranium, and a leading producer of zinc. Our portfolio of large, low-cost mining operations includes the Escondida mine in Chile, which is the world’s largest single producer of copper, and Olympic Dam in South Australia, which is already a major producer of copper and uranium and haswith the potential to be significantly expanded.
In recent years, we have commissioned the Spence copper mine and the Escondida Sulphide Leach projects. Our total copper production in FY2010FY2012 was 1.0 million tonnes.1.1 Mt. In addition to conventional mine development, we continue to pursue advanced treatment technologies, such as the leaching of low-grade chalcopyrite ores, which we believe hashave the potential to recover copper from ores which were previously uneconomic to treat.
We market five primary products:
copper concentrates,
copper cathodes,
uranium oxide,
lead concentrates
and zinc concentrates.
We sell most of our copper, lead and zinc concentrates to smelters under long-term volume contracts withat prices based on the LME price for the contained metal, typically set three or four months after shipment, less treatment charges and refining charges (collectively referred to as ‘TCRCs’) that we negotiateare negotiated with the smelters mostly on an annual or bi-annual basis. Some of the ores we mine contain quantities of silver and gold, which remain in the base metal concentrates we sell. We receive payment credits for the silver and gold recovered by our customers in the smelting and refining process.
We sell most of our copper cathode production to wire rod andmills, brass mills and casting plants around the world under annual contracts with prices at premiums to LME prices. We sell uranium oxide to electricity generating utilities, principally in westernWestern Europe, northNorth America and northNorth Asia. Uranium is typically sold under long-terma mix of longer-term and shorter-term contracts. A significant portion of our uranium production is sold into fixed price contracts, although increasingly sales are based on flexible pricing terms.
We have seven production assets:six assets, with Pampa Norte having two operations.
Escondida
Our 57.5 per cent owned and operated Escondida mine is the largest and one of the lowest-cost copper producersproducer in the world. In FY2010,FY2012, our share of Escondida production was 448,111, tonnes333.8 kt of payable copper in concentrate and 174,199 tonnes172.0 kt of copper cathode. Current
Escondida has a reserve life of 54 years. The increase in reserves from 35 years in FY2011 is predominantly due to OGP1 approval that will support mining for a further 30 years atdeliver double the current production rates. Availabilityflotation capacity that allows improved recovery of lower grade ores with commensurate expansion of the reserves footprint.
The availability of key inputs like power and water supply at competitive prices is an important focus at Escondida. To ensure securityEscondida’s power demand of supplyapproximately 440 MW is currently covered by four contracts: one of which provides 340 MW until 2029; and competitive power costs in the long term, we supported the constructionbalance of an LNG facility to supply gas to the Northern grid system, which has been operating since June 2010 and have signed-off-take agreements underwriting the construction of a 460 megawatt coal-fired power plant, which is scheduled for completion in CY2011. provide 252 MW until 2016.
To address limitations on the availability of water, we desalinate and carefully manage our use and re-use of available water, and explore forwater. We are exploring alternative sources, including further desalination of seawater.
During FY2009, Escondida experienced an electrical motor failure at the SAG Mill in the Laguna Seca concentrator plant. This impacted the throughput at the plant given the increased maintenance requirements. A permanent repair was successfully completed in the first quarter of FY2010.
Olympic Dam
While itOlympic Dam is already a significant producer of copper cathode and uranium oxide and a refiner of smaller amounts of gold and silver bullion, webullion. We are continuing to exploreexploring a series of staged development options that would make our wholly owned Olympic Dam operation one of the world’s largest producers of copper, the largest producer of uranium and a significant producer of gold (see Development projects below).
During the second quarter of FY2010, the haulage systemProduction in the Clark Shaft atFY2012 was lower than that achieved in FY2011. Olympic Dam was damaged. Ore hoisting operated at approximately 25 per cent of capacity until the fourth quarter of FY2010, when hoisting from the Clark Shaft resumed achieving a return to full production following the completion of repair works. Production in FY2010 was impacted due to this incident with Olympic Dam producing 103,253 tonnesproduced 192.6 kt (FY2011: 194.1 kt) of copper cathode, 2,279 tonnes3.9 kt (FY2011: 4.0 kt) of uranium oxide, 65,494 ounces117.8 kilo-ounces (FY2011: 111.4 kilo-ounces) of refined gold and 500,346 ounces907 kilo-ounces (FY2011: 982 kilo-ounces) of refined silver.
Olympic Dam has a reserve life of 57 years.
Antamina
We own 33.75 per cent of Antamina, a large, low-cost, long-life copper/zinc mine in Peru. Opened in 2001, its reserves will support mining at current rates forAntamina has a further 20reserve life of 16 years. Our share of Antamina’s FY2010FY2012 production was 98,600 tonnes127.0 kt of copper in concentrate, and 135,573 tonnes57.5 kt of zinc in concentrate. In addition to its primary copper and zinc concentrate products, Antamina also produces smaller amounts of molybdenum and lead/bismuth concentrate.
Pampa Norte Spence Operation
We completed ourOur wholly owned greenfield Spence copper mine development in Chile and began ramping up cathode production in December 2006.produces copper cathode. During FY2010,FY2012, we produced 159,604 tonnes180.3 kt of copper cathode which was impacted by industrial action during the second quarter. Spence´s current reserves will support mining at current rates forcathode.
Spence has a further 16reserve life of 11 years.
Pampa Norte Cerro Colorado Operation
Our wholly owned Cerro Colorado mine in Chile remains a significant producer of copper cathode, although production levels have declined in recent years as grades have declined. Production in FY2010FY2012 was 85,200 tonnes83.4 kt of copper cathode. Our current mine plan sees production continuing until FY2021, although we are currently evaluating the extent
Cerro Colorado has a reserve life of hypogene mineralisation that may support further extension options.10 years.
Cannington
Our wholly owned Cannington mine in northwest Queensland, has grown to becomeAustralia, is one of the world’s largest and, we believe, one of the lowest-cost producers of silver and lead.silver. In FY2010,FY2012, Cannington produced concentrates containing 245,445 tonnes239.1 kt of lead, 62,706 tonnes54.7 kt of zinc and approximately 3734.2 million ounces of silver. The current mine plan sees production continuing until 2019.
Cannington has a reserve life of eight years.
North America – Pinto Valley
As a result of the globalfavourable economic slowdownconditions in FY2009, we madeFY2012, in particular copper prices, the decision was made to stopresume sulphide mining and milling operations at ourthe Pinto Valley Mine located in Arizona, US, placingUnited States. The mine, which will produce copper and molybdenum concentrate, is expected to have annual production capacity of approximately 60 kt of copper in concentrate. The project is expected to resume mining at the operations in care and maintenance.end of the CY2012 (FY2013).
WeCopper cathode will also continue to produce copper cathodebe produced at the Pinto Valley site and the neighbouring Miami Unit from our residual solvent extraction electrowinning (SXEW) operations. Current reserves would support mining operations for approximately
Pinto Valley has a reserve life of four years.
Information on the Base Metals CSG’s mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production (see section 2.3.2) and reserve tables (see section 2.14.2)2.13.2).
| Means of Access | Ownership | Operator |
| History | Mine Type & Style | Power Source | Facilities, | ||||||||
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Escondida | ||||||||||||||||
Atacama Desert, |
Copper cathode
Copper concentrate |
| BHP Billiton | Mining concession from | Original construction Subsequent expansion projects
First production 2006 | 2 open-cut pits: Escondida and Escondida Norte Escondida and Escondida Norte mineral deposits are adjacent but distinct supergene enriched porphyry copper deposits | Escondida
Electricity | 2 concentrator plants extract copper concentrate from sulphide ore by flotation extraction process 2 solvent extraction plants produce copper cathode Nominal capacity: 3.2 mtpa copper concentrate 330 ktpa copper cathode | ||||||||
Spence | ||||||||||||||||
Atacama Desert, 150 km northeast of Antofagasta, Chile |
Copper cathode |
| BHP Billiton | Mining concession from |
First |
| Group-owned transmission lines connect to Chile’s northern power grid Electricity purchased under contract | Processing and
Nominal
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Mine & Location | Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & Style | Power Source | Facilities, Use & Condition | ||||||||||
Cerro Colorado | ||||||||||||||||||
Atacama Desert, | Public road
| 100% | BHP Billiton | Mining concession from Chilean Government valid indefinitely (subject to payment of annual fees) | Commercial production commenced 1994 Expansions 1996 and 1998 | Open-cut Supergene enriched and oxidised porphyry copper deposit that consists of a sulphide enrichment zone overlayed by oxide ore (chrysocolla
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plant, electrowinning
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Pinto Valley | ||||||||||||||||||
125 km east of Phoenix, Arizona, US | Public road As a result of the resumption of the sulphide operations, copper and molybdenum concentrate to be trucked | 100% | BHP Billiton | Freehold title to the | Acquired 1996 as part of Magma Copper acquisition Sulphide mining and milling operations discontinued 2009 to restart FY2013 (1) Residual SXEW production continues | Pinto Valley: open-pit Miami Unit: in-situ leach Porphyry copper deposit of low-grade primary mineralisation | Salt River Project | 2 SXEW operations at Pinto Valley and Miami | ||||||||||
(1) Mining operations previously discontinued in 1998 and restarted in 2007 and again discontinued in 2009. |
| Means of Access | Ownership | Operator |
| History | Mine Type & Style | Power Source | Facilities, | ||||||||||
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Olympic Dam | ||||||||||||||||||
560 km northwest of Adelaide, South Australia | Public road
| 100% | BHP Billiton | Mining lease granted by South Australian Government expires 2036 Right of extension for 50 years |
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Throughput raised to 9
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| Supplied via a 275 kV powerline from Port Augusta, transmitted by | Automated train and trucking network. Crushing, storage and ore hoisting facilities. 2 grinding circuits to extract copper concentrate from sulphide ore. Flash furnace produces copper anodes, which are then refined to produce copper cathodes (2) Nominal capacity: 200 ktpa copper cathode | |||||||||
(2) Electrowon copper cathode and uranium oxide concentrate produced by leaching and solvent extracting flotation tailings. |
| Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & Style | Power Source | Facilities, Use & | ||||||||
Copper Zinc | ||||||||||||||||
Antamina | ||||||||||||||||
Andes mountain range, 270 km north of Lima, north-central Peru | Public road Copper and zinc concentrates transported by pipeline to port of Huarmey Molybdenum and lead/bismuth concentrates transported by truck | BHP Billiton 33.75% of Compañía Minera Antamina S.A. Xstrata 33.75% Teck Cominco 22.5% Mitsubishi 10% | Compañía Minera Antamina S.A. | Mining rights from Peruvian Government held indefinitely, subject to payment of annual fees and supply of information on investment and production | Commercial production commenced 2001 Capital cost US$2.3 billion (100%) | Open-cut Zoned porphyry and skarn deposit with central Cu-only ores and an outer band of Cu-Zn ore zone | Long-term contracts with individual power producers | Primary crusher, concentrator (nominal capacity 130,000 tpd), copper and zinc flotation circuits, bismuth/moly cleaning circuit 300 km concentrate pipeline (design throughput 2.3 dry mtpa) Port facilities at Huarmey | ||||||||
Silver, Lead and Zinc | ||||||||||||||||
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300 km southeast of Mt Isa, Queensland, Australia | Public road and Group-owned airstrip
| 100% | BHP Billiton | Mining leases granted by Queensland Government expire 2029 | Concentrate production commenced 1997, subsequent projects improved mill throughput and metal recovery | Underground Broken Hill-type silver-lead-zinc sulphide deposit
| On-site power station operated under contract |
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Nominal
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Development projects
Olympic Dam
Pre-feasibility study work on theThe proposed expansion of Olympic Dam has addressed production capacities, mining methods, processing (including smelting) options and supporting infrastructure requirements. The proposed expansion would be a progressive development requiring construction activity to increase production to up to 750,000 tonnes750 kt per annum (ktpa) of copper, 19,000 tonnes per annum19 ktpa of uranium oxide and 800,000 ounces800 kilo-ounces of gold. The Group released a draftOn 10 October 2011, the South Australian Government and Australian Commonwealth Government approved the Environmental Impact Statement (EIS)for the Olympic Dam Project.
We announced on 22 August 2012 that we will not approve the open-pit expansion of our Olympic Dam mine in May 2009 and received more than 4,000 public submissions onSouth Australia in time to meet the project. The issues raised in the public submissions are addressed inRoxby Downs (Indenture Ratification) (Amendment of Indenture) Amendment Act 2011 deadline of 15 December 2012. We will investigate a Supplementary EIS which the Group expects to complete by the end of CY2010. Government decisions on the project are expected in the second half of CY2011. After that, the expansion project will depend on successfully completing all required feasibility studies and on Board approvalless capital intensive design of the final investment case.Olympic Dam open-pit expansion, involving new technologies to substantially improve the economics of the project.
Yeelirrie
Pre-feasibility study work relatingOn 27 August 2012, we announced we have signed an agreement to the proposedsell our wholly owned Yeelirrie uranium oxide minedeposit in Western Australia to Cameco Corporation for US$430 million. The sale is in progresssubject to relevant approvals from the Australian Foreign Investment Review Board and will be reviewed by the Group to determine whether feasibility study work should commence in early 2011. The work currently underway includes resource definition drilling, test work, process plant concept design, environment impact assessment, capital and operating costing and economic evaluation.Government of Western Australia.
Escondida
Exploration of the Escondida lease and early drilling results suggest that there ishave resulted in an announcement of extensive additional mineralisation in close proximity to existing infrastructure and processing facilities, including a prospect known asthe Pampa Escondida.Escondida and Pinta Verde prospects. In FY2010FY2012, Escondida has expensed US$125104.7 million (US$7260.2 million ourBHP Billiton share) in exploration.
The Escondida is planningOre Access project provides access to invest a further estimated US$541 million (US$311 million our share) in drilling, assayinghigher-grade ore and metallurgical test work in exploration overcommenced the next five years.
Theexecution phase during FY2011 with first production achieved during the June 2012 quarter. In addition, the Laguna Seca Debottlenecking project, which will provide additional processing capacity, has moved into feasibility. Itcommenced the execution phase in FY2011 and is expected thatto complete this project will move into executionphase during FY2011. Developmentthe second half of CY2012. Organic Growth Project 1 continues(OGP1), which is the replacement of the Los Colorados concentrator allowing access to higher gradehigher-grade ore and additional processing capacity.capacity, was approved and moved into the execution phase in February 2012. OGP1 is expected to cost US$3.8 billion (US$2.2 billion BHP Billiton share). In February 2012, BHP Billiton also approved the Oxide Leach Area Project (OLAP), which creates a new dynamic leaching pad and mineral handling system that will include several overland conveyers. The new pad is expected to maintain oxide leaching capacity at current levels following the exhaustion of the existing heap leach in CY2014. OLAP is expected to cost US$721 million (US$414 million BHP Billiton share) with commissioning anticipated in the middle of CY2014.
Antamina
In FY2010FY2012, Antamina announced the approvalcontinued execution of the Expansionexpansion project. With a total investment of US$1.3 billion (US$434.7435 million ourBHP Billiton share), the project will expandexpands milling capacity by 38 per cent to 130,000 tpd.130 kt per day (ktpd). The Expansionexpansion project includes a new SAG mill, a new 55 kilometre55-kilometre power transmission line, an expanded truck shop facility and upgrades to the crushing and tailing systems, flotation circuit and port capacity. Commissioning of the SAG mill and first production was achieved in March 2012. The project is scheduled to start at the end of CY2011. Our share of the capital expenditures in the Antamina expansion project totalled US$47 million in FY2010.
Resolution Copper
We hold a 45 per cent interest in the Resolution Copper project in Arizona, which isUnited States, operated by our partner, Rio Tinto which owns the other 55(55 per cent. cent interest).
Resolution Copper is currently undertaking a pre-feasibility study into a substantial underground copper mine and processing facility.
In FY2012, Resolution Copper continued to advance the sinking of the No. 10 Shaft in order to gain access to the ore deposit for characterisation work of mineralisation and geotechnical conditions. In addition to work completed at the project site, efforts
Work also continued towards gaining approval withinfrom the US Congress for a Federal Land Exchange to access the ore deposit.
2.2.5 Diamonds and Specialty Products Customer Sector Group
Our Diamonds and Specialty Products CSG operates our diamonds business and titanium minerals businesses andengages in the exploration and development of a potash business. On 1 February 2012 we announced that we had exercised an option to sell our 37.8 per cent non-operated interest in Richards Bay Minerals to Rio Tinto and will exit the titanium minerals industry. On 7 September 2012, we announced the sale was complete.
Diamonds
The cornerstone of ourOur diamonds business is comprised of the EKATI diamond mineDiamond Mine in the Northwest Territories of Canada, of which we own 80 per cent.Canada. EKATI has produced on average overalmost three million carats per year of rough diamonds over the last threefive years. However, theThe grade of ore we process fluctuates from year to year, resulting in variations in carats produced. In addition, the proportion of our production consisting of high-value carats (larger and/or higher-quality stones) and low-value carats (smaller and/or lower-quality stones) will fluctuatefluctuates from year to year. DuringEKATI has a reserve life of three years.
Our interest in EKATI consists of an 80 per cent interest in the year mining ofCore Zone Joint Venture, comprising existing operations and a 58.8 per cent interest in the higher grade Panda underground was completed. The mine life basedBuffer Zone Joint Venture, primarily focusing on the mine plan is eight years.exploration targets.
Annual sales from EKATI (100 per cent terms) representrepresented approximately threetwo per cent of current world rough diamond supply by weight and approximately ninesix per cent by value.value in FY2012. We sell most of our rough diamonds to international diamond buyers through our Antwerp sales office.
On 30 November 2011, we announced that we are reviewing our diamonds business, comprising our interests in the EKATI Diamond Mine and the Chidliak exploration project in Canada. This review is examining whether a continued presence in the diamonds industry is consistent with our strategy and evaluating the potential sale of all or part of the diamonds business. On 20 December 2011, we confirmed that we agreed to sell our 51 per cent interest in the Chidliak diamonds exploration project on Baffin Island, Canada, to our joint venture partner, Peregrine Diamonds Ltd.
Potash
Our potash strategy is to build a material industry position over the long term. We also sellcontinue advancing the Jansen Project, a smaller amountgreenfield potash project in Saskatchewan, Canada. Jansen progressed into the feasibility study phase (an advanced stage of our diamond productionproject approvals process) in February 2011. Approved spending for Jansen is US$1.1 billion.
Jansen is designed ultimately to two Canadian manufacturers basedproduce approximately eight mtpa of agricultural grade potash.
We are also continuing to study other potential projects in the Northwest Territories.Saskatchewan potash basin, including Young, Boulder and Melville, and are progressing these projects in the context of our development portfolio.
We are conducting a potash exploration program, including 3D seismic survey and drilling programs. We have approved spending of almost US$2 billion (including Jansen and other acquisitions) in respect of developing our potash business. Our permit positions for potash extend over 14,500 square kilometres in the Saskatchewan basin.
Titanium minerals
Our principal interest in titanium minerals consists of our 37.7637.8 per cent economic interest in Richards Bay Minerals (RBM). RBM is one of the largest and lowest-cost producersa major producer of titania slag, high-purity pig iron, rutile and zircon from mineral sands. Approximately 90 per cent of the titanium dioxide slag produced by RBM is suitable for the chloride process of titanium dioxide pigment manufacture and is sold internationally under a variety of short, mediumshort-, medium- and long-term contracts.
In December 2009,On 1 February 2012, we announced that we exercised an option to sell our non-operated interest in RBM completed its Broad-Based Black Economic Empowerment (‘BBBEE’) transaction by transferring 26 per cent to Rio Tinto and will exit the BBBEE Consortium.titanium minerals industry. On 7 September 2012, we announced the sale was complete. The BBBEE Consortium includes investors, local communities and RBM employees.
Potash
We believe potash has significant growth potential underpinned by increasing demand for food and decreasing arable land, which is largely driven by growing economies in developing countries.
On 18 August 2010, BHP Billiton announced its intention to make an all-cash offer, and on 20 August 2010 formally commenced the offer, to acquire all of the issued and outstanding common shares of Potash Corporation of Saskatchewan Inc. (PotashCorp) at asale price ofwas US$130 in cash per PotashCorp common share (the ‘Offer’). The Offer values the total equity of PotashCorp at approximately US$401.9 billion on a fully diluted basis.
On 23 March 2010, we completed the acquisition of all the issued and outstanding common shares of Athabasca Potash Inc (API) for C$8.35 cash per common share. This acquisition provided us with 100 per cent control of the Burr project and various additional potash exploration properties in Saskatchewan, Canada. Our permit positions for potash extend over 14,000 square kilometres in the Saskatchewan basin and have expiry dates between 2013 and 2016. We are currently studying development opportunities (see Development projects below).before adjustments.
Information on Diamonds and Specialty Products mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production (see section 2.3.2) and reserve tables (see section 2.14.2)2.13.2).
| Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & Style | Power Source | Facilities, | ||||||||||
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310 km northeast of Yellowknife, Northwest Territories, Canada | Aircraft Ice road open approximately 10 weeks per year | Core Zone JV BHP Billiton 80% Buffer Zone JV BHP Billiton 58.8% Remaining interest held by 2 individuals | BHP Billiton | Mining leases granted by Canadian Government until 2022 | Production began1997 Mine and processing plant began operating 1998 Ownership increased with acquisition of Dia Met Minerals in 2001 | Fox: open-cut Koala and Koala North: underground Eocene age kimberlite pipes – dominantly volcaniclastic infill | JV owned and operated diesel power station | Crushers, washers/scrubber and grinder and heavy media separator Magnetics and X-ray sorters for diamond recovery Fuel storage | ||||||||||
Titanium minerals | ||||||||||||||||||
Richards Bay Minerals
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10-50 km north of Richards Bay, KwaZulu-Natal, South Africa | Public road Product transported by public rail to port | BHP Billiton 37.8% economic interest through 50% interest in the 2 legal entities that comprise RBM, Richards Bay Mining (Pty) Ltd and Richards Bay Titanium (Pty) Ltd RBM functions as a single economic entity | Rio Tinto | Long-term renewable mineral leases from South African Government subject to South African Mining Charter | RBM formed 1976 Fifth mine added 2000 One mining plant decommissioned in 2008 Announced exercise of option to sell interest in RBM on 1 February 2012 and completion of the sale on 7 September 2012 | Dune sand dredging
Quaternary age coastal dune deposits
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Gravity separation
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(1) | Smelter processes
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Development projects
Jansen Potash Project
We continued advancing the Jansen Project, a greenfield potash project near Saskatoon, Saskatchewan, Canada which is being designedOn 24 June 2011, we approved US$488 million of pre-commitment spending to produce approximately eight million tonnes per annumfund early-stage site preparation for surface construction, procurement of saleable potash. The Project is nearing the end of its pre-feasibility studylong lead time items and is anticipated to progress to feasibility in the first half of FY2011. Based on the current schedule and subject to investment approval, the project is expected to produce saleable potash from CY2015. We have also allotted pre-commitment funding of US$240 million to support the development of the first stages of the Jansen Potash Project. This pre-approval expenditure will facilitate the early stage work for the establishmentsections of the production and service shafts.
On 30 June 2011, the Saskatchewan Ministry of Environment approved our Environmental Impact Statement for the development of the Jansen is the most advanced of our multiple development options in potash, with nearby Young and Boulder projects both in the concept study phase. We continued exploration activities in Saskatchewan, Canada. The Burr project, acquired with Athabasca Potash on 23 March 2010, is currently under review in the context of our full potash development portfolio. Exploration in the Melville area, also acquired with Athabasca Potash, began in July 2010.
Diamondsproject.
We are working on pre-feasibilitycurrently executing a ground freezing program in which the ground will be frozen using a closed system of refrigeration pipes through which brine is circulated. Excavation of shafts is also under way with shaft collars completed and concept studies for developments at EKATI. Becauseshaft sinking due to begin by the end of CY2012. Sinking headframes and hoists are also being installed. The eventual depth of the natureservice and production shafts will be approximately one kilometre.
Diamonds
On 9 May 2011, we approved the Misery open-pit project at the EKATI Diamond Mine in the Northwest Territories of Canada. This project consists of a pushback of the kimberlite pipesexisting Misery open-pit, which was mined from 2001 to 2005. Stripping operations began in which diamonds are found, individual pipes are relatively short-lived, so we are continually working on optionsSeptember 2011, with ore production expected to bring new pipes on-stream.
2.2.6 Stainless Steel Materials Customer Sector Group
Our Stainless Steel Materials businessCSG is primarily a supplier of nickel to the stainless steel industry. Nickel is an important component of the most commonly used types of stainless steel. In addition, weWe also supply nickel to other markets, including the specialty alloy, foundry, chemicals and refractory material industries. We are the world’s fourth-largestfifth-largest producer of nickel and we sell our nickel products under a mix of long-term, medium-term and spot volume contracts, with prices linked to the London Metal Exchange (LME)LME nickel price.
For the duration of FY2010, ourOur nickel business comprisedcomprises two sets of production assets:Assets:
Nickel West
Nickel West is the name for our wholly owned Western Australian nickel assets,Asset, which consistconsists of an integrated system of mines, concentrators, a smelter and a refinery. We mine nickel-bearing sulphide ore at our Mt Keith, Leinster and Cliffs operationsOperations north of Kalgoorlie, Western Australia.Kalgoorlie. We operate concentrator plants at Mt Keith and at Leinster, which also concentratesconcentrate ore from Cliffs. Leinster and Mt Keith have reserve lives of eight and 1413 years, respectively, at current rates of production, and both have options for further expansion. The Mt Keith Talc Redesign project, which enables the processing of talc bearing ore, was successfully commissioned in December 2011. Cliffs is a high-grade underground mine with an expecteda reserve life of three years. The extraction of ore at Cliffs commenced in FY2008.
We also operate the Kambalda concentrator south of Kalgoorlie, where we source ore is sourced through tolling and concentrate purchase arrangements with third parties in the Kambalda region. In addition, weWe also have a regular purchase agreementagreements in place for the direct purchase of concentrate, which we re-pulp, dry and blend with other concentrate processed at Kambalda.
We transport concentrate from Leinster, Mt Keith and Kambalda to our Kalgoorlie smelter, which processeswhere it is processed into nickel matte, containing approximately 6667 per cent nickel. In FY2010,FY2012, we exported approximately 4348 per cent of our nickel matte production. We processed the remaining nickel matte at our Kwinana nickel refinery, which produces nickel metal in the form of LME grade briquettes, and nickel powder together with a range of saleable by-products.
Nickel West production in FY2012 was 109 kt of contained nickel.
During FY2010,FY2012 the Nickel West Kwinana hydrogen plant was successfully commissioned, following a restriction in hydrogen supply which impacted production of nickel metal from the Kwinana nickel refinery was impacted by a restriction in hydrogen supply, resulting in the redirection of matte feed stocks for external sale. A new hydrogen plant is under construction at the Kwinana nickel refinery and construction is expected to be completed in the second quarter of FY2012.refinery.
Cerro Matoso
Cerro Matoso, our 99.94 per cent owned nickel operationAsset in Colombia, combines a lateritic nickel ore deposit with a low-cost ferronickel smelter. Cerro Matoso is the world’s second-largest producer of ferronickel and is one of the lowest-cost producers of ferronickel. The smelter produces high-purity, low-carbon ferronickel granules. Cerro Matoso has an estimated current reserve life of 39 years, based on current production levels.
Significant changes to32 years. Production in FY2012 was 48.9 kt of nickel in ferronickel form following the Stainless Steel Materials business
During FY2010 Stainless Steel Materials made two significant business divestments. In July 2009 we completed the salesuccessful early completion of the Yabulu nickel refinery. In February 2010 we completedplanned furnace replacement.
Cerro Matoso operates under mining concessions that are due to expire on 30 September 2012 and has applied, in accordance with the salelaw and its contracts, for an extension of these mining concessions. If this extension is not granted, Cerro Matoso has an underlying agreement with the Ravensthorpe nickel operation followingColombian Government that grants it the suspensionrights to continue mining and producing through to 2029 under a mining arrangement, with a further extension of production activities in January 2009.15 years possible.
Information on Stainless Steel Materials mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production (see section 2.3.2) and reserve tables (see section 2.14.2)2.13.2).
| Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & Mineralisation Style | Power Source | Facilities, | ||||||||||||
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Mt Keith | ||||||||||||||||||||
Western Australia | Private road
| 100% | BHP Billiton | Leases over the land from Western Australian Government Key leases expire 2013 – 2033 Renewals at government discretion | Officially commissioned 1995 by WMC Mt Keith was acquired as part of | Open-cut
Disseminated textured magmatic nickel-sulphide mineralisation, associated with a metamorphosed ultramafic
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| Concentration plant with a
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Leinster | ||||||||||||||||||||
Western Australia | Public road
| 100% | BHP Billiton | Leases over the land from Western Australian Government Key leases expire 2013 – 2031 Renewals at government discretion | Production commenced 1979 Leinster was acquired as part of | Underground and open-cut
Steeply dipping disseminated and massive textured nickel-sulphide mineralisation, associated with metamorphosed ultramafic lava flows and intrusions |
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| Concentration plant with a
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Cliffs | ||||||||||||||||||||
Western Australia | Private road
| 100% | BHP Billiton | Leases over the land from Western Australian Government Key leases expire 2025 – 2028 Renewals at government discretion | Production commenced 2008 Cliffs was acquired as part of | Underground
Steeply dipping massive textured nickel-sulphide mineralisation, associated with metamorphosed ultramafic lava flows | Supplied from Mt Keith | Mine site |
Underground mine
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Access |
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| Title, Leases or | History | Mine Type & Mineralisation
| Power Source | Facilities, Use & | ||||||||||||||
Cerro Matoso | ||||||||||||||||||||||
Montelibano, Córdoba, Colombia | Public road | BHP Billiton 99.94% Employees and former employees 0.06% | BHP Billiton | Existing mining concessions either renewable as of 1 October 2012 with 30-year extension until 2042 or, in absence of extension, to be automatically incorporated on 1 October 2012 into a larger area mining lease with a term until 2029 with the possibility of an extension for a further 15 years | Mining commenced 1980 Nickel production started 1982 Ownership increased to 53% in 1989 and to 99.94% in 2007 Expansion project to double installed capacity completed 2001 | Open-cut
Nickel-laterite mineralisation formed from residual weathering of ophiolitic peridotite | National electricity grid under contracts expiring December 2014
Gas supply contracts expiring December 2021 | Ferronickel smelter and refinery integrated with the mine
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Beneficiation
Actual capacity depends on nickel grade from the
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Information on Stainless Steel Materials smelters, refineries and processing plants
| Location | Ownership |
| Title, Leases or Options | Product | Nominal Production | Power source | |||||||||
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Kambalda | ||||||||||||||||
Nickel concentrator | 56 km south of Kalgoorlie, Western Australia | 100% | BHP Billiton |
| Concentrate containing approximately 14% nickel | 1.6 mtpa ore
Ore |
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Kalgoorlie
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Nickel smelter | Kalgoorlie, | 100% | BHP Billiton | Freehold title over the | 110 ktpa nickel matte |
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Kwinana | ||||||||||||||||
Nickel refinery | 30 km south of Perth, Western Australia | 100% | BHP Billiton | Freehold title over the property |
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| A combination of
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Development projects
Cerro Matoso Nickel Ore Smelting System
During FY2010, the Nickel Ore Smelting System project was approved to progress into execution phase. The project will deliver a replacement of the 27-year-old Line 1 furnace to improve operational reliability and accommodate changes in the mineralogy of the ore feed. The construction phase will take approximately six months, followed by heating and ramp-up of the new furnace over a further three months. The shutdown is planned to commence during the second half of FY2011.
Cerro Matoso expansion options
Cerro Matoso has undertaken conceptual studies on options for expanding production, including a heap leaching operation.production. A completed feasibility study and Board approval would be required before any project based on these studies proceeds.is in progress for the Cerro Matoso Heap Leach project.
Mt Keith Talc co-processing
In September 2009 the Mt Keith Talc re-design project was approved to move into execution phase. This will enable Mt Keith to process talcose ore to supplement the current ore supply. The general scope of this project is the installation of additional grinding and flotation equipment within the existing circuits at Mt Keith and the addition of a high magnesium oxide concentrate flotation circuit. This project allows us to treat talcose ores which make up approximately 15 per cent of the Mt Keith orebody and which were not previously able to be processed economically with existing technology. The project is expected to be commissioned in the second quarter of FY2012.
2.2.7 Iron Ore Customer Sector Group
Our Iron Ore CSG consists of our Western Australia Iron Ore (WAIO) businessinterests and a 50 per cent interest in the Samarco joint ventureJoint Venture in Brazil. We are one of the leading iron ore producers in the world. We sell lump and fines product produced in Australia and pellets from our operations in Brazil.
Western Australia Iron Ore
WAIO’s operations involve a complex integrated system of seven mines and more than 1,000 kilometres of rail infrastructure and port facilities all located in the Pilbara region of northern Western Australia. Our strategy is to maximise output utilising available infrastructure at our disposal.
InOur WAIO operations consist of three joint ventures: Mt Newman, Yandi and Mt Goldsworthy, and our 100 per cent interest in Jimblebar. Our interest in these joint ventures is 85 per cent. Mitsui and ITOCHU own the remaining 15 per cent. Along with the other joint venture participants, we have entered into marketing agreements in the form of joint ventures with certain customers. These joint ventures, JW4, Wheelarra and POSMAC, involve subleases of part of WAIO’s existing mineral leases whereby ore is sold to the existing joint ventures with contractual terms applying to the customers’ share. As a consequence, we are entitled to 85 per cent of production from these subleases and the customer joint ventures are accounted for as marketing arrangements rather than as jointly controlled assets.
We have been expanding our WAIO operations in response to increasing demand for iron ore, we have been expanding our WAIO operations.ore. Since 2001, we have completed six expansion projects to increase our system production capacity from 69 million tonnes per annummtpa to 155 million tonnes per annum190 mtpa (100 per cent basis). Our share of FY2012 production was 148.1 Mt of ore. We now have aadditional projects in various stages of the project under constructionlife cycle (including construction) to further increase system capacity to 205 million tonnes per annum (100 per cent basis). Additional(see Development projects now undergoing pre-feasibility or feasibility studies would further increase system capacity. Our share of FY2010 production was 113.9 million tonnes of ore.below).
Our Pilbara reserve base is relatively concentrated, allowing us to plan our development around a series of integrated ‘mining hubs’ joined to the orebodies by conveyors or spur lines. The mining hubThis approach enables us to maximise the value of installed infrastructure by using the same processing plant and rail infrastructure for a number of orebodies. Blending ore at the hub gives us greater flexibility to respond to changing customer requirements andas well as changing properties in the ore being mined as well as reducingand reduces the risk of port bottlenecks.
In conjunction with our capacity expansion, we have continued to explore and refine our understanding of existing tenements. Our proven ore reserves are high-grade, with average iron content ranging from 57.1 per cent at Yandi to 63.0 per cent at Mt Newman. The reserve lives of our mines at current production levels range from 1114 years at Mt Goldsworthy (JV Northern)Yandi to 7244 years at Jimblebar.
Acquisition of HWE Mining Subsidiaries
On 30 September 2011, BHP Billiton completed its acquisition of HWE Mining Subsidiaries from Leighton Holdings. The acquisition relates to the mining equipment, people and related assets that service the Area C, Yandi and Orebody 23 and 25 Operations. These operations collectively account for almost 70 per cent of WAIO’s total material movement. The amount paid was US$710 million (A$725 million) representing purchase consideration of US$449 million and settlement of pre-existing obligations of US$241 million and US$20 million for transitional services to be provided post acquisition.
Samarco
We are a 50–50 – 50 joint venture partner with Vale at the Samarco operationsOperation in Brazil. During the FY2008, Samarco completed an expansion project consistingis currently comprised of a thirdmine and two concentrators located in the State of Minas Gerais, and three pellet plant, a mine expansion, a new concentrator, port enhancementsplants and a second slurry pipeline.port located in the State of Espirito Santo. Two 396 kilometre pipelines connect the mine site to the pelletising facilities.
In FY2010,FY2012, our share of production was 10.35 million tonnes10.7 Mt of pellets. Samarco’s total ore reserve is about 2.112.1 billion tonnes. In addition, Samarco completed the selection (pre-feasibility) study for its fourth pellet plant which is expected to increase the iron ore pellet capacity by 8.2 million tonnes per annum to 30.7 million tonnes per annum (100 per cent share). This project is still subject to shareholder and Samarco Board approval.
Information on Iron Ore mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production (see section 2.3.2) and reserve tables (see section 2.14.2)2.13.2).
| Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & Style | Power Source | Facilities, | ||||||||||
Iron ore | ||||||||||||||||||
Mt Newman | ||||||||||||||||||
Pilbara region, Western Australia
Mt Whaleback Orebodies 18, 23, 25, 29 and 30 | Private road Iron ore shipped by Mt Newman | BHP Billiton 85% Mitsui ITOCHU Iron 10% ITOCHU Minerals and Energy of Australia 5% | BHP Billiton: Mt Whaleback Orebodies 29 and 30 Orebodies 23 and 25 (since October 2011) Independent contractors: Orebody 18 Orebodies 23 and 25 (until October 2011) | Mining lease under the Iron Ore (Mt Newman) Agreement Act 1964 expires 2030 with right to successive renewals of 21 years | Production began Mt Whaleback orebody 1969 Production from orebodies 18, 23, 25, 29 and 30 complements production from Mt Whaleback First ore | Open-cut Bedded ore
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Pilbara region, Western Australia | Private Road
Our railway spur links Yandi mine to |
Mitsui Iron Ore Corporation | BHP Billiton (since October 2011)
| Mining lease under the Iron Ore (Marillana Creek) Agreement Act 1991 expires | Development began 1991 First shipment 1992 Capacity expanded between 1994 – 2011 |
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| Three processing plants, primary crusher and overland conveyor (normal capacity 75 mtpa) Ore delivered to two train-loading facilities | ||||||||
| Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & Style | Power Source | Facilities, Use & | ||||||||
JW4 JV | ||||||||||||||||
Pilbara region, Western Australia | Private road
Iron ore on-sold to Yandi JV, then transported via rail to Finucane Island and Nelson Point shipping facilities, Port Hedland | BHP Billiton 68% ITOCHU Minerals and Energy of Australia 6.4%, Mitsui Iron Ore Corporation 5.6%, JFE Steel Australia 20% Sublease agreement over JW4 deposit | BHP Billiton (since October 2011) Previously operated by independent contractors | Sublease from Yandi JV, with mining lease under the Iron Ore (Marillana Creek) Agreement Act 1991 expires 2033 with one renewal right for a further 21 years | Operations began April 2006 Ore currently being produced is sold to Yandi JV and blended with Yandi ore | Open-cut Channel Iron Deposits are Cainozoic fluvial sediments | Alinta Dewap’s Newman gas-fired power station via Mt Newman JV owned power lines | Mine site | ||||||||
Jimblebar | ||||||||||||||||
Pilbara region, Western Australia | Private road | BHP Billiton 100% of the Jimblebar | New mine is currently under construction which BHP Billiton will operate | Mining lease under the Iron Ore (McCamey’s Monster) Agreement Authorisation Act 1972 expires 2030 with rights to successive renewals of 21 years | Production at Jimblebar began in March 1989 From 2004, production was transferred to Wheelarra as part of the Wheelarra sublease agreement | Open-cut Bedded ore | Alinta Dewap’s Newman gas-fired power station via Mt Newman JV owned power lines | Primary and secondary crusher are in the commissioning phase (nominal capacity 35 mtpa at full capacity in FY2014) | ||||||||
Mine & Location | Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & Style | Power Source | Facilities, Use & | ||||||||
Wheelarra | ||||||||||||||||
Pilbara region, Western Australia | Private road
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ITOCHU Minerals and Energy of Wugang Australia 10% Sublease agreement over Wheelarra deposit | Operated by independent contractors | Sublease agreement over the As a consequence of this arrangement, we are entitled to 85% of the production from the
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| Alinta Dewap’s Newman gas-fired power station via | Primary crushing plant (nominal capacity 14.5 mtpa) | ||||||||
Mt Goldsworthy | ||||||||||||||||
Pilbara region, Western Australia
| Private road
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Mitsui Iron Ore Corporation | BHP Billiton (since October 2011)
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A number of smaller mining leases granted under the Mining Act 1978 expire in | Operations Original Goldsworthy mine closed Associated Shay Gap mine closed Mining at
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| Yarrie and Nimingarra: Alinta Dewap’s Port Hedland gas-fired power station under long-term contracts Area C: Alinta Dewap’s Port Newman gas-fired power station under long-term contracts | Area C: ore processing plant, primary crusher and overland conveyor (nominal capacity: 50 mtpa)
Primary crushers at Yarrie and Nimingarra | ||||||||
Mine & Location | Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & Style | Power Source | Facilities, Use & | ||||||||||
POSMAC JV | ||||||||||||||||||
Pilbara Region, Western Australia | Private Road
Iron ore on-sold to Goldsworthy JV, it is then transported via Goldsworthy-owned rail to JV’s Finucane Island and Nelson Point shipping facilities, Port Hedland | BHP Billiton 65% ITOCHU Minerals and Energy of Australia 8%, Mitsui Iron Ore Corporation 7%, POSCO 20% Sublease agreement over POSMAC deposit | BHP Billiton (since October 2011) Previously operated by independent contractors | Sublease over part of the mineral lease held by Mt Goldsworthy JV under the Iron Ore (Mt Goldsworthy) Agreement Act 1964 with rights to successive renewals of 21 years | Operations commenced October 2003 The ore currently being produced is sold to the Goldsworthy JV and blended with Area C | Open-cut Bedded ore types classified as per host Archaean or Proterozoic iron formation, which are Brockman, Marra Mamba and Nimingarra | Alinta Dewap’s Newman gas-fired power station | Mine site | ||||||||||
Samarco | ||||||||||||||||||
Southeast Brazil | Public road
Two slurry pipelines transport concentrate to pellet plants on coast Iron pellets exported via port facilities | BHP Billiton 50% Vale 50% | Samarco | Mining concessions granted by Brazilian Government as long as Alegria complex mined according to agreed plan | Production began at Germano mine 1977, at Alegria complex 1992 Two expansions completed with a second pellet plant built in 1997 and a third pellet plant, second concentrator and second pipeline built in 2008 In April 2011, Samarco’s shareholders approved the fourth pellet plant | Open-cut Itabirites (metamorphic quartz-hematite rock) and friable hematite
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Contracts will expire by the end of 2014 and their extension is under negotiation |
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Development projects
Western Australia Iron Ore
Construction of Rapid Growth Project (RGP) 5 is ongoing. Project expenditure of US$4.8 billion was approved in November 2008 for RGP 5, our share of spend to date amounts to US$3.1 billion. The focus of this expansion project is to substantially double track the Newman mainline rail, construction of two new shipping berths on the Finucane Island side of the Port Hedland harbour and additional crushing, screening and stockpiling facilities at Yandi. RGP 5 is expected to increase the installed capacity of our WAIO operations by a further 50 million tonnes per annum to 205 million tonnes per annum (100 per cent share).
In January 2010,March 2011, we announced approval of an additional US$1.937.4 billion (100 per cent share)(BHP Billiton share US$6.6 billion) of capital expenditure to underpin furthercontinue production growth activities in our WAIO operations. This investment is the business. final approval of projects initiated in 2010, with pre-commitment funding of US$2.3 billion (BHP Billiton share US$2.1 billion). It is expected to deliver an integrated operation with a minimum capacity of 220 mtpa (100 per cent basis), with first production expected from Jimblebar early in CY2014.
This expenditure represents early spend foradditional investment includes:
US$3.4 billion (BHP Billiton share US$3.3 billion) to develop the Group’s RGP 6. The capital will allow for early procurementJimblebar mine and rail links, and procure mining equipment and rolling stock to deliver an initial capacity of long lead items and detailed engineering35 mtpa, expandable to continue the expansion of the inner harbour at Port Hedland, progress rail track duplication works and expand the mining operations. As55 mtpa. Work on this project was 34 per cent complete as at 30 June 2010, our capital spend2012;
US$2.3 billion (BHP Billiton share US$1.9 billion) to further develop Port Hedland, including two additional berths and shiploaders, a car dumper, connecting conveyor routes and associated rail works and rolling stock. Work on this project amountedwas 59 per cent complete as at 30 June 2012;
US$1.7 billion (BHP Billiton share US$1.4 billion) for port blending facilities and rail yards to US$687 million.enable ore blending, expand resource life and establish options for future growth of the business beyond the Inner Harbour. Work on this project was 22 per cent complete as at 30 June 2012.
Western Australia Iron Ore – Rio Tinto Joint VentureDual Harbour Strategy
In February 2012, we announced approval of US$917 million (BHP Billiton share US$779 million) in pre-commitment funding for the construction of an Outer Harbour facility associated with our WAIO operations.
On 5 June 2009, BHP Billiton signed a Framework Agreement, including non-binding core principles, with Rio Tinto24 August 2012, we announced that the Western Australia Minister for Transport and Port Hedland Port Authority has granted WAIO the right, subject to form a 50–50 production joint venture combining the economic interests of both companies’ current and future iron ore assetsState approvals processes, to develop two additional berths in Western Australia. On 5 December 2009, BHP Billiton and Rio Tinto signed binding agreements that set out the terms that will regulateInner Harbour. We also announced work on the establishmentOuter Harbour Development has been slowed while our focus has shifted to maximising our potential capacity from the Inner Harbour. Development of the joint venture and its ongoing operation. Those terms are consistent with the core principles set outOuter Harbour remains attractive in the Framework Agreement, except that the joint marketinglong term.
Western Australia Iron Ore – Orebody 24 mine
In November 2011, we announced approval of 15 per cent of output contemplated by the core principles will not take place: all output will be sold by BHPa US$822 million (BHP Billiton and Rio Tinto separately.
The joint venture offers an excellent opportunity to capture substantial production and development synergies from the companies’ overlapping world-class resources. These synergies are anticipated to come from:
combining adjacent mines into single operations;
reducing costs through shorter rail hauls and more efficient allocations of port capacity;
blending opportunities which will maximise product recovery and provide further operating efficiencies;
optimising future growth opportunities throughshare US$698 million) investment for the development of consolidated, larger and more capital efficient expansion projects;
combining the management, procurement and general overhead activities intoOrebody 24 mine, located approximately 10 kilometres northeast of Newman, Western Australia, Orebody 24 is a single entity.
It is intended that BHP Billiton’s Iron Ore President, Ian Ashby, will be appointed as the initial Chief Executive Officer of the joint venture, while Sam Walsh, currently Rio Tinto’s Chief Executive Iron Ore and Australia will be appointed as initial Chairman of the non-executive owners’ council.
Pre-conditions for formation of the joint venture include receipt of regulatory and relevant governmental clearances and approvalsustaining mine to maintain iron ore production output from the shareholdersMt Newman JV operations. Orebody 24 is expected to have a capacity of both Rio Tinto17 mtpa and BHP Billiton. The Framework Agreementwill include the construction of an ore crushing plant, train loadout facility, rail spur and other associated support facilities. Initial mining is expected to begin in the binding agreements will terminate if the pre-conditions are not satisfied by 31 December 2010 unless extended by agreementsecond half of Rio Tinto and BHP Billiton.CY2012.
HeadsSamarco
During FY2011, Samarco shareholders approved a US$3.5 billion (BHP Billiton share US$1.75 billion) expansion project consisting of Agreement with Western Australian Government
On 21 June 2010, BHP Billitona fourth pellet plant, a new concentrator and Rio Tinto announced that they had signed a non-binding Heads of Agreement with the Government of Western Australia (HoA).
Based on the HoA, the State will proceed with amendmentsthird slurry pipeline. The project is expected to the State Agreement Acts covering operations managed by BHP Billiton and operations managed by Rio Tinto, to require payment of royalties onexpand Samarco’s iron ore shipments at the rates specifiedpellet production capacity from 22.2 mtpa to 30.5 mtpa. First pellet production is expected in the WA Mining Regulations with effect from 1 July 2010. Royalty rates will increase from 3.75 per centfirst half of sales revenue to 5.625 per cent for fine ore and from 3.25 per cent to five per cent for beneficiated ore. The lump ore royalty will be 7.5 per cent, which is already the prevailing rate in most cases. The rates as amended will apply to all existing operations and future projects covered by the State Agreements.
Additionally, the HoA permits sharing of infrastructure and blending of products across the network operated by BHP Billiton and the network operated by Rio Tinto, and (subject to agreement between the parties) across both networks.
The State Agreement amendments are subject to the approval of relevant co-venturers under existing joint venture arrangements and the passage of ratifying legislation by the Western Australian Parliament. The amendments are not conditional on finalisation of the joint venture.
In recognition of the value that the amendments to the State Agreements are expected to generate and the need to support local communities, the parties to the relevant State Agreements will make a contribution totalling A$350 million to the consolidated revenue of the State.CY2014.
West Africa
We are currently carrying out exploration activities in the West African countries of Guinea and Liberia. AtLiberia, West Africa.
Guinea Iron Ore
BHP Billiton currently has a 41.3 per cent interest in a joint venture that holds the Nimba Mining Concession and four iron ore prospecting permits in Guinea, we are conducting concept studiessoutheast Guinea. The joint venture is undertaking a pre-feasibility study for the development of the Concession and associated transport infrastructure. Once developed, it is envisaged that the mine will deliver a high-grade direct shipping ore to determine economic viability, sustainability impacts and management implications of operationsmarket.
Liberia Iron Ore
BHP Billiton currently has a 100 per cent interest in this area. During the year, we signed a Mineral Development Agreement with the Government of Liberia to enableLiberia. This enables the further exploration and development of our Liberian iron ore mineral leases, in that country, this is currently before the Legislature for ratification.each of which are proximate to existing rail and port infrastructure. Exploration and development of these leases continues, with drilling conducted on select targets.
2.2.8 Manganese Customer Sector Group
Our Manganese operations produceCSG produces a combination of ores and alloys from sites in South Africa and Australia. The Manganese CSG isWe are the world’s largest producer of manganese ore and amongone of the top three global producers of manganese alloy.
Manganese alloy is a key input into the steelmaking process. Manganese high-grade ore is particularly valuable to alloy producers because of the ‘valuevalue in use differential’differential over low-grade ore, which is the degree to which high-grade ore is proportionately more efficient than low-grade ore in the alloying process than low-grade ore.process.
Our strategy is to focus on upstream resource businesses which have been significant contributors to our profit in FY2010. However, ourbusinesses. Manganese alloy smelters add value to the overallare a key conduit of manganese business because theyunits into steelmaking and enable us to access markets with an optimal mix of ore and alloy, optimise production to best suit market conditions and give us technical insight into the performance of our ores in smelters.
Approximately 80 per cent of ore production is sold directly to external customers and the remainder is used as feedstock in our alloy smelters.
The Group ownsWe own and managesmanage all manganese mining assetsoperations and alloy plants through ajoint ventures with Anglo American. We own 60 per cent of the joint ventures. Our joint venture with Anglo-American in which the Group owns 60 per cent. The joint venture assetsinterests are held through Samancor Manganese, which operates our global Manganese assets. In South Africa, Samancor Manganese (Pty) Ltd owns 74 per cent of Hotazel Manganese Mines (Pty) Ltd (HMM) and 100 per cent of the Metalloys both situateddivision. This gives BHP Billiton an effective interest of 44.4 per cent in HMM and 60 per cent in Metalloys. The remaining 26 per cent of HMM is owned under the terms of South African Black Economic Empowerment (BEE) legislation, which reflects our commitment to economic transformation in South Africa and theAfrica. In Australia, we own 60 per cent of Groote Eylandt Mining Company Pty Ltd (GEMCO) and we have an effective interest of 60 per cent in Tasmanian Electro Metallurgical Company Pty Ltd (TEMCO) located in Australia. In July 2009, Samancor Manganese (Pty) Ltd sold 26through GEMCO, which owns 100 per cent of HMMTEMCO.
In response to challenging market conditions in a seriesthe manganese alloy industry, we announced the temporary suspension of transactions designedproduction at TEMCO, Australia, and the cessation of production of energy-intensive silicomanganese at the Metalloys South plant, South Africa, during the March 2012 quarter. After extensive stakeholder consultation and the identification of significant cost reduction opportunities, in May 2012, we announced our decision to comply with South Africa’s Black Economic Empowerment requirements. In May 2010, Samancor Manganese sold its 51 per cent equity stakerestart TEMCO, which is currently in Manganese Metal Company (Pty) Ltdprogress and planned to Agattu Trading 195 (Pty) Ltd.complete in CY2012.
Mines:Mines
HotazelHMM
HMM owns the Mamatwan open-cut mine and the Wessels underground mine. Manganese high-grade ore is particularly valuable to alloy producers because of the ‘value in use differential’ over low-grade ore, which is the
degree to which high-grade ore is proportionately more efficient than low-grade ore in the alloying process. The ore contained infrom these mines require only requires crushing and screening to create saleable product with no further upgrade steps required. During FY2010,product. In FY2012, the total manganese ore production was increased in response to3,625 kt, 21 per cent higher demand.than FY2011 production. Wessels has a reserve life of 46 years and Mamatwan has a reserve life of 21 years.
GEMCO
As a result of its location near our own port facilities and its simple, open-cut mining operation, GEMCO is one of the world’s lowest-cost manganese ore producers in the world. Simpleproducers. These simple operations, combined with its high-grade of ore and relative proximity to Asian export markets, make GEMCO unique among the world’s manganese mines. During FY2010,FY2012 production of manganese ore was increased in response to4,306 kt, five per cent higher demand.than FY2011 production. GEMCO has a reserve life of 12 years.
Alloy Plants:Plants
Metalloys
The Samancor Manganese Metalloys alloy plant is one of the largest manganese alloy producers in the world. Due to its size and access to high-quality feedstock from the Hotazel operations, it is also one of the lowest-cost alloy producers.producers of medium-carbon ferromanganese. Metalloys only produces highhigh- and medium-carbon ferromanganese, and silicomanganese.after silicomanganese production ceased due to the permanent closure of the energy intensive Metalloys South plant in January 2012. The annual production capacity of silicomanganese was 120 ktpa.
TEMCO
TEMCO is a meduim-sizedmedium-sized producer of high-carbon ferromanganese, silicomanganese and sinter using ore shipped from GEMCO, primarily using hydro-electrichydroelectric power.
Information on Manganese mining operations
The following table contains additional details of our mining operations. These tables should be read in conjunction with the production (see section 2.3.2) and reserve tables (see section 2.14.2)2.13.2).
| Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & Style | Power Source | Facilities, Condition | ||||||||||
Manganese ore | ||||||||||||||||||
Hotazel Manganese Mines (Pty) Ltd (HMM) | ||||||||||||||||||
Kalahari Basin, South Africa Mamatwan Wessels mines | Public road
Approximately |
44.4% Anglo American 29.6% Ntsimbintle 9% NCAB 7% Iziko 5% | BHP Billiton
| Existing New Order Rights | Mamatwan commissioned 1964
| Mamatwan: open-cut Wessels: underground Banded Iron Manganese | Eskom (national power supplier) | Mamatwan
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Dense medium separator and
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Groote Eylandt Mining Company Pty Ltd (GEMCO) | ||||||||||||||||||
Groote Eylandt, Northern Territory, Australia
| Ore | BHP Billiton
Anglo American 40% | BHP Billiton | All leases | Commissioned 1965 | Open-cut Sandstone claystone sedimentary Manganese ore type |
Produces lump and fines products
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Information on Manganese smelters, refineries and processing plants
Processing Plant | Location | Ownership |
| Title, Leases or Options | Product | Nominal Production | Power source | |||||||
Manganese alloy | ||||||||||||||
Metalloys
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Manganese alloy plant (division of Samancor Manganese (Pty) | Meyerton, South Africa | BHP Billiton 60% Anglo American 40% | BHP Billiton | Freehold title over |
| Eskom
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Tasmanian Electro Metallurgical Company Pty Ltd (TEMCO) | ||||||||||||||
Manganese alloy plant | Bell Bay, Tasmania, Australia | BHP Billiton
| BHP Billiton | Freehold title over |
| Aurora Energy |
Development projects
GEMCO expansion
The selection study (pre-feasibility study) into a furtherpartners in Samancor Manganese approved the second expansion of the GEMCO mine (GEMCO 2nd expansion)Operation in the Northern Territory of Australia in July 2011. This follows the successful commissioning of the GEMCO expansion phase 1 (GEEP1) project in April 2009. The US$279 million GEEP2 project (BHP Billiton share US$167 million) has commenced and will increase GEMCO’s beneficiated product capacity from 4.2 mtpa to 4.8 wet million tonnes per annum (100 per cent, or about 2.9 wet million tonnes per annum BHP Billiton share) is reaching its conclusion.mtpa through the introduction of a dense media circuit by-pass facility. The project is subject to approval and is expected to advance into execution at the endbe completed in late CY2013. The expansion will also address infrastructure constraints by increasing road and port capacity to 5.9 mtpa, creating 1.1 mtpa of second quarter in FY2011. The total investment amount is approximately US$130 million (BHP Billiton share).additional capacity for future expansions.
Hotazel Manganese MinesHMM
TheDue to subsurface challenges experienced, which impacted progress and budget, the central block development project at Wessels mine is expected towas re-phased. The US$92 million Phase 1 project will be completed in FY2013. TheFY2014. It will comprise the construction of the ventilation shaft and development of the associated underground ventilation network. Phase 2 of the project is in the feasibility phase and will enablecomprise the completion of the underground crusher and mobile workshops. Upon completion of Phases 1 and 2, the Wessels mine tocapacity will increase production from 1 million tonnes per annummtpa to 1.5 mtpa.
Metalloys
The High-Carbon Ferromanganese (HCFeMn) furnace M14 at the Metalloys West Plant was approved for execution in November 2010 with a total approved investment of US$91 million tonnes per annum of(US$54.6 million BHP Billiton share). This furnace will add an additional 130 ktpa capacity (100 per cent or about 0.7 million tonnes per annum78 ktpa BHP Billiton share). of HCFeMn and replace the closed South Plant silicomanganese (capacity of 120 ktpa), to take Metalloys capacity to 500 ktpa. The forecast capital expenditureM14 furnace will contribute to completion of the project is an estimated US$26 million (BHP Billiton share).
Metalloys
The definition study (feasibility study) for the High Carbon Ferro Manganese furnace M14power efficiency at the Metalloys smelter in Meyerton, South Africa is reaching its conclusion. This furnace wouldsite as it will add an additional 130,000 tonnes per annum capacity (100 per cent, or about 78,000 tonnes per annum BHP Billiton share) to the smelter for capital at a costsite’s own generation capacity utilising the furnace off-gases. Completion of US$54 million (BHP Billiton share).the furnace is expected during FY2013.
Samancor Gabon Manganese project
The selectionA feasibility study (pre-feasibility study) for the establishment of a manganesenew 300 ktpa mine in Franceville, Gabon, was completedcommenced in July 2010. A small entry mine of approximately 300,000 tonnes per annum (100 per cent, or about 180,000 tonnes per annum BHP Billiton share) was selected as the preferred option. The small entry mine requires growth capital investment of US$43 million (BHP Billiton share) to establish the asset producing approximately 300,000 tonnes per annum of manganese ore by FY2012.project has experienced delays in concluding key agreements and has been placed under review.
2.2.9 Metallurgical Coal Customer Sector Group
Our Metallurgical Coal CSG is the world’s largest supplier of seaborne metallurgical coal. Metallurgical coal, along with iron ore and manganese, is a key input in the production of steel.
Our export customers are steel producers around the world. In FY2012, most of our contracts were annual or long-term volume contracts with prices largely negotiated on a quarterly or monthly basis.
We have production assets in two major resource basins: the Bowen Basin in Central Queensland, Australia, and the Illawarra region of New South Wales, Australia.
Bowen Basin
In comparison with other coal producing regions, theThe Bowen Basin is extremely well positioned to supply the seaborne market because of:
of its high-quality metallurgical coals, which are moreideally suited to efficient in blast furnace use;
the relatively low cost of production because of its extensive near-surface deposits;operations, and
its geographical proximity to Asian customers.
We also have access to key infrastructure, including a modern, integrated electric rail network and our own coal loading terminal at Hay Point, Mackay. This infrastructure enables us to maximise throughput and blending of products from multiple mines to optimise the value of our production and satisfy customer requirements.
Our Bowen Basin mines are owned through a series of joint ventures. We share 50–50 ownership with Mitsubishi Development Pty Ltd in BHP Billiton Mitsubishi Alliance (BMA), which operates the Goonyella Riverside, Broadmeadow, Peak Downs, Saraji, Norwich Park (production ceased), Blackwater and Gregory Crinum mines, together with the Hay Point terminal. The twoCoal terminal through the Central Queensland Coal Associates (CQCA) joint venture and the Gregory joint venture. Our BHP Billiton Mitsui Coal (BMC) operations –asset operates South Walker Creek and Poitrel mines – aremines. BMC is owned by BHP Billiton (80 per cent) and Mitsui and Co (20 per cent).
The reserve lives of the Bowen Basinour mines at target production rates range from sixfour years at Gregory Crinum to 65 years.
Our export customers are steel producers around the world. In FY2010 most of our contracts were long-term or annual volume contracts with prices negotiated annually, however we are now moving predominantly to short-term pricing.
40 years at Saraji. Total attributable production in FY2010FY2012 was approximately 30.8 million tonnes,25.3 Mt compared with 30.1 million tonnes25.7 Mt in FY2009.FY2011. Production in FY2010FY2012 was higher duelargely constrained by industrial action and severe wet weather. Additionally, in April 2012, BMA announced the intention to improved operational and supply chain performance, supported by strong demand.cease production at Norwich Park mine indefinitely, following a review of the mine’s viability. On 10 September 2012, BMA announced its intention to cease production at its Gregory open-cut mine, part of the Gregory Crinum complex, from 10 October 2012.
Production figures for the Bowen Basin include some energy coal (less than five per cent).
Illawarra
We own and operate three underground coal mines in the Illawarra region of New South Wales, which supply metallurgical coal to the nearby BlueScope Port Kembla steelworks, and other domestic and export markets. Total production in FY2010FY2012 was approximately 6.5 million tonnes and the7.9 Mt compared with 6.9 Mt in FY2011. The reserve lives of the Illawarraour mines at target production rates range from four years at West Cliff to 19 years.31 years at Appin.
Production figures for both the Bowen Basin and Illawarra include some energy coal (less than six17 per cent and 13 per cent, respectively)cent).
Information on Metallurgical Coal mining operations
The following table contains additional details of our mining operations. The tables should be read in conjunction with the production (see section 2.3.2) and reserves tables (see section 2.14.2)2.13.2).
Mine & Location |
| Ownership | Operator | Title, Leases or Options | History | Mine Type & | Power Source | Facilities, | ||||||||||
Metallurgical coal | ||||||||||||||||||
Central Queensland Coal Associates (CQCA) joint venture | ||||||||||||||||||
Bowen Basin, Queensland, Australia
| Public road Coal transported by rail to Hay Point and Gladstone ports | BHP Billiton 50% Mitsubishi Development 50% | BMA | Mining leases, including undeveloped tenements, expire between 2012–2037, renewable for further periods as Queensland Government/legislation allows Mining is permitted to continue under the legislation during the renewal application period. Applications have been lodged to renew mining leases expiring in 2012 | Goonyella mine commenced 1971, merged with adjoining Riverside mine 1989 Operates as Goonyella Riverside Production commenced: Peak Downs 1972 Saraji 1974 Norwich Park 1979 Blackwater 1967 Broadmeadow (longwall operations) 2005 | All open-cut except Broadmeadow: longwall underground Bituminous coal is mined from the Permian Moranbah and Rangal Coal measures Products range
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Mine & Location | Means of | Ownership | Operator | Title, Leases or Options | History | Mine Type & | Power Source | Facilities, Use & | ||||||||||
Gregory joint venture | ||||||||||||||||||
Bowen Basin, Queensland, Australia
| Public road Coal transported by rail to Hay Point and Gladstone ports | BHP Billiton 50% Mitsubishi Development 50% | BMA | Mining leases including undeveloped tenements, expire between 2014 – 2027, renewable for further periods as Queensland Government/legislation allows | Production commenced: Gregory 1979 Crinum mine (longwall) 1997 Production at Gregory mine to cease from 10 October 2012 | Gregory: open-cut Crinum: longwall underground Bituminous coal is mined from the Permian German Creek Coal measures Product is a high volatile, low ash hard coking coal, and a medium ash thermal
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BHP Billiton Mitsui Coal Pty Limited | ||||||||||||||||||
Bowen Basin, Queensland, Australia South Walker Creek and Poitrel mines | Public road Coal transported by rail to Hay Point port | BHP Billiton 80% Mitsui and Co 20% | BMC | Mining leases, including undeveloped tenements expire in 2020, renewable for further periods as Queensland Government/legislation allows | South Walker Creek commenced 1996 Poitrel commenced 2006 | Open-cut Bituminous coal is mined from the Permian Rangal Coal measures
Produces a range of coking coal, pulverised coal injection (PCI) coal, and thermal coal products with medium to high phosphorus and ash
properties |
|
| South Walker Creek coal Nominal capacity: in excess of 3.5 mtpa
Poitrel
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Mine & Location | Means of | Ownership | Operator | Title, Leases or Options | History | Mine Type & | Power Source | Facilities, Use & | ||||||||
Illawarra Coal | ||||||||||||||||
Illawarra, New South Wales, Australia
Dendrobium, Appin and West Cliff mines | Public road Coal transported by road or rail to BlueScope Steel’s Port Kembla steelworks or Port Kembla for export | 100% | BHP Billiton | Mining leases expire between 2012–2026, renewable for further periods as NSW Government/legislation allows Mining is permitted to continue under the legislation during the application period Applications lodged to renew mining leases expiring in 2012 and 2013 | Production commenced: Appin 1962 (longwall operations 1969) West Cliff 1976 Dendrobium 2005 | Underground Bituminous coal is mined from the Permian Illawarra Coal Measures Produces
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Development projects
Bowen Basin Expansions
In November 2011, approval was given for the development of the Caval Ridge mine project and expansion of the Peak Downs mine in the Bowen Basin in Central Queensland, Australia. In response to the challenging external environment, the Group has chosen to delay indefinitely the 2.5 mtpa (100 per cent basis) expansion of Peak Downs that is associated with the Caval Ridge mine development. The 5.5 mtpa (100 per cent basis) Caval Ridge mine remains on schedule to deliver first production in CY2014.
The Caval Ridge mine will be an open-cut dragline and truck and shovel operation, with coal railed to the BMA Hay Point Coal terminal.
In March 2011, approval was given for three key metallurgical coal projects located in the Bowen Basin in Central Queensland, Australia. The projects are expected to add 4.9 Mt of annual mine capacity (100 per cent basis) through development of the Daunia Operation and a new mining area at Broadmeadow. In addition, 11 Mt of annual port capacity (100 per cent basis) will be developed at the Hay Point Coal terminal. These projects are ongoing with first coal expected from the Daunia mine in 2013, completion of the Broadmeadow expansion expected in 2013 and the first shipments from the expanded terminal expected in FY2015.
IndoMet Coal Project (Indonesia)
IndometIndoMet Coal includes the Maruwai and Juloicomprises seven coal contracts of work (CCoWs) covering a large metallurgical coal concessionsresource in Kalimantan, Indonesia, andwhich was discovered by BHP Billiton Exploration in the 1990’s.1990s. Following a strategican assessment of the importance of local participation in the development ofdeveloping the project in 2010, we sold a 25 per cent interest in the project was sold to a subsidiary of PT Adaro Energy TBK. We retain 75 per cent of the project and hold management responsibility for the project.
Study work is underway to identify development options across our mining areas of interest (Coal Contracts of Work).CCoWs and early work on infrastructure development has commenced.
Bowen Basin ExpansionsAppin Area 9 Project
BMA is currently investigatingIn June 2012, approval was given to invest US$845 million to sustain operations at Illawarra Coal, in southern New South Wales, Australia, by establishing a number of brownfield and greenfield expansion options in the Bowen Basin, including:
Daunia Coal Mine (greenfield project);
Caval Ridge Mine (greenfield project);
Goonyella Riverside Mine Expansion (brownfield project);
Hay Point Coal Terminal Expansion (brownfield project).
Daunia, located to the east of the Poitrel mine, has been designed with capacity to produce up to 4 million tonnes per annum, and thereplacement mining area at Appin mine. The replacement area will have a production capacity of Caval Ridge, located to the north of the Peak Downs mine, would3.5 mtpa and will sustain Illawarra Coal’s production capacity at 9 mtpa. Appin Area 9 will be up to 5.5 million tonnes per annum (100 per cent, or 2.75 million tonnes per annum BHP Billiton share)operational in addition to potential expansion of Peak Downs mine of 2.5 million tonnes per annum (100 per cent, or 1.25 million tonnes per annum BHP Billiton share). Both developments would include coal handling preparation plants. We are assessing the optimal time to advance these projects2016 and we are continuing to progress owner and government approvals.
To support this growth, BMA is progressing owner and government approvals to increase the capacity of the Hay Point Coal Terminal from 44 million tonnes per annum to 55 million tonnes per annum in a first phase expansion (HPX3). We have committed pre-approval expenditure for further project studies and items requiring long lead times. A potential further stage (HPX4) would increase capacity from 55 million tonnes per annum to approximately 75 million tonnes per annum. We were also awarded ‘preferred developer’ status for the construction of a new coal terminalwill replace production at the X80 site at Abbot Point, with a capacity of at least 30 million tonnes per annum.West Cliff mine. The project includes roadway development, new ventilation infrastructure, new and reconfigured conveyors and other mine services.
2.2.10 Energy Coal Customer Sector Group
Our Energy Coal CSG is one of the world’s largest producers and marketers of export energy coal (also known as thermal or steaming coal) and is also a significant domestic supplier to the electricity generation industry in Australia, South Africa and the United States. Our global portfolio of energy coal assets and our insights into the broader energy market through our sales of other fuels such as gas,(gas, uranium and oil, and our control of options for bulk freightoil) provide our business with keysubstantial advantages as a supplier. Like our other businesses, our Energy Coal CSG owns large, long-life assets with substantial options for expansion.
We generally make our domestic sales under long-term fixed-pricefixed price or cost plus contracts with nearby power stations that are located in close proximity to the mine.stations. We make export sales to power generators and some industrial users in Asia, Europe and the United States, usually under contracts for delivery of a fixed volume of coal. Pricing is either index-linked or fixed; where pricing is fixed, in which case we use financial instruments are used to swap our fixed-price exposure for exposure to market indexed prices.
We recognise that the need to control carbon dioxide emissions has substantial implications for the use of thermal coal as an energy source. We have committed to invest US$300 million over five years from June 2007 to support the research, development and demonstration of low-emissions technologies, including ‘clean coal’ and carbon sequestration technologies.index basis.
We operate three sets of assets: a group of mines and associated infrastructure collectively known as BHP Billiton Energy Coal South Africa (BECSA);Africa; our New Mexico Coal operations in the United States; and our NSWNew South Wales Energy Coal operations in Australia. We also own a one-third33.33 per cent share of the Cerrejón Coal Company, which operates a coal mine in Colombia.
BHP Billiton Energy Coal South Africa
BECSABHP Billiton Energy Coal South Africa (BECSA) operates threefour coal mines being Khutala, Klipspruit, Middelburg and Wolvekrans in the Witbank region of Mpumalanga province of South Africa, which in FY2012 produced a totalapproximately 33 Mt. The reserve lives of approximately 30.5 million tonnes in FY2010. We have a major mine expansion project underway in South Africa (see Development projects below). our mines range from eight years at Khutala and Klipspruit to 29 years at Middelburg.
In FY2010,FY2012, BECSA sold approximately 6457 per cent of its production to Eskom, the government-owned electricity utility in South Africa and exported the rest via the Richards Bay Coal Terminal (RBCT), in which we own a 2422 per cent share.
During FY2012, BECSA entered into an empowerment transaction with a black-owned consortium, which will effectively hold an eight per cent equity interest in BECSA once the transaction is completed. The reserve livesshareholders of BECSA have also approved the implementation of an Employee Share Ownership Plan (ESOP) in which participating employees will hold a beneficial interest of two per cent equity in BECSA for a vested period. The empowerment transaction and the introduction of the BECSA mines at current production rates range from 11ESOP are expected to 24 years.be completed in FY2013.
New Mexico Coal
We own and operate the Navajo mine, located on Navajo Nation land in New Mexico, and the nearby San Juan mine.mine located in the state of New Mexico. Each of these minesmine transports its production directly to a nearby power station. The reserve lives of our mines are four years at Navajo mine and six years at San Juan atMine, being the life of the current production rates are 21 and 10 years, respectively.customer contracts. New Mexico Coal produced approximately 13.5 million tonnes9.4 Mt in FY2010.FY2012.
NSWNew South Wales Energy Coal
Our NSWNew South Wales Energy CoalCoal’s operating asset is the Mt Arthur Coal open-cut coal mine located in the Hunter Valley region of New South Wales, which produced approximately 12 million tonnes17 Mt in FY2010FY2012 and has a reserve life at current production rates of 5545 years. We have a project in execution and a number of studies underway to evaluate expansion opportunities for this operation (see Development projects below). In FY2010,FY2012, we delivered approximately 1810 per cent of Mt Arthur’s production to a local power station and exported the rest via the port of Newcastle. During FY2012, the RX1 project achieved first production ahead of schedule. This project is expected to increase run-of-mine thermal coal production by approximately four mtpa. We are a 35.5 per cent shareholder in Newcastle Coal Infrastructure Group, a jointly controlled entity that is operating the Newcastle Third Port export coal loading facility and currently has a project in execution (see Development projects below). We also have a 1.75 per cent interest in Port Waratah Coal Services Limited which operates two coal loading facilities at the port of Newcastle.
Cerrejón Coal Company
We have a one-third interest in Cerrejón Coal Company, which owns and operates one of the largest open-cut export coal mines in the world in La Guajira province of Colombia, together withas well as integrated rail and port facilities through which the majority of production is exported.exported to European, Middle Eastern, North American and Asian customers. In FY2008,FY2012, Cerrejón completed ancommenced its expansion that increasedproject (P40), which will increase BHP Billiton’s share of saleable production from 10.7 mtpa to 13.3 mtpa (see Development projects below). Cerrejón has a current production capacity toof 32 million tonnes per annummtpa (100 per cent terms). At Cerrejón’s current rate of production, Cerrejón and has a reserve life of 21 years.
Information on Energy Coal mining operations
The following table contains additional details of our mining operations. The tablestable should be read in conjunction with the production (see section 2.3.2) and reserves tables (see section 2.14.2)2.13.2).
| Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & | Power Source | Facilities, | ||||||||||||
100 km east of Johannesburg, Gauteng Province, South Africa | Public road Domestic coal transported by overland conveyor to Kendal Power Station | 100% | BHP Billiton | BECSA holds a 100% share of Converted Mining Right, which was granted on 11 October 2011 | Production commenced 1984 Open-cut operations 1996 Commenced mining thermal/metallurgical coal for domestic market 2003 | Combination open-cut and underground
Produces a medium rank bituminous thermal coal (non-coking)
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Middelburg/Wolvekrans | ||||||||||||||||||||
20 km southeast of Witbank, Mpumalanga Province, South Africa | Public road Export coal transported to RBCT by rail Domestic coal transported by conveyor to Duvha Power Station | 100% Previous JV (84:16) with Xstrata Plc (through Tavistock Collieries Pty Limited) was amended in February 2008 | BHP Billiton | BECSA and Tavistock are joint holders of 3 Converted Mining Rights in the previous JV ratio (84:16). BECSA is the 100% holder of a fourth Converted Mining Right All 4 Rights comprise the Middelburg Mine Complex (1) The Converted Mining Rights were granted during October and December 2011(2) | Production commenced 1982 Middelburg Mine Services (MMS) and Duvha Opencast became one operation in 1995 Douglas-Middelburg Optimisation project completed in July 2010 During FY2011 the mine was split into Middelburg and Wolvekrans | Open-cut
Produces a medium rank bituminous thermal coal, most of which can be beneficiated for the European or Asian export
| Eskom under long-term contracts |
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(1) This includes the Wolvekrans and Middelburg collieries and excludes the portion Tavistock (2) JV agreement has been amended such that upon the Department of Mineral Resources |
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| Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & Style | Power Source | Facilities, Use & | ||||||||||
Klipspruit | ||||||||||||||||||
30 km west of Witbank, Mpumalanga Province, South Africa | Public road Export coal transported to RBCT by rail | 100% 50% of Phola Coal Plant in JV with Anglo Inyosi Coal | BHP Billiton | BECSA holds a Converted Mining Right, which was granted on 11 October 2011 | Production commenced 2003 Expansion project completed FY2010, includes 50% share in Phola Coal Plant Expected ROM capacity: 8.0 mtpa at full ramp-up | Open-cut
Produces a medium rank bituminous thermal coal, most of which can be beneficiated for the European or Asian export
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Mt Arthur Coal |
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Approximately 125 km from Newcastle, New South Wales, Australia | Public road Domestic coal transported by conveyor to Bayswater Power Station Export coal transported by rail to Newcastle port | 100% | BHP Billiton | Various mining leases and licences expire 2010–2032 Renewal is being sought for expired mining leases The original approvals permit mining and other activities to continue during renewal application | Production commenced 2002 Government approval permits extraction of up to 36 Mt of run of mine coal from underground and open-cut operations, with open-cut extraction limited to 32 mtpa | Open-cut
Produces a medium rank bituminous thermal coal (non- coking)
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Nominal capacity: in excess of
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US | ||||||||||||||||||||||
30 km southwest of Farmington, New Mexico, US | Public road Coal transported by rail to Four Corners Power Plant (FCPP) | 100% | BHP Billiton | Long-term lease from Navajo Nation continues for as long as coal can be economically produced and sold in paying quantities | Production commenced 1963 | Open-cut
Produces a medium rank bituminous thermal coal (non-coking suitable for the domestic market only)
| Four Corners Power Plant |
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Mine & Location | Means of Access | Ownership | Operator | Title, Leases or | History | Mine Type & Style | Power Source | Facilities, Use & | ||||||||||||
San Juan | ||||||||||||||||||||
25 km west of Farmington, New Mexico, US | Public road Coal transported by truck and conveyor to San Juan Generating Station (SJGS) | 100% | BHP Billiton | Mining leases from federal and state governments Leases viable as long as minimum production criteria achieved | Surface mine operations commenced 1973 Development of underground mine to replace open-cut mine approved 2000 | Underground
Produces a medium rank bituminous thermal coal (non-coking suitable for the domestic market only)
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Colombia | ||||||||||||||||||||
La Guajira province, Colombia | Public road Coal exported by rail to Puerto Bolivar | |||||||||||||||||||
BHP Billiton 33.33% Anglo American 33.33% Xstrata 33.33% | Cerrejón Coal Company | Mining leases expire 2034 | Original mine began producing in 1976
| Open-cut
Produces a medium rank bituminous thermal coal (non-coking, suitable for the export market)
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| Beneficiation
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Development projects
Douglas-Middelburg OptimisationCerrejón Coal P40 Project
This project involves works to optimiseOn 18 August 2011, we announced a US$437 million (BHP Billiton share) investment in the developmentexpansion of existing reserves acrossCerrejón Coal, known as the Douglas and Middelburg collieries, the development of additional mining areas and the construction of a new 14 million tonnes per annum coal processing plant,P40 Project, which will replace the less efficient existing plant at Douglas.enable Cerrejón Coal’s saleable thermal coal production to increase by 8.0 mtpa to approximately 40 mtpa. We have a one-third interest in Cerrejón Coal. The work will enable us to maintain energy coal exports from the combined Douglas and Middelburg colliery at around current levels (approximately 10 million tonnes per annum) while also fulfilling our domestic contractual commitments. The capital investmentexpansion project is expected to be within budgetincrease our share of saleable production from 10.7 mtpa to 13.3 mtpa. Construction commenced in CY2011 with completion expected in CY2013. The project scope includes a second berth and dual quadrant ship loader at Cerrejón’s 100 per cent owned and operated Puerto Bolivar, along with necessary mine, rail and associated supply chain infrastructure.
Newcastle Port Third Phase Expansion
On 31 August 2011, we announced a US$367 million (BHP Billiton share) investment in the new plantthird stage development of the Newcastle Coal Infrastructure Group’s coal handling facility in Newcastle, Australia. The port expansion project will increase total capacity at the coal terminal from 53 mtpa to 66 mtpa. This will increase New South Wales Energy Coal’s allocation by a further 4.6 mtpa to 19.2 mtpa. First coal is currently being completedscheduled to occur in FY2014, with the first train load of coal railed on 30 July 2010.
Mt Arthur open-cut expansions
On 24 July 2009, we announced the Mt Arthur Coal (MAC) mine expansion, which is designed to increase production of saleable thermal coal by an increment of approximately 3.5 million tonnes per annum. Known as the MAC 20 Project, it isterminal expected to commence operation inoperate at full capacity within the first half of CY2011 at an estimated capital investment of US$260 million.following 12 months.
We have submitted a development consent application to expand the production capacity of the mine to 32 million tonnes per annum open-cut and 4 million tonnes per annum underground. Studies are underway to examine the expansion of the mine to utilise this capacity.
2.3.1 Petroleum
The table below details Petroleum’s historical net crude oil and condensate, natural gas and natural gas liquids production, primarily by geographic segment, for each of the three years ended 30 June 2010, 20092012, 2011 and 2008.2010. We have shown volumes of marketable production after deduction of applicable royalties, fuel and flare. We have included in the table average production costs per unit of production and average sales prices for oil and condensate and natural gas for each of those periods.
BHP Billiton Group share of production Year ended 30 June | BHP Billiton Group share of production Year ended 30 June | |||||||||||||||||
2010 | 2009 | 2008 | 2012 | 2011 | 2010 | |||||||||||||
Production volumes | ||||||||||||||||||
Crude oil and condensate(‘000 of barrels) | ||||||||||||||||||
Crude oil and condensate(’000 of barrels) | ||||||||||||||||||
Australia | 31,540 | 32,496 | 30,386 | 31,145 | 40,447 | 31,540 | ||||||||||||
United States | 41,522 | 20,818 | 12,437 | 30,824 | 30,157 | 41,522 | ||||||||||||
Other | 11,325 | 13,014 | 14,621 | 9,232 | 9,987 | 11,325 | ||||||||||||
|
|
| ||||||||||||||||
Total crude oil and condensate | 84,387 | 66,328 | 57,444 | 71,201 | 80,591 | 84,387 | ||||||||||||
|
|
| ||||||||||||||||
Natural gas(1) (billion cubic feet) | ||||||||||||||||||
Natural gas(billion cubic feet) | ||||||||||||||||||
Australia | 259.65 | 258.14 | 262.69 | 249.97 | 274.74 | 259.65 | ||||||||||||
United States | 17.68 | 11.91 | 10.44 | 456.69 | 49.09 | 17.68 | ||||||||||||
Other | 91.24 | 92.75 | 93.41 | 115.60 | 81.23 | 91.24 | ||||||||||||
|
|
| ||||||||||||||||
Total natural gas(1) | 368.57 | 362.80 | 366.54 | |||||||||||||||
Total natural gas | 822.26 | 405.06 | 368.57 | |||||||||||||||
|
|
| ||||||||||||||||
Natural Gas Liquids(1) (2) (‘000 of barrels) | ||||||||||||||||||
Natural Gas Liquids(1) (’000 of barrels) | ||||||||||||||||||
Australia | 8,652 | 7,977 | 9,253 | 7,943 | 7,962 | 8,652 | ||||||||||||
United States | 2,545 | 1,128 | 809 | 5,744 | 1,980 | 2,545 | ||||||||||||
Other | 1,552 | 2,071 | 1,471 | 398 | 1,341 | 1,552 | ||||||||||||
|
|
| ||||||||||||||||
Total NGL(1) (2) | 12,749 | 11,176 | 11,533 | |||||||||||||||
Total NGL(1) | 14,085 | 11,283 | 12,749 | |||||||||||||||
|
|
| ||||||||||||||||
Total petroleum products production(million barrels of oil equivalent)(3) | ||||||||||||||||||
Total petroleum products production(million barrels of oil equivalent)(2) | ||||||||||||||||||
Australia | 83.47 | 83.50 | 83.42 | 80.75 | 94.20 | 83.47 | ||||||||||||
United States | 47.01 | 23.93 | 14.99 | 112.69 | 40.32 | 47.01 | ||||||||||||
Other | 28.08 | 30.54 | 31.66 | 28.90 | 24.86 | 28.08 | ||||||||||||
|
|
| ||||||||||||||||
Total petroleum products production(million barrels of oil equivalent)(3) | 158.56 | 137.97 | 130.07 | |||||||||||||||
Total petroleum products production(million barrels of oil equivalent)(2) | 222.34 | 159.38 | 158.56 | |||||||||||||||
|
|
| ||||||||||||||||
Average sales price | ||||||||||||||||||
Crude oil and condensate(US$ per barrel) | ||||||||||||||||||
Australia | 114.33 | 96.32 | 74.12 | |||||||||||||||
United States | 106.22 | 90.01 | 71.55 | |||||||||||||||
Other | 113.26 | 90.69 | 75.57 | |||||||||||||||
|
|
| ||||||||||||||||
Total crude oil and condensate | 110.66 | 93.29 | 73.05 | |||||||||||||||
|
|
| ||||||||||||||||
Natural gas(US$ per thousand cubic feet) | ||||||||||||||||||
Australia | 4.62 | 4.21 | 3.52 | |||||||||||||||
United States | 2.82 | 3.48 | 4.80 | |||||||||||||||
Other | 4.13 | 3.92 | 3.05 | |||||||||||||||
|
|
| ||||||||||||||||
Total natural gas | 3.40 | 4.00 | 3.43 | |||||||||||||||
|
|
| ||||||||||||||||
Natural Gas Liquids(US$ per barrel) | ||||||||||||||||||
Australia | 61.61 | 58.05 | 48.20 | |||||||||||||||
United States | 45.72 | 49.79 | 39.51 | |||||||||||||||
Other | 55.06 | 59.54 | 49.40 | |||||||||||||||
|
|
| ||||||||||||||||
Total NGL | 54.85 | 56.77 | 46.47 | |||||||||||||||
|
|
| ||||||||||||||||
Total average production cost(US$ per barrel of oil equivalent)(3) | ||||||||||||||||||
Australia | 7.95 | 5.75 | 5.59 | |||||||||||||||
United States | 5.91 | 6.45 | 5.62 | |||||||||||||||
Other | 7.84 | 8.39 | 7.48 | |||||||||||||||
|
|
| ||||||||||||||||
Total average production cost(US$ per barrel of oil equivalent)(3) | 6.90 | 6.34 | 5.93 | |||||||||||||||
|
|
|
Average sales price Crude oil and condensate(US$ per barrel) Australia United States Other Total crude oil and condensate Natural gas(US$ per thousand cubic feet) Australia United States Other Total natural gas Natural Gas Liquids(US$ per barrel) Australia United States Other Total NGL Average Production Cost(US$ per barrel of oil equivalent)(4) Australia United States Other Average Production Cost(US$ per barrel of oil equivalent)(4) BHP Billiton Group share of production
Year ended 30 June 2010 2009 2008 74.12 70.32 98.00 71.55 62.90 97.69 75.57 60.69 91.60 73.05 66.18 96.27 3.52 3.07 3.20 4.80 6.61 10.37 3.05 4.08 4.09 3.43 3.57 3.75 48.20 44.71 56.97 39.51 48.19 58.98 49.40 38.88 49.83 46.47 43.91 56.15 5.59 4.51 3.61 5.62 7.20 6.84 7.48 6.74 7.37 5.93 5.47 4.90
(1) |
LPG and |
Total |
Average production costs include direct and indirect costs relating to the production of hydrocarbons and the foreign exchange effect of translating local currency denominated costs into US dollars but excludes ad valorem and severance taxes. |
2.3.2 Minerals
The table below details our mineral and derivative product production for all CSGs except Petroleum for the three years ended 30 June 2010, 20092012, 2011 and 2008.2010. Production shows our share unless otherwise stated. For discussion of minerals pricing during the past three years, refer to section 3.4.1.
BHP Billiton Group | BHP Billiton Group share of production Year ended 30 June | BHP Billiton Group interest % | BHP Billiton Group share of production Year ended 30 June | |||||||||||||||||||||
interest % | 2010 | 2009 | 2008 | 2012 | 2011 | 2010 | ||||||||||||||||||
Aluminium | ||||||||||||||||||||||||
Alumina | ||||||||||||||||||||||||
Production (‘000 tonnes) | ||||||||||||||||||||||||
Production (’000 tonnes) | ||||||||||||||||||||||||
Worsley, Australia | 86.0 | 3,054 | 2,924 | 3,035 | 86.0 | 2,917 | 2,902 | 3,054 | ||||||||||||||||
Paranam, Suriname(1) | 45.0 | 78 | 935 | 983 | 45.0 | – | – | 78 | ||||||||||||||||
Alumar, Brazil | 36.0 | 709 | 537 | 536 | 36.0 | 1,235 | 1,108 | 709 | ||||||||||||||||
|
|
| ||||||||||||||||||||||
Total alumina | 3,841 | 4,396 | 4,554 | 4,152 | 4,010 | 3,841 | ||||||||||||||||||
|
|
| ||||||||||||||||||||||
Aluminium | ||||||||||||||||||||||||
Production (‘000 tonnes) | ||||||||||||||||||||||||
Hillside, RSA | 100.0 | 710 | 702 | 695 | ||||||||||||||||||||
Bayside, RSA | 100.0 | 98 | 99 | 168 | ||||||||||||||||||||
Production (’000 tonnes) | ||||||||||||||||||||||||
Hillside, South Africa | 100.0 | 621 | 711 | 710 | ||||||||||||||||||||
Bayside, South Africa | 100.0 | 98 | 97 | 98 | ||||||||||||||||||||
Alumar, Brazil | 40.0 | 174 | 177 | 178 | 40.0 | 170 | 174 | 174 | ||||||||||||||||
Mozal, Mozambique | 47.1 | 259 | 255 | 257 | 47.0 | 264 | 264 | 259 | ||||||||||||||||
|
|
| ||||||||||||||||||||||
Total aluminium | 1,241 | 1,233 | 1,298 | 1,153 | 1,246 | 1,241 | ||||||||||||||||||
|
|
| ||||||||||||||||||||||
Base Metals(2) | ||||||||||||||||||||||||
Copper | ||||||||||||||||||||||||
Payable metal in concentrate (’000 tonnes) | ||||||||||||||||||||||||
Escondida, Chile | 57.5 | 333.8 | 390.5 | 448.1 | ||||||||||||||||||||
Antamina, Peru | 33.8 | 127.0 | 97.8 | 98.6 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Total copper concentrate | 460.8 | 488.3 | 546.7 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Cathode(’000 tonnes) | ||||||||||||||||||||||||
Escondida, Chile | 57.5 | 172.0 | 179.1 | 174.2 | ||||||||||||||||||||
Pampa Norte, Chile(4) | 100.0 | 263.7 | 272.2 | 244.8 | ||||||||||||||||||||
Pinto Valley, United States(3) | 100.0 | 5.4 | 5.7 | 6.2 | ||||||||||||||||||||
Olympic Dam, Australia | 100.0 | 192.6 | 194.1 | 103.3 | ||||||||||||||||||||
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|
| ||||||||||||||||||||||
Total copper cathode | 633.7 | 651.1 | 528.5 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Total copper concentrate and cathode | 1,094.5 | 1,139.4 | 1,075.2 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Lead | ||||||||||||||||||||||||
Payable metal in concentrate (’000 tonnes) | ||||||||||||||||||||||||
Cannington, Australia | 100.0 | 239.1 | 243.4 | 245.4 | ||||||||||||||||||||
Antamina, Peru | 33.8 | 0.8 | 1.2 | 3.0 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Total lead | 239.9 | 244.6 | 248.4 | |||||||||||||||||||||
|
|
|
BHP Billiton Group | BHP Billiton Group share of production Year ended 30 June | BHP Billiton Group interest % | BHP Billiton Group share of production Year ended 30 June | |||||||||||||||||||||
interest % | 2010 | 2009 | 2008 | 2012 | 2011 | 2010 | ||||||||||||||||||
Base Metals(2) | ||||||||||||||||||||||||
Copper | ||||||||||||||||||||||||
Payable metal in concentrate (‘000 tonnes) | ||||||||||||||||||||||||
Escondida, Chile | 57.5 | 448.1 | 417.6 | 679.5 | ||||||||||||||||||||
Antamina, Peru | 33.8 | 98.6 | 109.0 | 111.7 | ||||||||||||||||||||
Pinto Valley, US(3) | 100.0 | — | 33.3 | 26.8 | ||||||||||||||||||||
Total copper concentrate | 546.7 | 559.9 | 818.0 | |||||||||||||||||||||
Cathode(‘000 tonnes) | ||||||||||||||||||||||||
Escondida, Chile | 57.5 | 174.2 | 172.1 | 131.6 | ||||||||||||||||||||
Cerro Colorado, Chile | 100.0 | 85.2 | 102.1 | 106.4 | ||||||||||||||||||||
Spence, Chile | 100.0 | 159.6 | 172.7 | 142.7 | ||||||||||||||||||||
Pinto Valley, US(3) | 100.0 | 6.2 | 6.2 | 6.9 | ||||||||||||||||||||
Olympic Dam, Australia | 100.0 | 103.3 | 194.1 | 169.9 | ||||||||||||||||||||
Total copper cathode | 528.5 | 647.2 | 557.5 | |||||||||||||||||||||
Total copper concentrate and cathode | 1,075.2 | 1,207.1 | 1,375.5 | |||||||||||||||||||||
Lead | ||||||||||||||||||||||||
Payable metal in concentrate (‘000 tonnes) | ||||||||||||||||||||||||
Cannington, Australia | 100.0 | 245.4 | 226.8 | 251.5 | ||||||||||||||||||||
Antamina, Peru | 33.8 | 3.0 | 3.3 | 1.6 | ||||||||||||||||||||
Total lead | 248.4 | 230.1 | 253.1 | |||||||||||||||||||||
Zinc | ||||||||||||||||||||||||
Payable metal in concentrate (‘000 tonnes) | ||||||||||||||||||||||||
Payable metal in concentrate (’000 tonnes) | ||||||||||||||||||||||||
Cannington, Australia | 100.0 | 62.7 | 54.8 | 61.0 | 100.0 | 54.7 | 60.7 | 62.7 | ||||||||||||||||
Antamina, Peru | 33.8 | 135.6 | 108.4 | 83.5 | 33.8 | 57.5 | 91.5 | 135.6 | ||||||||||||||||
|
|
| ||||||||||||||||||||||
Total zinc | 198.3 | 163.2 | 144.5 | 112.2 | 152.2 | 198.3 | ||||||||||||||||||
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|
| ||||||||||||||||||||||
Gold | ||||||||||||||||||||||||
Payable metal in concentrate (‘000 ounces) | ||||||||||||||||||||||||
Payable metal in concentrate (’000 ounces) | ||||||||||||||||||||||||
Escondida, Chile | 57.5 | 76.4 | 67.3 | 79.7 | 57.5 | 50.9 | 84.7 | 76.4 | ||||||||||||||||
Olympic Dam, Australia (refined gold) | 100.0 | 65.5 | 108.0 | 80.5 | 100.0 | 117.8 | 111.4 | 65.5 | ||||||||||||||||
Pinto Valley, US(3) | 100.0 | — | 0.9 | 1.3 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Total gold | 141.9 | 176.2 | 161.5 | 168.7 | 196.1 | 141.9 | ||||||||||||||||||
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|
| ||||||||||||||||||||||
Silver | ||||||||||||||||||||||||
Payable metal in concentrate (‘000 ounces) | ||||||||||||||||||||||||
Payable metal in concentrate (’000 ounces) | ||||||||||||||||||||||||
Escondida, Chile | 57.5 | 2,874 | 2,765 | 3,604 | 57.5 | 1,921 | 2,849 | 2,874 | ||||||||||||||||
Antamina, Peru | 33.8 | 4,712 | 4,090 | 3,505 | 33.8 | 4,272 | 3,600 | 4,712 | ||||||||||||||||
Cannington, Australia | 100.0 | 37,276 | 33,367 | 35,485 | 100.0 | 34,208 | 35,225 | 37,276 | ||||||||||||||||
Olympic Dam, Australia (refined silver) | 100.0 | 500 | 937 | 780 | 100.0 | 907 | 982 | 500 | ||||||||||||||||
Pinto Valley, US(3) | 100.0 | — | 182 | 113 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Total silver | 45,362 | 41,341 | 43,487 | 41,308 | 42,656 | 45,362 | ||||||||||||||||||
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|
| ||||||||||||||||||||||
Uranium oxide | ||||||||||||||||||||||||
Payable metal in concentrate (tonnes) | ||||||||||||||||||||||||
Olympic Dam, Australia | 100.0 | 2,279 | 4,007 | 4,144 | 100.0 | 3,885 | 4,045 | 2,279 | ||||||||||||||||
|
|
| ||||||||||||||||||||||
Total uranium oxide | 2,279 | 4,007 | 4,144 | 3,885 | 4,045 | 2,279 | ||||||||||||||||||
|
|
| ||||||||||||||||||||||
Molybdenum | ||||||||||||||||||||||||
Payable metal in concentrate (tonnes) | ||||||||||||||||||||||||
Antamina, Peru | 33.8 | 813 | 1,363 | 2,542 | 33.8 | 2,346 | 1,445 | 813 | ||||||||||||||||
Pinto Valley, US(3) | 100.0 | — | 159 | — | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Total molybdenum | 813 | 1,522 | 2,542 | 2,346 | 1,445 | 813 | ||||||||||||||||||
|
|
| ||||||||||||||||||||||
Diamonds and Specialty Products | ||||||||||||||||||||||||
Diamonds | ||||||||||||||||||||||||
Production (’000 carats) | ||||||||||||||||||||||||
EKATITM, Canada | 80.0 | 1,784 | 2,506 | 3,050 | ||||||||||||||||||||
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|
| ||||||||||||||||||||||
Total diamonds | 1,784 | 2,506 | 3,050 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Titanium minerals(5) | ||||||||||||||||||||||||
Production (’000 tonnes) | ||||||||||||||||||||||||
Titanium slag | ||||||||||||||||||||||||
Richards Bay Minerals, South Africa(6) | 37.8 | 384 | 366 | 317 | ||||||||||||||||||||
Rutile | ||||||||||||||||||||||||
Richards Bay Minerals, South Africa(6) | 37.8 | 38 | 32 | 34 | ||||||||||||||||||||
Zircon | ||||||||||||||||||||||||
Richards Bay Minerals, South Africa(6) | 37.8 | 100 | 83 | 83 | ||||||||||||||||||||
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|
| ||||||||||||||||||||||
Total titanium minerals | 522 | 481 | 434 | |||||||||||||||||||||
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| ||||||||||||||||||||||
Stainless Steel Materials | ||||||||||||||||||||||||
Nickel | ||||||||||||||||||||||||
Production (’000 tonnes) | ||||||||||||||||||||||||
Cerro Matoso, Colombia | 99.9 | 48.9 | 40.0 | 49.6 | ||||||||||||||||||||
Yabulu, Australia(7) | 100.0 | – | – | 2.8 | ||||||||||||||||||||
Nickel West, Australia | 100.0 | 109.0 | 112.7 | 123.8 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Total nickel | 157.9 | 152.7 | 176.2 | |||||||||||||||||||||
|
|
|
Diamonds and Specialty Products Diamonds Production (‘000 carats) EKATI, Canada Total diamonds Titanium minerals(4) Production (‘000 tonnes) Titanium slag Richards Bay Minerals, RSA(5) Rutile Richards Bay Minerals, RSA(5) Zircon Richards Bay Minerals, RSA(5) Total titanium minerals Stainless Steel Materials Nickel Production (‘000 tonnes) Cerro Matoso, Colombia Yabulu, Australia(6) Nickel West, Australia Total nickel Cobalt Production (‘000 tonnes) Yabulu, Australia(6) Total cobalt Iron Ore(7) Production (‘000 tonnes) Newman, Australia (8) Mt Goldsworthy, Australia Area C joint venture, Australia Yandi, Australia Samarco, Brazil Total iron ore Manganese Manganese ores Saleable production (‘000 tonnes) Hotazel, South Africa(9) GEMCO, Australia(9) Total manganese ores Manganese alloys Saleable production (‘000 tonnes) South Africa(9)(10) Australia (9) Total manganese alloys BHP Billiton
Group BHP Billiton Group share of production
Year ended 30 June interest % 2010 2009 2008 80.0 3,050 3,221 3,349 3,050 3,221 3,349 37.76 317 490 480 37.76 34 44 43 37.76 83 120 120 434 654 643 99.9 49.6 50.5 41.8 100.0 2.8 33.9 28.0 100.0 123.8 88.7 98.1 176.2 173.1 167.9 100.0 0.1 1.4 1.7 0.1 1.4 1.7 85.0 32,097 31,350 35,449 85.0 1,688 1,416 941 85.0 38,687 35,513 27,130 85.0 41,396 37,818 40,276 50.0 11,094 8,318 8,464 124,962 114,415 112,260 44.4 2,718 2,191 3,040 60.0 3,406 2,284 3,535 6,124 4,475 6,575 60.0 364 301 513 60.0 219 212 262 583 513 775
Metallurgical Coal(11) Production (‘000 tonnes) Blackwater Goonyella Riverside(12) Peak Downs Saraji Norwich Park Gregory Joint Venture Total BMA, Australia South Walker Creek Poitrel Total BHP Mitsui Coal, Australia(13) Illawarra, Australia Total metallurgical coal Energy Coal Production (‘000 tonnes) Navajo San Juan Total New Mexico Douglas/Middelburg(14) Khutala Klipspruit Optimum Total BECSA(15) Mt Arthur Coal, Australia Cerrejón Coal Company, Colombia Total energy coal Iron Ore(8) Production (’000 tonnes) Newman, Australia(9) Goldsworthy joint venture, Australia Area C joint venture, Australia Yandi joint venture, Australia Samarco, Brazil Total iron ore Manganese Manganese ores Saleable production (’000 tonnes) Hotazel Manganese Mines, South Africa(10) GEMCO, Australia(10) Total manganese ores Manganese alloys Saleable production (’000 tonnes) Metalloys, South Africa(10)(11) TEMCO, Australia(10) Total manganese alloys Metallurgical Coal(12) Production (’000 tonnes) Blackwater, Australia Goonyella Riverside, Australia(13) Peak Downs, Australia Saraji, Australia Norwich Park, Australia Gregory Joint Venture, Australia(14) Total BMA, Australia South Walker Creek, Australia Poitrel, Australia Total BHP Billiton Mitsui Coal, Australia(15) Illawarra, Australia Total metallurgical coal Energy Coal Production (’000 tonnes) Navajo, United States San Juan, United States Total New Mexico Middelburg/Wolvekrans, South Africa(16) Khutala, South Africa Klipspruit, South Africa Total BECSA Mt Arthur Coal, Australia Cerrejón Coal Company, Colombia Total energy coal BHP Billiton
Group BHP Billiton Group share of production
Year ended 30 June interest % 2010 2009 2008 50.0 5,733 5,382 5,632 50.0 6,668 6,685 6,037 50.0 4,332 4,390 4,094 50.0 3,402 3,505 2,896 50.0 1,870 1,984 2,026 50.0 2,398 2,762 2,110 24,403 24,708 22,795 3,609 2,978 2,862 2,834 2,457 2,271 80.0 6,443 5,435 5,133 100.0 6,535 6,273 7,265 37,381 36,416 35,193 100.0 7,465 8,363 7,533 100.0 6,013 5,773 6,119 13,478 14,136 13,652 100.0 14,703 14,807 17,003 100.0 10,868 11,125 13,327 100.0 4,887 3,964 3,440 — — — 11,302 30,459 29,896 45,072 100.0 12,039 11,775 11,776 33.3 10,155 10,594 10,368 66,131 66,401 80,868 BHP Billiton
Group interest
% BHP Billiton Group share of production
Year ended 30 June 2012 2011 2010 85.0 51,326 45,245 32,097 85.0 768 1,198 1,688 85.0 42,425 39,794 38,687 85.0 53,536 36,460 41,396 50.0 11,423 11,709 11,094 159,478 134,406 124,962 44.4 3,625 3,007 2,718 60.0 4,306 4,086 3,406 7,931 7,093 6,124 60.0 404 486 364 60.0 198 267 219 602 753 583 50.0 4,435 4,589 5,733 50.0 5,003 5,359 6,668 50.0 3,534 3,402 4,332 50.0 3,053 2,779 3,402 50.0 1,175 1,055 1,870 50.0 1,411 2,717 2,398 18,611 19,901 24,403 4,081 3,134 3,609 2,612 2,759 2,834 80.0 6,693 5,893 6,443 100.0 7,926 6,884 6,535 33,230 32,678 37,381 100.0 7,004 7,472 7,465 100.0 2,408 4,140 6,013 9,412 11,612 13,478 100.0 14,848 14,328 14,703 100.0 10,863 12,928 10,868 100.0 7,568 7,072 4,887 100.0 33,279 34,328 30,459 100.0 16,757 13,671 12,039 33.3 11,663 9,889 10,155 71,111 69,500 66,131
(1) | Suriname was sold effective 31 July 2009. |
(2) | Metal production is reported on the basis of payable metal. |
(3) | The Pinto Valley mining operations were placed on care and maintenance in January 2009, and continue to produce copper cathode through sulphide leaching. Sulphide mining and milling operations will recommence in FY2013. |
(4) | Includes Cerro Colorado and Spence. |
(5) | Data was sourced from the TZ Minerals International Pty Ltd Mineral Sands Annual Review |
On 1 February 2012 we announced we had exercised an option to sell our 37.8 per cent non-operated interest in Richards Bay Minerals |
Yabulu was sold effective 31 July 2009. |
Iron ore production is reported on a wet tonnes |
Newman includes Mt Newman Joint Venture and |
Shown on 100 per cent basis. BHP Billiton interest in saleable production is 60 per |
Production includes Medium Carbon Ferro Manganese. |
Metallurgical coal production is reported on the basis of saleable product. Production figures include some thermal coal. |
Goonyella Riverside includes the Broadmeadow underground mine. |
BMA intends to cease production at the Gregory open-cut mine from 10 October 2012. |
(15) | Shown on 100 per cent basis. BHP Billiton interest in saleable production is 80 per |
Wolvekrans was previously known as Douglas |
BHP Billiton’s Marketing network manages the Group’s revenue line and is responsible for:
selling the Group’sour products and for the purchase of all major raw materials;
the supply chain for our various products, from assets to market, and also for raw materials, from suppliers to our production Assets;assets;
managing credit and price risk associated with the revenue line;
achieving market clearing prices for the Group’s products;
developing a single Groupdefining our view of the markets.long-term market fundamentals.
This requiresOur responsibilities require an active and significant presence in the various commodities markets and also the global freight market.
Our marketing activities are centralised in Singapore, The HagueSingapore; Houston, United States; and Antwerp.Antwerp, Belgium. Our Aluminium, Energy Coal, Iron Ore, Metallurgical Coal, Manganese, Base Metals, Stainless Steel Materials, PetroleumFreight and Uranium marketing teams are headquartered in Singapore. The Hague is the hub for our Aluminium, Energy CoalOur Petroleum and FreightDiamonds marketing teams. Ourteams operate from Houston and Antwerp, office serves our diamonds customers.respectively.
These three marketing offices incorporate all the functions required to manage product marketing and distribution -– from the point of production to final customer delivery. In addition, we have marketers located in 1512 regional offices around the world.
We have a centralised ocean freight business that manages our in-house freight requirements. The primary purpose of the freight business is to create a competitive advantage for our shipments through the procurement and operation of quality, cost-effective shipping. From time to time, we carry complementary cargoes for external parties to optimise profitability.
Our minerals exploration program is integral to our growth strategy and is focused on identifyingdiscovering and capturing new world-class projects for future development or projects that add significant valueacquiring operating interests in mineral deposits with the potential to existing operations. Targets forsupport large, long-life, low-cost, expandable upstream assets, diversified by commodity, geography and market.
Our greenfield exploration are generally large low-cost mining projects in a range of minerals, includingtargets, focused on copper, uranium, nickel, diamonds, bauxite, iron ore manganese, coal and potash. The process of discovery runspotash, are organised from early-stage mapping through to drilling and evaluation. The program is global and prioritises targets based on our assessment of the relative attractiveness of each mineral.
We continue to pursue opportunities and build our positionthree principal offices in prospective countries, including exploring for copper in South America, Zambia and South East Asia; nickel inSantiago, Chile; Perth, Australia; and diamonds in Canada. In the bulk commodities, activities are focused on a number of highly prospective terrains in Australia and Africa.
Singapore. Our exploration activities are organised from four principal offices in Singapore, Perth (Australia), Johannesburg (South Africa)include opportunity identification, application for and Santiago (Chile).acquisition of mineral title, early reconnaissance operations and multi-million dollar delineation drilling programs.
In addition to our activities focused on finding new world-class deposits, several of our CSGs undertake brownfield exploration, principally aimed at delineating and categorising mineral deposits near existing operations, and advancing projects through the development pipeline.
In FY2010, we spent US$516 millionOur expenditure on minerals exploration. Of this, US$126 million was spent on greenfield exploration US$390 million was spent on brownfield exploration and advanced projects.over the last three years is as follows.
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||
US$M | US$M | US$M | ||||||||||
Greenfield exploration | 324 | 207 | 126 | |||||||||
Brownfield exploration | 773 | 476 | 390 | |||||||||
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Total minerals exploration | 1,097 | 683 | 516 | |||||||||
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2.6 Group Resource and Business Optimisation
Group Resource and Business Optimisation (RBO) provides governance and technical leadership for resource development and Ore Reserve reporting. RBO’s 4166 professionals are focused on ensuring optimal value recovery from our resources. The team includes functional experts in mineral resource evaluation, brownfields exploration, planning, research and development, work management, production reporting,processes, mine engineering and mineral process engineering.
RBO engages directly with operating assets to deliver guidance and assess compliance in resource development and Ore Reserve reporting. It provides the Group Management Committee with assurance reports and portfolio analysis. RBO also provides functional expertise to audits and to investment review programs conducted by other Group Functions.
RBO’s accountabilities include governance for all resource and reserve estimation and Ore Reserve reporting.
Government regulations touch all aspects of our operations. However, because of the geographical diversity of our operations noreduces the risk that any one set of government regulations is likely towould have a material effect on our business, taken as a whole.
The ability to extract minerals, oil and natural gas is fundamental to our business. In most jurisdictions, the rights to undeveloped mineral or petroleum deposits are owned by the state. Accordingly, we rely upon the rights granted to us by the government that owns the mineral, oil or natural gas. These rights usually take the form of a lease or licence, which gives us the right to access the land and extract the product. The terms of the lease or
licence, including the time period for which it is effective, are specific to the laws of the relevant government. Generally, we own the product we extract and royalties or similar taxes are payable to the government. Some of our operations, such as our oil and gas operations in Trinidad and Tobago and Algeria, are subject to production sharing contracts under which both we, as the contractor, and the government are entitled to a share of the production. Under such production sharing contracts, the contractor is entitled to recover its exploration and production costs from the government’s share of production.
Related to the ability to extract is the ability to process the minerals, oil or natural gas. Again, we rely upon the relevant government to grant the rights necessary to transport and treat the extracted material in order to ready it for sale.
Underlying our business of extracting and processing natural resources is the ability to explore for those orebodies. TheTypically, the rights to explore for minerals, oil and natural gas are granted to us by the government that owns those natural resources that we wish to explore. Usually, the right to explore carries with it the obligation to spend a defined amount of money on the exploration or to undertake particular exploration activities.
Governments also impose obligations on us in respect of environmental protection, land rehabilitation, occupational health and safety, and native land title with which we must comply in order to continue to enjoy the right to conduct our operations within that jurisdiction. These obligations often require us to make substantial expenditures to minimise or remediate the environmental impact of our operations, to ensure the safety of our employees and contractors and the like. For further information on these types of obligations, refer to section 2.8 and 2.9 of this Report.
Of particular note are the following regulatory regimes:
2.7.1 South African Mining Charter and Black Economic Empowerment
In 2003, the Government released a strategy for broad-based black economic empowerment (BBBEE) that defined empowerment as ‘an integrated and coherent socio-economic process that directly contributes to the economic transformation of South Africa and brings significant increases in the numbers of black people who manage, own and control the country’s economy, as well as significant decreases in income inequalities’. This strategy laid the foundation for the Black Economic Empowerment Act of 2003, which granted government the power to legislate how it wanted black economic empowerment (BEE) to be implemented in South Africa.
As outlined in section 1.5 of this Report, on 1 May 2004, the Mineral and Petroleum Resources Development Act 2002 (MPRDA) took effect, providing for state custodianship of all mineral deposits and abolishing the prior system of privately held mineral rights. It is administered by the Department of Minerals and Energy of South Africa. In February 2007, the codes of good practice were gazetted, further crystallising government’s BEE strategy into a single binding document. The codes make provision for businesses to measure their success in contributing to the economic transformation and empowerment of historically disadvantaged South Africans (HDSAs) in the local economy and a scorecard comprising seven metrics was also developed to assist businesses in achieving this success.
In terms of the MPRDA, holders of mining rights granted under the previous system, known as ‘Old Order Rights’, must have applied to convert their rights to ‘New Order Rights’ prior to 30 April 2009. In order for the conversions to be effected, applicants are required to comply with the terms of the Black Economic Empowerment Act of 2003 and the Mining Charter, which has been published under the MPRDA. The Mining Charter requires holders of mining rights to achieve 26 per cent ownership participation by historically disadvantaged South Africans in their mining operations by 30 April 2014, of which 15 per cent needed to have been achieved by 30 April 2009. We have submitted to the Department of Mineral Resources of South Africa transactions to meet the legislative requirements and support the conversion to ‘New Order Rights’.
We support broad-based black economic empowerment in South Africa. We believe it is imperative to both the growth and stability of the South African economy and the Company’s strategic objectives and long-term sustainability in that country.
The principles of transformation and empowerment are in line with the BHP Billiton Charter, which underscores the Group’s ‘Courage to Lead Change’.
We have established a transformation and empowerment technical committee comprising senior managers with diverse skills to ensure our transformation and empowerment agenda is coordinated and comprehensive.
2.7.2 Uranium production in Australia
To mine, process, transport and sell uranium from within Australia, we are required to hold possession and export permissions, which are also subject to regulation by the Australian Government or bodies that report to the Australian Government.
To possess ‘nuclear material’, such as uranium, in Australia, a Permit to Possess Nuclear Materials (Possession Permit) must be held pursuant to the Australian Nuclear Non-Proliferation (Safeguards) Act 1987 (Non-Proliferation Act). A Possession Permit is issued by the Australian Safeguards and Non-Proliferation Office, an office established under the Non-Proliferation Act, which administers Australia’s domestic nuclear safeguards requirements and reports to the Australian Government.
To export uranium from Australia, a Permit to Export Natural Uranium (Export Permit) must be held pursuant to the Australian Customs (Prohibited Exports) Regulations 1958. The Export Permit is issued by the Minister for Industry, TourismResources and Resources.Energy.
A special transport permit will beis required under the Non-Proliferation Act by a party that transports nuclear material from one specified location to another specified location. As we engage service providers to transport uranium, those service providers are required to hold a special transport permit.
2.7.32.7.2 Exchange controls and shareholding limits
BHP Billiton Plc
There are no laws or regulations currently in force in the UKUnited Kingdom that restrict the export or import of capital or the remittance of dividends to non-resident holders of BHP Billiton Plc’s shares, although the Group does operate in some other jurisdictions where remittances of funds could be affected as they are subject to exchange control approvals. There are certain sanctions adopted by the UK Government which implement
resolutions of the Security Council of the United Nations and sanctions imposed by the European Union (EU) against certain countries, entities and individuals.individuals and may restrict the export or import of capital or the remittance of dividends to certain non-resident holders of BHP Billiton Plc’s shares. Any enforcement of thefinancial sanctions by the UK Government would be initiated by HM Treasury. Such sanctions may be in force from time to time and include those against: (i) certain entities and/or individuals associated with the Burmese regime (Myanmar),Belarus, Cote d’Ivoire, The Democratic People’s Republic of Korea (North Korea), the Democratic Republic of Congo, Egypt, Eritrea, the Republic of Guinea, the Republic of Guinea-Bissau, Lebanon, Liberia, Libya, Iran, Somalia, Sudan, Syria, Tunisia, Zimbabwe and the previous regimes of Iraq and Yugoslavia; (1)(ii) certain officials of Belarus, Syria and Zimbabwe; (iii) individuals indicted by the International Criminal Tribunal for the former Yugoslavia; and (iv)(iii) entities and individuals linked with the Taliban, Al-Qaeda and other terrorist organisations.
There are no restrictions under BHP Billiton Plc’s Articles of Association or (subject to the effect of any sanctions) under English law that limit the right of non-resident or foreign owners to hold or vote BHP Billiton Plc’s shares.
There are certain restrictions on shareholding levels under BHP Billiton Plc’s Articles of Association described under the heading ‘BHP Billiton Limited’ below.
BHP Billiton Limited
TheUnder the Australian Banking (Foreign Exchange) Regulations 1959, the Reserve Bank of Australia may impose restrictions on certain financial transactions and require the consent of the Reserve Bank of Australia for the movement of funds into and out of Australia. Based on our searches, restrictions currently apply if funds are to be paid to or received from specified persons and individuals associated with Syria, specified government and military officials and supporters of the government of Libya, specified supporters of the former Government of the Federal Republic of Yugoslavia, specified ministers and senior officials of the Government of Zimbabwe, certain specified entities associated with the Democratic People’s Republic of Korea (North Korea) and specified individuals associated with the Burmese regime, and certain Iranian entitiesorganisations and persons not already listed byministers. In addition, from time to time the United Nations Security Council ofand the Australian Government impose international sanctions on certain countries and organisations. The countries and organisations that are currently subject to United Nations. In addition, legislation and regulationsNations sanctions are in place restricting transactions with certain individuals or entities linked with the Taliban, Al-Qaeda and associated individuals and entities, other terrorist organisationsdesignated individuals and entities associated with terrorism, certain entities and individuals associated with the Democratic Republic of Congo, Cote d’Ivoire, the Democratic People’s Republic of Korea (North Korea), Eritrea, Guinea-Bissau, Iran, Iraq, Lebanon, Liberia, Libya, Sudan Afghanistan, Rwanda and Somalia. The countries currently subject to the Australian Government’s autonomous sanctions are the Democratic People’s Republic of Korea (North Korea), Fiji, the former Federal Republic of Yugoslavia, Iran, Libya, Syria and Zimbabwe. The controls impose certain approval and reporting requirements on transactions involving such countries, entities and individuals and/or assets controlled or owned by them. Transfers into or out of Australia of amounts greater than A$10,000 in any currency are also subject to reporting requirements.
Remittances of any dividends, interest or other payments by BHP Billiton Limited to non-resident holders of BHP Billiton Limited’s securities are not restricted by exchange controls or other limitations, save that in certain circumstances, BHP Billiton may be required to withhold Australian taxes.
There are no limitations, either under the laws of Australia or under the Constitution of BHP Billiton Limited, on the right of non-residents to hold or vote BHP Billiton Limited ordinary shares other than as set out below.
The Australian Foreign Acquisitions and Takeovers Act 1975 (the FATA) restricts certain acquisitions of interests in shares in BHP Billiton. Generally, under the FATA, the prior approval of the Australian Treasurer must be obtained for proposals by a foreign person (either alone or together with associates) to acquire control of 15 per cent or more of the voting power or issued shares in BHP Billiton Limited.
(1) | As at 14 May 2012, the financial sanctions on the Burmese regime (Myanmar) were suspended until 30 April 2013. |
The FATA also empowers the Treasurer to make certain orders prohibiting acquisitions by foreign persons in BHP Billiton Limited (and requiring divestiture if the acquisition has occurred) where he considers the acquisition to be contrary to the national interest and the 15 per cent threshold referred to above would be exceeded as a result. Such orders may also be made in respect of acquisitions by foreign persons where two or more foreign persons (and their associates) in aggregate already control 40 per cent or more of the issued shares or voting power in BHP Billiton Limited.
There are certain other statutory restrictions, and restrictions under BHP Billiton Limited’s Constitution and BHP Billiton Plc’s Articles of Association, that apply generally to acquisitions of shares in BHP Billiton (i.e. the restrictions are not targeted at foreign persons only). These include restrictions on a person (and associates) breaching a voting power threshold of:
20 per cent in relation to BHP Billiton Limited on a ‘stand alone’‘stand-alone’ basis, i.e. calculated as if there were no special voting share and only counting BHP Billiton Limited’s ordinary shares.
30 per cent of BHP Billiton Plc. This is the threshold for a mandatory offer under Rule 9 of the UK takeover code and this threshold applies to all voting rights of BHP Billiton Plc (therefore including voting rights attached to the BHP Billiton Plc Special Voting Share).
30 per cent in relation to BHP Billiton Plc on a ‘stand alone’‘stand-alone’ basis, i.e. calculated as if there were no special voting share and only counting BHP Billiton Plc’s ordinary shares.
20 per cent in relation to the BHP Billiton Group, calculated having regard to all the voting power on a joint electorate basis, i.e. calculated on the aggregate of BHP Billiton Limited’s and BHP Billiton Plc’s ordinary shares.
Under BHP Billiton Limited’s Constitution and BHP Billiton Plc’s Articles of Association, sanctions for breach of any of these thresholds, other than by means of certain ‘permitted acquisitions’, include withholding of dividends, voting restrictions and compulsory divestment of shares to the extent a shareholder and its associates exceed the relevant threshold.
2.8 Sustainable Development – Health, Safety, Environment and CommunitySustainability
As the world’s largest diversifiedOur BHP BillitonCharter value of Sustainability reflects our priority of putting health and safety first, being environmentally responsible and supporting our communities.
Our ability to operate globally is heavily dependent on gaining access to natural resources company,and maintaining our operations touch every cornerlicence to operate. Sustainable development is core to our business strategy; we integrate health, safety, environmental, social and economic factors into our decision-making. We report the sustainability dimensions of the globe. We recognise and embrace our responsibility to consider and respond to the needs of many different stakeholders.
Our Charter sets out what we value. In particular,do in detail in the Sustainability Report 2012. The sustainability dimensions that we must remain committed to ensuringreport on include the health and safety of our people, respectingpeople; governance and risk management processes; how we are socially responsible and contributing to improved standards of living and self-sustaining communities; resource conservation and biodiversity; and how we ensure the broader economic contributions of our operations benefit the regions in which we operate.
The information contained in this section covers assets that have been wholly owned and operated by BHP Billiton or which have been operated by BHP Billiton in a joint venture operation (controlled assets) for FY2012. In March 2011, we acquired the US Fayetteville shale resource from Chesapeake Energy Corporation and subsequently acquired Petrohawk Energy Corporation in August 2011, which now form our Petroleum Onshore US business. Under a transition services agreement, Chesapeake Energy Corporation continued to operate Fayetteville on our behalf until 1 April 2012. Accordingly, health safety environment and community (HSEC) data relating to our Onshore US business has not been collected in BHP Billiton systems for the communities where we work.FY2012 period and all information contained in this section excludes data from our Onshore US business.
In additionAdditional information relating to our sustainability performance for FY2012 is available in the wider Group corporateSustainability Report 2012 and is available online atwww.bhpbilliton.com.
2.8.1 Our sustainability governance processes, we have systems in place to implement our policy commitment to sustainable development. structure
The Sustainability Committee ofassists the Board continuesin oversight of HSEC matters. This includes overseeing areas relating to oversee our sustainability strategy, policy, initiativesHSEC risk, compliance with applicable legal and activities. Management holds primary responsibilityregulatory requirements, and overall Group HSEC performance.
More specifically, management is accountable for our Health, Safety, Environment and Community (HSEC)the implementation of sustainability-related processes and performance.
Our Codeperformance to comply with our suite of Business Conduct applies to every member of our workforce and provides a framework for decision-making. It is based on the values contained in our Charter and highlights that we care as much about how results are obtained as we do about delivering good results.
Our HSEC Standards are part of a wider suite of Group Level Documents (GLD)(GLDs). They provideGLDs contain minimum mandatory performance requirements and performance controls whichand are the basisfoundation for developing and applyingimplementing management systems at all sites operatedour operations. Regular internal audits are conducted to test compliance with the requirements of the HSEC GLDs. Audit results are used by BHP Billiton.management to create action plans where the businesses have not yet achieved full compliance with the GLD requirements. Key findings are reported to senior management, and summary reports are considered by the Sustainability Committee of the Board and, where appropriate, by the Risk and Audit Committee of the Board.
These documents highlight four2.8.2 Assessing risks and establishing controls
We mandate criteria to identify risks we consider material to our business and take into consideration the potential health, safety, environmental, social, reputational, legal and financial impacts. The severity of any particular risk is assessed according to a matrix that describes the degree of harm, injury or loss from the most severe impact associated with a specific risk, assuming reasonable effectiveness of controls. The objectives of the risk assessment process are to understand the nature and tolerance of the material risks for the Group and ensure they are managed through the verification of critical controls. Information relating to the material risks for the Group, including sustainability risks is available in section 1.5 of this Report. Our risk management processes are consistent with the hierarchy of controls described in Article 6 of International Labour Organization (ILO) Convention 176 –Safety and Health in Mines, 1995.
2.8.3 Identifying our sustainability issues
We identified the sustainability issues included in this Report and the Sustainability Report 2012 through a three-step materiality process. Step one of the process included identifying issues by reviewing our internal risk registers, enquiries from our shareholders and investors, daily print media coverage and an independent review of issues raised by non-government organisations (NGOs) and global electronic and print media. Step two involved rating the significance of these issues to our stakeholders and the potential impact on our business as low, medium or high. The third step was to review the issues and seek feedback from key componentsstakeholders. A number of sustainable development:material issues are discussed in the following sections:
Health – focusing on the elimination of risks through the control of potential workplace exposures to noiseKeeping our people safe and substances which could result in long-term harm.healthy
Safety – providing a workplace whereEmploying and developing our people can work without being injured.
Environment – delivering efficient resource use, reducing and preventing pollution and enhancing biodiversity protection.Reducing our climate change impacts
Community – engagingManaging water
Managing land and enhancing biodiversity
Ensuring meaningful engagement with those affected by our operations, including employees, contractorsstakeholders
Making a positive contribution to society
Understanding and communities;managing our human rights impact
Reporting transparently and respecting and upholding fundamental human rights.behaving ethically.
Health2.8.4 Keeping our people safe and healthy
The healthsafety and wellbeinghealth of our people is core to every aspect of our business. Having our people return home safe and well at the end of each day, and enabling them to end their working life fit and healthy is central to everything we do. This is reflected in the processes and controls we have in place throughout our business success. organisation.
Our safety and health performance
The key safety and health issues that we faced in FY2012 related to adherence to isolation and permit-to-work procedures, and to reducing potential occupational health exposures, particularly to carcinogens and airborne contaminants, noise-induced hearing loss, musculoskeletal injuries and fatigue.
The FY2012 total recordable injury frequency (TRIF) performance of 4.7 per million hours worked improved by six per cent compared with FY2011 (5.0), and while we have not met our TRIF target of 3.7, it has reduced by 36 per cent since the FY2007 base year. Although our injury rates and statistical measures showed a steady improvement, we still had three fatalities in FY2012. Each of these incidents was thoroughly investigated. We reviewed and updated our Fatal Risk Controls GLD to provide further clarity about controls associated with isolation and permit to work, including expectations around change management and ensuring those involved in the work fully understand the hazards and associated controls.
In FY2012, the incidence of occupational illness was 43.7 cases per 10,000 employees, an increase of 7.4 per cent compared with 40.7 cases per 10,000 employees in FY2011(1). However, since 2007, we have achieved a 22 per cent reduction in the incidence of occupational illness against a target of 30 per cent. Forty-one per cent of these cases were due to noise-induced hearing loss and 44 per cent due to musculoskeletal illness. The increased number of cases led our operations to increase their focus on control effectiveness for these hazards.
We focus on improving our workplaces, using the recognised hierarchy of controls and work practices to minimise the need for personal protective equipment (PPE), which we provide to all employees and contractors as required.
Safely undertaking deepwater drilling
Deepwater oil and gas exploration is an important aspect of our worldwide business. Our team of skilled drilling professionals, comprehensive processes and systems are fundamental to ensuring our deepwater drilling operations are conducted in a safe manner that comply with the United States Bureau of Ocean Energy Management, Regulation and Enforcement regulations and our own strict requirements. Following the oil spill from BP’s Macondo well in the Gulf of Mexico in April 2010, we reviewed our deepwater drilling safety standards to assess the effectiveness of our existing risk management controls, which were tested and improved where required.
Managing aviation risk
Aviation is a significant material safety risk. We move a substantial number of people by chartered aircraft each year. Our Group aviation safety assurance process continues to use the Flight Safety Foundation Basic Aviation Risk Standard to satisfy the minimum technical requirements for contracted aviation activities. In FY2012, through our Aviation GLD, we enhanced the operational review process undertaken by our aviation specialists to assess the effectiveness of aviation critical controls. The Aviation GLD was also updated to provide greater emphasis on eliminating risk throughoperational readiness and airfield infrastructure. We engage with our aviation specialists to ensure we maintain the necessary balance between audit and approval of aircraft operations and the risk-based operational review in the field.
Occupational health exposures
Our priority is to control exposures at their source. Health risks faced by our people include fatigue and other causes of workplace exposures that may result in long-term harm. The main sources of potentialimpaired fitness for work, as well as occupational exposure areto noise, silica, manganese, diesel exhaust particulate, fluorides, coal tar pitch, nickel and sulphuric acid mist. Our Health GLD requires that an exposure
(1) | In FY2012, internal audits identified that some illnesses had not been recorded as required in FY2011. Consequently, the number of employee illnesses for FY2011 increased and has been adjusted. Employee data is based on head count as at 30 June 2012. |
risk profile be established and maintained for our employees and contractors and that relevant exposure controls be identified and implemented. If the potential exposure to harmful agents exceeds 50 per cent of the occupational exposure limit (OEL), medical surveillance is implemented to identify potential illness or health effects at an early stage and to provide feedback as to whether the exposure controls we have in place are functioning as designed. We have seen a 41 per cent reduction since FY2009 in the number of carcinogen exposures to our employees that potentially exceed the OEL. This does not take into account the protection afforded by PPE.
Serious disease
BHP Billiton operations with a high exposure to serious diseases, such as HIV/AIDS, malaria and tuberculosis, have education, training and counselling programs in place to assist employees. We also offer prevention and risk-control programs to employees and, where appropriate, to employees’ families and local communities. We help manage the impact of disease and protect the viability of our operations by assisting in caring for our employees and the wellbeing of our host communities.
2.8.5 Employing and developing our people
Attracting, employing and developing people with exceptional skills, who share our values, provides us with a competitive advantage and is critical to our long-term sustainability. Each individual brings unique skills, experience and perspectives, and we recognise that we are strengthened by diversity. We are committed to providing a work environment in which everyone is treated fairly and with respect and has the opportunity to maximise their potential. We value promoting from within and seek to build a high-performance organisation through fair reward and recognition.
Recruitment is managed on a local basis by each Customer Sector Group, Minerals Exploration, Marketing and Group Function. Employment is offered and provided based on merit. Every person applying for a job is evaluated according to their job-related skills, qualifications, abilities, aptitudes and alignment withOur BHP Billiton Charter values. We acknowledge that targeted affirmative action may be required to address historical imbalances and past discrimination through programs such as Indigenous employment and training and Black Economic Empowerment.
Additional information relating to diversity, and employee policies and involvement at BHP Billiton is available in sections 5.17 and 7.8 of this Report and in the Sustainability Report 2012 available online at www.bhpbilliton.com.
2.8.6 Reducing our climate change impacts
As a global organisation operating in an energy-intensive industry, we are actively managing risks associated with climate change, which are discussed in section 1.5 of this Report.
Potential impacts of climate change on our organisation
In the medium and long-term, we are likely to see changes in the cost structures of our greenhouse gas (GHG) intensive assets as a result of regulatory requirements in the countries where we operate. This may also have implications for our suppliers and customers. Inconsistency of regulations, particularly between developed and developing countries, could affect the investment attractiveness of assets in different jurisdictions.
Potential physical impacts of climate change on our operations may include changes in precipitation patterns, increased storm intensities and higher average temperature levels, which may adversely affect the productivity and financial performance of our operations.
Reducing energy intensity and greenhouse gas emissions
We strive to continually improve energy and GHG management. Our approachoperations with material emissions must implement and maintain Energy and GHG Management Plans. These plans include a five-year forecast and identification, evaluation and implementation of energy-efficiency and GHG-reduction projects.
Emissions abatement and energy savings are key considerations in our decision-making, and we undertake transparent public reporting of our emissions. In FY2012, our carbon-based energy intensity and GHG emissions intensity were lower than the FY2006 baseline, by 15 per cent and 16 per cent, resulting in the successful achievement of our FY2012 target of 13 per cent and six per cent respectively. This result was primarily driven by the use of hydroelectric power to supply 98 per cent of the electricity needs at our Mozal aluminium smelter in Mozambique. The result also reflects successful implementation of energy efficiency projects and reductions of fugitive methane emissions.
We work collaboratively with customers, communities and employees to reduce emissions and support internal emissions reduction projects. To this end, we committed to spending US$300 million over the 2008 to 2012 period to support the implementation of energy efficient and low GHG emission technologies. We exceeded our commitment, having spent US$430 million on projects, which are in various stages of implementation. While this commitment was realised in FY2012, we remain focused on establishing projects that reduce our energy consumption and carbon emissions footprint.
Future greenhouse gas emissions abatement and targets
In FY2011 and FY2012, our Customer Sector Groups identified GHG emissions abatement projects and committed to implementing the most cost-effective options from FY2012 through to FY2017. The suite of abatement projects successfully implemented in FY2012 will deliver an annual GHG emissions reduction of up to 260,000 tonnes. The combined effect of all abatement projects to be undertaken through to FY2017 has enabled us to set a target to limit FY2017 GHG emissions equal to or below FY2006 levels.
Engaging in policy development
The issues associated with climate change continue to be a challenge for governments, communities and industries around the world and it seems a global solution to climate change is some time away. Until then, nations are likely to continue to accelerate their domestic emissions reduction efforts and establish low-carbon economies, balancing their needs to ensure a reliable energy supply and sustain economic growth.
Governments globally are considering a variety of legislative and regulatory options to mitigate GHG emissions. In our view, assessing these options requires an understanding of their likely effectiveness, scale and cost, as well as their implications for economic growth and quality of life. We take an active role in climate change policy development in the key regions where we operate and market our products. We have developed six principles that outline what we believe climate change policies should deliver to best tackle carbon emission reduction: clear price signal; revenue neutral; trade friendly; broad-based, predictable and gradual; simple and effective. In all instances of climate change policy development, we analyse and compare the various policy options by evaluating the degree to which they meet these principles. Although we are committed to contributing to the public debate on climate change, including sharing our knowledge and experience, we recognise that it is for government and society as a whole to decide which direction to take.
In recent years, we have actively engaged with the Australian Government on the development and implementation of its climate change policy response. During FY2012, we commented on the Australian Government’s draft Energy White Paper 2011, which will become the policy framework for government decision-making regarding energy sources in the years ahead. In terms of the carbon price introduced in July 2012, as part of the Australian Government’s Clean Energy Future Plan, we continue to hold the view that this is just one of the potential policy measures that government can adopt to address climate change and that any policy
response should be broad-based and use a portfolio of complementary measures to deliver abatement. Independently, we maintain the Carbon Pricing Protocol, an internal mechanism for pricing carbon and determining carbon price impacts on our greenfield and brownfield developments and on mergers and acquisitions. The Carbon Pricing Protocol is updated annually to reflect internal and external carbon price modelling and the proposed treatment of carbon permits in countries where we operate.
2.8.7 Managing water
The sustainability of our operations relies on our ability to obtain the appropriate quality and quantity of water and to use this resource responsibly.
Managing water is a complex issue
Increased competition for water, due to population growth, urbanisation and industrialisation, is affecting the quantity and quality of available water resources and poses a potential operational risk for our business. The social, cultural, environmental, ecological and economic values of water have led to greater scrutiny of responsible water use and expectations from our stakeholders for improved resource stewardship. We are experiencing greater governance, regulation and performance requirements in response to these expectations. At the same time, climate change is likely to make the patterns and cycles of water flows less predictable, requiring flexible and adaptive responses. We also consider the cumulative effects on water resources when multiple operations are active within a region.
Managing water risks across our operations
Water risks and impacts experienced by our operations vary from region to region and from site to site, with some sites facing multiple and conflicting risks, including water scarcity, water excess and water quality issues.
The range of potential water-related risks and their potential impacts on water resources, biodiversity and communities makes managing water a complex task for our businesses. To ensure these impacts are managed to an acceptable level, all operations are required to develop a Water Management Plan. This plan takes into consideration the baseline quantity and quality of water potentially affected and quantifies the acceptable level of impact to water resources, taking into account regulatory requirements and stakeholder expectations. It also details the preventive and mitigating controls necessary to achieve the acceptable level of impact, with each operation required to implement a monitoring and review program that verifies the effectiveness of these controls.
In FY2012, we achieved our water target with a 29 per cent improvement in the ratio of water recycled/reused to high-quality water consumed when compared with the FY2007 base year. This was primarily due to the reduction in high-quality water use and increase in desalinated water use at our Base Metals Escondida Asset.
Our new water target requires all operations with water-related material risks, including volume and quality considerations, to set targets and implement projects to reduce their impact on water resources. This target recognises the local and regional context of water by including all material risks, rather than adhering to a single metric based on water use reduction, and allows operations to define the necessary projects that will best address their material water risks.
Onshore US and hydraulic fracturing
In line with our strategy to have a suite of diversified commodities, we made a significant investment in natural gas and liquids by acquiring the US Fayetteville shale resource from Chesapeake Energy Corporation in March 2011 and subsequently acquiring Petrohawk Energy Corporation in August 2011, which now form our Petroleum Onshore US business. Extracting oil and gas from shale involves hydraulic fracturing. Hydraulic fracturing is an essential and common practice in the oil and gas industry to stimulate production of natural gas and oil from dense subsurface rock formations. Hydraulic fracturing involves using water, sand and a small amount of chemicals to fracture the hydrocarbon-bearing rock formation to allow flow of hydrocarbons into the wellbore.
Public concerns have been raised about hydraulic fracturing, including potential environmental impacts of the hydraulic fracturing fluid, its potential effect on drinking water aquifers, the handling and disposal of waste water produced from the wells, and the visual, noise and traffic impacts on the use of the surface land. The oil and gas industry is well established and is subject to federal, state and local regulations requiring permits for well construction, drilling and waste water disposal. The waste water produced from the wells, including the hydraulic fracturing fluids, is disposed of safely in accordance with applicable oil and gas industry regulations and BHP Billiton’s operating standards. The composition of hydraulic fracturing fluids, including chemicals, is publicly disclosed in FracFocus, the hydraulic fracturing Chemical Disclosure Registry (www.fracfocus.org). Our priority is to identifysafely develop these operations in a way that protects the health and safety of the environment and the communities in which we operate.
Developing new water accounting standards
Unlike the more developed accounting approach to GHG emissions, there is no internationally consistent approach to water accounting and reporting. During FY2012, we piloted the Minerals Council of Australia’s Water Accounting Framework at several of our sites. From FY2013, we will align our water reporting across all our operations with the framework, which aims to improve data integrity, allow more meaningful analysis to inform policy-making and deliver improved outcomes for industry and communities.
2.8.8 Managing land and enhancing biodiversity
We seek to deliver lasting benefits to the environment and communities by improving natural resource management and enhancing biodiversity. Securing access to land and managing it effectively are essential components of our commitment to operate in a responsible and sustainable manner. We depend upon biodiversity and the related benefits derived from ecosystems, which include food, air and water.
Biodiversity and land is a complex issue
We appreciate the importance of preserving biodiversity and the challenge this presents to all land users. Host governments and communities are seeking a greater demonstration of effective land stewardship as a critical component in their decision to grant land access. This is exacerbated by growing competition for land, whether it is for mining, agriculture, forestry, water supply or biodiversity conservation. Increasingly, operations are located within areas of greater environmental or social sensitivity. Consequently, this requires broader consideration of how we manage sourcesland use and biodiversity at our operations and how this is balanced with other societal needs. Obtaining community support is most challenging when there is strong competition for the use of exposure to reduce the minimum number of people required to undertake additional protective measures,land, such as the wearingcompetition between resource development and agriculture.
Biodiversity, land and our business
We assess and manage the potential land and biodiversity impacts of personal protective equipment.our operations throughout their life cycle. Our HealthEnvironment GLD requires all operations to establishhave Land and maintainBiodiversity Management Plans that incorporate baseline and impact assessments, controls designed to mitigate impacts on biodiversity and the exposure risk profilerelated benefits derived from ecosystems, and monitoring programs to verify the effectiveness of all personnelcontrols. Operations are required to harmful agentsadhere to a formal management hierarchy that begins with avoiding disturbance, followed by mitigating negative impacts, rehabilitating land (both during operation and at closure) and undertaking compensatory actions, such as biodiversity offsets, at our operations. We rehabilitate disturbed areas consistent with the pre disturbance land use or alternative land uses developed in consultation with stakeholders. We have explicit commitments relating to exploration and extraction of resources in areas of high environmental sensitivity and also in relation to threatened species.
Managing land access
Our approach to land access is undertaken on a case-by-case basis, and takes into account potential environmental, societal, economic or cultural impacts. We first consider what land we need. We then implement appropriate controls. Controls are prioritisedlook at our possible short-term and long-term impacts on that land, including the basiseffects that our use may have on biodiversity and the related benefits derived from ecosystems. We also seek to identify the present and past uses of the potential health consequenceland and any landowners, occupiers and users who may be affected by our activities. Compensatory actions, such as biodiversity offsets, may be undertaken where residual impacts exceed the acceptable level of impact to biodiversity, land use or water resources.
Addressing land rehabilitation challenges
The rehabilitation of land no longer required for our activities continues to be a central part of our approach to managing our effects on land. In 2007, we established a target of achieving a 10 per cent improvement in the exposureland rehabilitation index (the ratio of land rehabilitated to land disturbed). We did not achieve our land rehabilitation target due to the growth of some of our operations and the challenges associated with progressive rehabilitation while an operation is active. This delayed our ability to rehabilitate land for suitable uses that meet environmental and stakeholder requirements.
Enhancing biodiversity and contributing to conservation
Improving our management of land and enhancing biodiversity are essential to operating in a responsible and sustainable manner. In July 2012, we introduced new biodiversity and conservation targets. The first target focuses on a core business requirement to implement management plans that include controls to prevent, minimise, rehabilitate and offset impacts to biodiversity and the related benefits derived from ecosystems. In addition to this, we have introduced a conservation target, which will see the Group finance the conservation and ongoing management of areas of high biodiversity and ecosystem value that are of national or international conservation significance. As a result of this conservation target, we will broaden our environmental activities beyond what could be achieved by our operations alone. This conservation work will be largely supported by the five-year alliance established in FY2012 between Conservation International and BHP Billiton, which aims to deliver significant and lasting benefits to the environment by preserving areas of high conservation value.
Managing waste
Mining and mineral processing operations produce large quantities of mineral waste, including waste rock, tailings and slag, which need to be effectively managed. Our operations are required to maintainhave Waste Management Plans, which address waste minimisation, storage, transportation and monitordisposal. These plans are maintained to control risk of adverse impacts on the environment and communities.
Tailings dams are constructed and operated to engineering standards, and monitored and assessed to manage material risks, including the risk of failure. Mineral wastes are analysed for physical and geochemical characteristics to identify potential impacts arising from erosion, acid rock drainage, salinity, radioactivity and metal leaching. We do not dispose of tailings or waste rock into river or marine environments.
2.8.9 Ensuring meaningful engagement with our stakeholders
We engage regularly, openly and honestly with people and organisations interested in and affected by our operations and take their effectiveness.views and concerns into account in our decision-making.
SignificantEffectively engaging with our stakeholders
We define stakeholders as those who are potentially affected by our operations or who have an interest in or an influence over what we do. Our key stakeholders include the investment community, shareholders, customers,
media, business partners, employees and contractors, local and Indigenous communities, industry associations, suppliers, governments and regulators, non-government organisations (NGOs), community-based health risks,organisations and labour unions.
We seek to build trust with stakeholders at the earliest possible stage of a project’s life. Our Community GLD stipulates that a Stakeholder Engagement Management Plan be in place from the development phase of a project and be reviewed annually. The plans identify the interests and relationships of stakeholders and contain a range of culturally and socially inclusive engagement activities to encourage open communication. Our operations are required to measure the effectiveness of their stakeholder engagement by conducting mandatory community perception surveys every three years.
Engaging with NGOs through the Forum on Corporate Responsibility
Established in 1999, the Forum on Corporate Responsibility currently includes six members from our Group Management Committee (GMC) and eight senior leaders from the NGO sector. The NGO members have extensive experience in regions where we have business interests, including South America, west Africa, Australia and the United Kingdom. Our Chief Executive Officer chairs the meetings, which were held twice during FY2012.
The Forum encourages open discussion and expression of views on environmental, socio-economic, geopolitical and ethical issues. Sustainability issues discussed in the past financial year included energy choices; biodiversity; Indigenous people and free prior and informed consent; resource endowment and benefit sharing; and consideration of our new HSEC targets. While we are not bound by the advice of the Forum and the Forum does not necessarily endorse the Company’s decisions, the meeting provides insight into society’s current priorities and an opportunity to understand and debate issues from multiple viewpoints.
Acknowledging customary rights
At a very early stage in a project, before any substantive work is carried out on the ground, we seek to identify landowners, occupiers and users who may be affected by our activities. Knowing who owns and uses the land is critical to establishing an effective community consultation and engagement program.
In instances where land may be used for customary purposes and no formal land title has been issued, information is sought from relevant organisations to determine those groups with connections to the land. This includes government authorities with responsibilities for customary land uses and any Indigenous peoples’ representative organisations. Surveys are commissioned to identify the customary owners and how the land is being used to ensure these uses are taken into account in our development plans.
Committed to broad-based community support
We require greenfield or significant expansion projects to obtain support from stakeholders before proceeding with development. Such broad-based community support is distinct from achieving free prior and informed consent, which we seek when it is mandated and defined by law.
Addressing community concerns
Our operations are required to have local processes to accept, assess and resolve community concerns, complaints and grievances about the performance or behaviour of BHP Billiton and our people. As part of the complaint resolution process, all complaints and grievances are required to be acknowledged, documented and investigated internally. As required, appropriate actions are implemented and complainants are advised of the outcome.
2.8.10 Making a positive contribution to society
We develop partnerships that promote social and economic development and benefit the broader community. We work with host governments and other organisations to create transparency of the broad economic benefits to communities generated from our operations.
Our broad socio-economic contribution
At a Group level, we are an active participant in industry and sustainable development forums, such as HIV/AIDSthe International Council on Mining and malaria, also existMetals (ICMM), and we are a member of the World Business Council for Sustainable Development.
We seek to understand our socio-economic impact on local communities and host regions through our participation in our business. We continuethe ICMM’s multi-stakeholder Resource Endowment initiative (REi). The REi aims to contributeenhance the mining industry’s socio-economic contribution to the managementcountries and communities where organisations like BHP Billiton operate, by better understanding the factors that either inhibit or promote social and economic development that are linked to large-scale mining projects.
We engage with governments on a range of thesepolicy issues on bothand also play a role in advocating transparent and ethical governance, through our own actions and in discussion with opinion leaders.
Economic value for regional economies is generated through revenues, employee compensation and other operating costs, donations and other community investments, retained earnings and payments to capital providers and to governments. Nationally and regionally, we contribute taxes and royalties to governments that in turn provide infrastructure and services to their constituents. Additionally, we often develop infrastructure that provides local communities and global basis.businesses with benefits, such as airports, roads, community childcare centres and medical clinics.
Safety
ProvidingTraining and employing local people is important to us. However, our ability to have a safe and healthy workplace and ensuring our activities do not adverselysignificant impact on our host communities are core values.
Despite strong performance improvement acrossunemployment is limited by the organisation, sadly we experienced the lossnature of five colleagues at our operations duringas typically we require highly skilled people with relevant industry and technical experience. We make a broader economic contribution through indirect employment, where we focus on building the year.
In FY2010, we completed the integrationcapacity of our catastrophic risk and risk management procedures into a single process. This process requires that for all material risks critical controls are identified, performance standards set and critical control effectiveness measured.
Our Total Recordable Injury Frequency (TRIF) for FY2010 was 5.3 per million hours worked (TRIF includes fatalities, lost-time cases, restricted work cases and medical treatment cases).
Environment
We own and operatelocal businesses to provide us with a diverse range of businesses in different countries around the worldservices and products. Our approach is to source locally if a product or service that by their nature, have the potential to affect the environment.
Effective strategies to address the issues associated with climate change must include policies that provide a path to reduce emissions. Our evaluation of policy options are covered in the Sustainability Report and Summary Review of this report.
The resultsmeets our requirements is available. In FY2012, 45 per cent of our participationGroup spend was with local and regional suppliers. Local and regional spend, in this context, refers to spend within communities in which we operate and the Australian Government’s Energy Efficiency Opportunities Act (EEO) program will be available publicly in December 2010.regions, such as states and provinces, where our operations are located.
We define a significant environmental incident asalso voluntarily invest one with a severity ratingper cent of four or above basedour pre-tax profit, calculated on our internal severity rating scale (tiered from one to five by increasing severity). One significant incident occurred during FY2010 at our Pinto Valley Operations (US) involving a tailings release. The majoritythe average of the eroded tailings and cover material were recovered. Metal concentrationsprevious three years’ pre-tax profit, in surface water and sediments appear to be well below levels that could present a hazard. While there were a number of incidents that had the potential to be significant, controls and mitigation actions prevented these incidents escalating in severity.
Community
Our operations are diverse and the scale and nature of their social impact varies significantly. Regular, open and honest dialogue is the key to building win-win relationships. Our goal is to minimise negative social impacts while maximising the opportunities and benefits the Group’s presence brings.
While our businesses tailor their community relations programs to suit the local context, our Community GLD sets the mandatory requirements to be implemented by all our operations. For example, our sites are required to have community development plans that aim to help contribute tohave a long-lasting positive impact on people’s quality of life. This includes implementing new and supporting existing community projects.
Community development programs
Our community development programs are focused on improving the sustainable developmentquality of life of people in our host communities. As
Each community development project is required to be linked to a Community Development Management Plan. In FY2012, as part of the community planning process,a GMC key performance indicator, all key stakeholders, including localcontrolled operations developed and Indigenous communities, must be identified and an analysis undertaken to understand their interests and relationshipimplemented Community Development Management Plans in compliance with the business.
We require all our operations to record stakeholder engagement activities, responses to concerns and complaints, outcomes, agreements and commitments.Community GLD.
Community development projects are selected on the basis of their capacity to have a positive impact positively on qualitythe quality-of-life indicators for the relevant community and enhance the Group’s licence to operate. Projects must have documented objectives specifically linked to the achievement of lifelong-term sustainable community
development and improvements in indicators (education, health and environment).identified in a social baseline study. We monitor their progress by tracking changes in these indicators every three years.
The Prior to approval, community projects are required to be assessed in relation to anti-corruption requirements and are implemented in accordance with the BHP Billiton Forum on Corporate Responsibility, which comprisesCode of Business Conduct.
During FY2012, our executive managementvoluntary community investment totalled US$214 million(1), comprising cash, in-kind support and leaders from non-government organisations (NGOs) chaired byadministrative costs and included a US$65 million contribution to our Chief Executive Officer, met twice during FY2010.UK-based charitable company, BHP Billiton Sustainable Communities. The cash component of our FY2012 community investment of US$128.6 million comprises:
No significant human rights-related issues were identified
direct investment in this reporting periodcommunity programs;
contributions to the Group’s charitable foundations, excluding BHP Billiton Sustainable Communities;
the Enterprise Development and there were no reported community resettlements.socio-economic development components of our broad-based Black Economic Empowerment programs in South Africa.
We continueExcluding the contribution to invest oneBHP Billiton Sustainable Communities, 51 per cent of our pre-tax profits (based onexpenditure was invested in local communities, 38 per cent was invested regionally and the averageremaining 11 per cent was invested in national or international programs in countries where we operate.
Supporting employee contributions
In addition to the social programs directly supported by the Group, many of our employees make a valuable contribution to their local communities by giving their personal time and expertise to a range of activities. One of the previous three years’ pre-tax profit publicly reported in eachmost significant ways we support the efforts of those years)our employees engaged in community programs.activities is through our global Matched Giving Program, whereby the Company matches employee volunteering hours, fundraising and donation efforts. The program aims to strengthen local communities by supporting and encouraging employees who volunteer, fundraise or donate to not-for-profit organisations. In FY2012, more than 6,000 employees participated in the Matched Giving Program, volunteering a total of approximately 60,000 hours of their own time to community activities important to them. Employee contributions benefited more than 1,400 not-for-profit organisations, which received US$7.7 million from the Group as part of the program.
2.9 Closure2.8.11 Understanding and rehabilitationmanaging our human rights impact
The requirementsWe have a responsibility to understand our potential impacts on human rights and to mitigate or eliminate them. We operate in accordance with the United Nations (UN) Universal Declaration of Human Rights and the UN Global Compact Principles.Our Sustainability Framework are incorporated through the planningCharter and Code of development projects, through operationsBusiness Conduct and into closure. Significant projects are governed by the performance requirements detailed in our GLDs support this commitment.
Our human rights due diligence process
Our human rights due diligence process requires our operations to identify and document key potential human rights risks by completing a human rights impact assessment (HRIA). HRIAs must be verified through an engagement process with stakeholders, validated by a qualified specialist every three years and internally reviewed on an annual basis. Where a HRIA identifies a material risk, a Human Rights Management Plan must be developed and implemented. Selected employees and contractors receive training on how to comply with BHP Billiton’s human rights commitments.
(1) | The expenditure represents BHP Billiton’s equity share, for both operated and non-operated joint venture operations. |
Security and human rights
Our Security and Emergency Management GLD requires all our operations to identify and manage security-related material risks to our people and property. The nature and global reach of our project management Group Level Documents (GLD). Health, Safety, Environmentbusiness can result in our people working in countries where there is potential exposure to personal and Community (HSEC) risks, legislated obligationsbusiness risk. Each country is assessed for the degree of risk associated with visiting, exploring and stakeholder requirements form important inputsoperating within it, and appropriate controls are developed to mitigate identified risks. The Voluntary Principles on Security and Human Rights (VPs) assists organisations to maintain the safety and security of their operations through the provision of an operating framework that upholds respect for human rights and fundamental freedoms.
We use both public and private security providers to protect our people and assets. Our Security and Emergency Management GLD requires private security providers engaged by BHP Billiton to be signatories to, or agree in writing to align with the International Code of Conduct for Private Security Providers. In addition to this, written advice is given to security providers outlining our commitment to the project planningVPs and execution process.the expectation for private security providers, or request for public security providers, to operate consistently with these principles.
OnceOccasionally, it is necessary to provide armed security protection for the safety of our people. Firearms are only deployed under a set of approved rules of engagement and when it can be demonstrated that no other options exist to protect a human life, to carry out stewardship requirements (such as injured livestock management) or as a means of last resort when threatened by dangerous wildlife. Criteria for the use of firearms and rules of engagement must comply with the International Association of Oil and Gas Producers, ‘Firearms and the Use of Force’ (Report number 320, Revision 2).
2.8.12 Reporting transparently and behaving ethically
Wherever we operate in operation,the world, we strive to work with integrity – doing what is right and doing what we say we will do. We care as much about how results are achieved as we do about the results themselves. At BHP Billiton, we believe that to maintain our assets undertake annual ‘life of asset’ planning, a process that incorporates all aspectsposition as one of the business. world’s leading companies, we must commit to the highest ethical business practices and governance standards in all our dealings. We strive to foster a culture that values and rewards exemplary ethical standards, personal and corporate integrity and respect for others.
As our operations expand globally, we increasingly confront the challenges of doing business in political, legal and commercial environments where corruption is a real risk. However, regardless of the country or culture within which our people work, our Anti-corruption GLD and theCode of Business Conduct forbid bribery and corruption in all our business dealings.
Particulars in relation to theCode of Business Conduct and anti-corruption are referred to in section 5.16 of this Report and in the Sustainability Report 2012 available online atwww.bhpbilliton.com. Specific discussion on legal proceedings is available in section 8 of this Report.
Transparently reporting taxes
Through our membership of the ICMM, BHP Billiton supports the Extractive Industries Transparency Initiative (EITI), a global initiative to improve governance in resource-rich countries through the verification and full publication of company payments and government revenues from oil, gas and mining. We are committed to supporting and cooperating in the implementation of country-level EITI Work Plans as our host countries progress the initiative.
In line with our support for the EITI, we report in the Sustainability Report 2012 payment of taxes and royalties derived from resource development on a country-by-country basis. We presented the data as the taxes and royalty payments that we make as BHP Billiton, such as corporate income taxes and royalties, and those that we collect on behalf of employees.
Closure planning
Closure planning is integrated into lifea key consideration in the planning and development of asset planning with each operationour projects and operations. Operations are required to produce Life of Asset Plans, which detail the activities to develop athe resource, and Closure Plans, which describe the proposed methods to rehabilitate and remediate following those activities and address closure plan. Weobligations. In addition to our projects and operating assets, we are also responsible for a number of legacy operations that are in various stages of decommissioning, rehabilitation or post-closure care and maintenance. The HSEC audit program covers the activities of these closed operations as well as closure-related issues at operations that are approaching closure. Closure plans provide the basis for estimating the financial costs of closure and the associated provisions. Information on our closure and rehabilitation provisions can be found in notes 1 andnote 18 of‘Provisions’ to the Financial Statements.financial statements.
In FY2010, a review of the Group’s closure planning and provisioning requirement was conducted. The recommendations from the reviewProduct stewardship
As our primary activities are in the processextraction (and, in some cases, processing) stages of being implementeda product’s life cycle, the majority of the life cycles of our products occur after the products have left our control. We recognise there is strong business merit in implementing product stewardship programs with other participants in the life cycles of our products. We seek to work with those involved in the product life cycles to enhance environmental and include further integrationsocial performance along the supply chain and to promote responsible product use and management. This approach applies to all stages of closure into planningthe supply chain from product storage to transport, consumption, recycling and accounting processesdisposal of our products and by-products.
In FY2012, we engaged in a number of product stewardship initiatives such as the Responsible Jewellery Council, Steel Stewardship Forum and Responsible Aluminium. For other commodities, including copper and nickel, we participate in the stewardship programs incorporated within industry associations.
As a member of the ICMM, we have also committed to implementing the ICMM Sustainable Development Framework, which requires that we facilitate and encourage responsible design, use, reuse, recycling and disposal of our products.
Many of our products are required to have a specific materials safety data sheet (MSDS). These MSDSs outline the relevant health, safety and environmental aspects of our products and are provided to customers and the developmenttransporters of more detailedour products.
Managing our suppliers
Our contractors and suppliers have requirements forin their contracts consistent withOur Charter, Code of Business Conduct, and Anti-corruption GLD and Health, Safety, Environment and Community GLDs. In our Supply ‘Source to Contract’ GLD, we specify that our suppliers align with these requirements, as well as with our zero tolerance to a number of human rights issues, including child labour, inhumane treatment of employees and forced or compulsory labour. All contracted suppliers are categorised depending on their HSEC and business conduct risk, and our level of commercial dependency, and a procedure to engage with each supplier is developed appropriate to the contentlevel of closure plans.risk.
Our corporate objective is to create long-term value for shareholders through the discovery, development and conversion of natural resources and the provision of innovative customer and market-focused solutions.
People are the foundation of our business and underpin our success. We value our people and encourage the development of talented and motivated individuals to support the continued performance and growth of our diverse operations. It is our aim as an organisation toWe strive to build a sense of purpose and achievement amongstamong all of our people in the work we do.
By working to ourOur Charter we align our people around our common purpose and values. We all use theOur Charter as a vital reference point for how we do business, wherever we are in the world, and whatever work we do.
Our organisation is structured in four component parts:
CSGs, Minerals Exploration,
Marketing
Customer Sector Groups
and Group Functions.
Each part of our organisation has a clear mandate that articulates itssets out the scope of responsibilities and accountabilities.
As a global business, our success depends on fostering a culture where diverse and often remotely located people behave in a manner that reflects our Charter and our commitment to open, honest and productive relationships with our people. We believe these relationships should be determined by local conditions, but always be consistent with our Charter values andBHP Billiton Code of Business Conduct.
Diversity of gender, ethnicity, skill, thought, experience, style and language are important elements of our people strategy and are key drivers for our success. In FY2010, we demonstrated our commitment to local employment. An average of 41 per cent of our workforce and 24 per cent of management were hired from the relevant local community.
Ensuring diversity in our local workforce and management populations is also supported by the work we have undertaken in our Accelerated Leadership Development Program and our Foundations for Graduates Program. Our Accelerated Leadership Development Program identifies employees with the potential to move into senior leadership roles and supports them with a structured development and learning program. 32 per cent of current participants are female.
Participation in the Foundations for Graduates Program in 2010 is 677 participants, up from 501 participants in 2009.
Females currently represent 15 per cent of our workforce. The number of females in management positions is approximately eight per cent. The representation of females across our workforce has remained consistent with FY2009.
In FY2011 we have committed to the following measurable objectives to enhance our gender diversity profile;
Each CSG, Group Function, Marketing and Minerals Exploration will be required to develop and implement a diversity plan in FY2011 that meets the corporations strategic imperative of diversity. The principles that underpin the development of those plans are set out in Section 5.8 of the Corporate Governance Statement.
Continue to focus on increasing female participation in the Accelerated Leadership Development Program, moving to 40 per cent for FY2012, .
Reviewing the means by which we recruit graduates and setting appropriate targets for female intake by end of FY2015 and identifying and implementing the necessary actions to achieve those targets.
The diverse nature of our business means we have a mix of collective and individually regulated employment arrangements. Whatever the nature of those arrangements, we recognise the right of our employees to freely associate and join trade unions. We strive to conduct constructive relationships with those trade unions. During FY2010, approximately 53 per cent of our global workforce was covered by collective bargaining agreements. We believe that successful relations with all our employees, unionised and non-unionised, must be built on values of mutual trust and respect.
In FY2010, we had an average of 39,57046,370 employees working in more than 100 operationslocations worldwide. We had an average of 58,56378,813 contractors globally. The multitudeglobally (2011: 64,548; 2010: 58,563). Females comprise 17 per cent of cultures and nationalities represented offer aour workforce. Approximately 10 per cent of our 406 senior leaders are female. For further information about our approach to diversity, that enriches the working lives of all.please refer to section 5.17.
The table below provides a breakdown of the average number of employees, in accordance with our IFRSInternational Financial Reporting Standards (IFRS) reporting requirements, which includes our proportionate share of jointly controlled entities’ employees, the Executive Director and executive Directors,100 per cent of employees of subsidiary companies, by CSG for each of the past three financial years. Part-time employees are included on a full-time equivalent basis. Employees of businesses acquired or disposed of during a particular year are included for the period of ownership. Contractors are not included in the figures below.
CSG | FY2010 | FY2009 | FY2008 | |||
Petroleum | 2,178 | 2,105 | 2,143 | |||
Aluminium | 4,471 | 4,938 | 5,145 | |||
Base Metals | 7,434 | 7,731 | 7,443 | |||
Diamonds and Specialty Products | 1,689 | 1,923 | 2,043 | |||
Stainless Steel Materials | 3,481 | 4,039 | 4,223 | |||
Iron Ore | 3,624 | 3,254 | 3,105 | |||
Manganese | 2,549 | 2,532 | 2,142 | |||
Metallurgical Coal | 3,533 | 3,892 | 3,680 | |||
Energy Coal | 8,762 | 8,437 | 9,183 | |||
Group and unallocated | 1,849 | 2,139 | 2,625 | |||
Total(1) | 39,570 | 40,990 | 41,732 | |||
|
CSG Petroleum Aluminium Base Metals Diamonds and Specialty Products Stainless Steel Materials Iron Ore Manganese Metallurgical Coal Energy Coal Group and unallocated Total FY2012 FY2011 FY2010 3,058 2,308 2,178 5,050 4,599 4,471 8,775 7,602 7,434 1,905 1,737 1,689 3,578 3,412 3,481 5,784 4,047 3,624 2,760 2,426 2,549 4,535 4,019 3,533 8,977 8,752 8,762 1,948 1,855 1,849 46,370 40,757 39,570
The table below provides a breakdown of our average number of employees by geographic location for each of the past three financial years.
FY2010 | FY2009 | FY2008 | FY2012 | FY2011 | FY2010 | |||||||||||||
Australia | 15,178 | 15,697 | 15,426 | |||||||||||||||
Southern Africa | 9,730 | 9,626 | 10,860 | |||||||||||||||
Africa | 10,311 | 10,061 | 10,622 | |||||||||||||||
Asia | 1,114 | 970 | 816 | |||||||||||||||
Australasia | 19,330 | 16,290 | 15,178 | |||||||||||||||
Europe | 532 | 492 | 515 | |||||||||||||||
North America | 4,166 | 3,168 | 2,971 | |||||||||||||||
South America | 9,468 | 9,897 | 9,342 | 10,917 | 9,776 | 9,468 | ||||||||||||
North America | 2,971 | 2,824 | 2,994 | |||||||||||||||
Europe | 515 | 563 | 606 | |||||||||||||||
Rest of World | 1,708 | 2,383 | 2,504 | |||||||||||||||
|
|
| ||||||||||||||||
Total | 39,570 | 40,990 | 41,732 | 46,370 | 40,757 | 39,570 | ||||||||||||
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2.112.10 Organisational structure
2.11.12.10.1 General
The BHP Billiton Group consists of the BHP Billiton Limited Group and the BHP Billiton Plc Group as a combined enterprise, following the completion of the Dual Listed Company (DLC)DLC merger in June 2001. Refer to note 25 ‘Subsidiaries’ into the financial statements for a list of BHP Billiton Limited and BHP Billiton Plc significant subsidiaries.
The BHP Billiton DLC merger was designed to place shareholders of both companies in a position where they effectively have an interest in a single group that combines the assets and is subject to the liabilities of both companies. BHP Billiton Limited and BHP Billiton Plc have each retained their separate corporate identities and maintained separate stock exchange listings, but they are operated and managed as if they are a single unified economic entity, with their boards and senior executive management comprising the same people.
2.11.22.10.2 DLC structure
The principles of the BHP Billiton DLC are reflected in the BHP Billiton Sharing Agreement and include the following:
the two companies are to operate as if they are a single unified economic entity, through Boards of Directors that comprise the same individuals and a unified senior executive management;
the Directors of both companies will, in addition to their duties to the company concerned, have regard to the interests of BHP Billiton Limited shareholders and BHP Billiton Plc shareholders as if the two companies were a single unified economic entity and, for that purpose, the Directors of each company take into account in the exercise of their powers the interests of the shareholders of the other; and
certain DLC equalisation principles must be observed. These are designed to ensure that for so long as the ‘Equalisation Ratio’ between a BHP Billiton Limited share and a BHP Billiton Plc share is 1:1, the economic and voting interests in the combined BHP Billiton Group resulting from the holding of one BHP Billiton Limited share are equivalent to that resulting from one BHP Billiton Plc share. Further details are set out in the sub-section ‘Equalisation of economic and voting rights’ below.
Additional documents that affect the DLC include:
BHP Billiton Limited Constitution
BHP Billiton Plc Memorandum and Articles of Association
BHP Billiton Special Voting Shares Deed
BHP Billiton Limited Deed Poll Guarantee
BHP Billiton Plc Deed Poll Guarantee.
Australian Foreign Investment Review Board (FIRB) conditions
The Treasurer of Australia approved the DLC merger subject to certain conditions, the effect of which was to require that, among other things, BHP Billiton Limited continues to:
be an Australian company, which is managed from Australia;
ultimately manage and control the companies conducting the business that was conducted by it at the time of the merger for as long as those businesses form part of the BHP Billiton Group.
The conditions have effect indefinitely, subject to amendment of the Australian Foreign Acquisitions Takeoverand Takeovers Act 1975 or any revocation or amendment by the Treasurer of Australia. If BHP Billiton Limited no longer wishes to comply with these conditions, it must obtain the prior approval of the Treasurer. Failure to comply with the conditions attracts substantial penalties under the Foreign Acquisitions and Takeovers Act.
Equalisation of economic and voting rights
BHP Billiton Limited shareholders and BHP Billiton Plc shareholders have economic and voting interests in the combined BHP Billiton Group. The economic and voting interests represented by a share in one company relative to the economic and voting interests of a share in the other company is determined by reference to a ratio known as the ‘Equalisation Ratio’. Presently, the economic and voting interests attached to each BHP Billiton Limited share and each BHP Billiton Plc share are the same, since the Equalisation Ratio is 1:1. The Equalisation Ratio would change if either BHP Billiton Limited or BHP Billiton Plc returned value to only its shareholders and no matching action were taken.
This means that the amount of any cash dividend paid by BHP Billiton Limited in respect of each BHP Billiton Limited share is normally matched by an equivalent cash dividend by BHP Billiton Plc in respect of each BHP Billiton Plc share, and vice versa. If one company has insufficient profits or is otherwise unable to pay the agreed dividend, BHP Billiton Limited and BHP Billiton Plc will, as far as practicable, enter into such transactions as are necessary so as to enable both companies to pay the amount of pre-tax dividends per share.
Joint Electorate Actions
Under the terms of the DLC agreements, the BHP Billiton Limited Constitution and the BHP Billiton Plc Articles of Association special voting arrangements have been implemented so that the shareholders of both companies vote together as a single decision-making body on matters affecting the shareholders of each company in similar ways (such matters are referred to as Joint Electorate Actions). For so long as the Equalisation Ratio remains 1:1, each BHP Billiton Limited share will effectively have the same voting rights as each BHP Billiton Plc share on Joint Electorate Actions.
A Joint Electorate Action requires approval by ordinary resolution (or special resolution if required by statute, regulation, applicable listing rules or other applicable requirements) of BHP Billiton Limited, with both the BHP Billiton Limited ordinary shareholders and the holder of the BHP Billiton Limited Special Voting Share voting as a single class and also of BHP Billiton Plc, with the BHP Billiton Plc ordinary shareholders and the holder of the BHP Billiton Plc Special Voting Share voting as a single class.
Class Rights Actions
In the case of certain actions in relation to which the two bodies of shareholders may have divergent interests (referred to as Class Rights Actions), the company wishing to carry out the Class Rights Action requires the prior approval of the shareholders in the other company voting separately and, where appropriate, the approval of its own shareholders voting separately. Depending on the type of Class Rights Action undertaken, the approval required is either an ordinary or special resolution of the relevant company.
These voting arrangements are secured through the constitutional documents of the two companies, the BHP Billiton Sharing Agreement, the Special Voting Shares Deed and rights attaching to a specially created Special Voting Share issued by each company and held in each case by a Special Voting Company. The shares in the Special Voting Companies are held legally and beneficially by Law Debenture Trust Corporation Plc.
Cross guarantees
BHP Billiton Limited and BHP Billiton Plc have each executed a Deed Poll Guarantee, pursuant to which creditors entitled to the benefit of the BHP Billiton Limited Deed Poll Guarantee and the BHP Billiton Plc Deed Poll Guarantee will, to the extent possible, be placed in the same position as if the relevant debts were owed by both BHP Billiton Limited and BHP Billiton Plc combined.
Restrictions on takeovers of one company only
The BHP Billiton Limited Constitution and the BHP Billiton Plc Articles of Association have been drafted to ensure that, except with the consent of the Board, a person cannot gain control of one company without having made an equivalent offer to the shareholders of both companies on equivalent terms. Sanctions for breach of these provisions would include withholding of dividends, voting restrictions and the compulsory divestment of shares to the extent a shareholder and its associates exceed the relevant threshold.
2.12.12.11.1 DLC agreements
On 29 June 2001, BHP Billiton Limited (then known as BHP Limited) and BHP Billiton Plc (then known as Billiton Plc) merged by way of a DLC structure. To effect the DLC, BHP Limited and Billiton Plc (as they were then known) entered into the following agreements designed to place the shareholders of both companies in a position where they effectively have an interest in a single group that combines the assets, and is subject to all the liabilities, of both companies:
BHP Billiton Sharing Agreement
BHP Billiton Special Voting Shares Deed
BHP Billiton Limited Deed Poll Guarantee
BHP Billiton Plc Deed Poll Guarantee.
The effect of each of these agreements and the manner in which they operate are described in section 2.112.10 of this Report. It is expected
2.11.2 Merger Agreement with Petrohawk Energy Corporation
The Offer
On 14 July 2011, BHP Billiton Limited, BHP Billiton Petroleum (North America) Inc. (Parent), North America Holdings II Inc. (Purchaser), and Petrohawk Energy Corporation, (Petrohawk), entered into an Agreement and Plan of Merger (Merger Agreement), pursuant to which Purchaser commenced an offer (Offer) to acquire all of the outstanding shares of Petrohawk’s common stock, par value US$0.001 per share (Shares), for US$38.75 per Share, net to the seller in cash (Offer Price), without interest.
The Merger
The Merger Agreement also provided that, these agreements will remain in effect until such timefollowing consummation of the Offer and satisfaction or waiver of certain customary conditions, Purchaser would be merged with and into Petrohawk (Merger), with Petrohawk surviving as a change in controlwholly owned subsidiary of the BHP Billiton Group may occur.
2.12.2 Proposed iron ore production joint venture with Rio Tinto
Iron Ore Joint Venture Framework Agreement
On 5 June 2009, BHP Billiton and Rio Tinto signed a Framework Agreement to establish an iron ore production joint venture combining the operation and management of their respective Western Australian iron ore production assets.
The Framework Agreement contains exclusivity provisions preventing either party from soliciting or engaging in discussions with respect to a proposal that (in broad terms) enables a person to acquire an economic or security interest in assets within the scope of the joint venture; which may adversely impact on its benefits; which is likely to be inconsistent withParent. Upon completion of the joint venture;Merger, each untendered Share outstanding immediately prior to the effective time of the Merger (excluding those Shares that are held by (i) Parent, Petrohawk or which might requiretheir respective wholly owned subsidiaries and (ii) stockholders of Petrohawk who properly demand appraisal in connection with the Merger under the Delaware General Corporation Law (DGCL)) would be converted into the right to receive the Offer Price.
If Purchaser held 90 per cent or more of the outstanding Shares following the consummation of the Offer (Short-Form Threshold), the parties would effect the Merger as a restructuringshort-form merger under the DGCL without the need for approval by Petrohawk’s stockholders.
Conditions to the Offer
Consummation of it.the Offer was subject to several conditions, including: (i) that a majority of the Shares outstanding (generally determined on a fully diluted basis) be validly tendered and not properly withdrawn prior to the expiration date of the Offer; (ii) clearance from the Committee on Foreign Investment in the United States; (iii) the absence of a material adverse effect on Petrohawk; and (iv) certain other customary conditions. The Offer was not subject to a financing condition.
Representations and warranties, covenants, termination fee
Petrohawk made customary representations, warranties and covenants in the Merger Agreement. Petrohawk’s covenants included covenants relating to Petrohawk’s conduct of its business between the date of the Merger Agreement and the closing of the Merger, restrictions on soliciting proposals for alternative transactions, public disclosures and other matters. The FrameworkMerger Agreement provides forcontained certain termination rights of Parent and Petrohawk and provided that, upon the termination of the Merger Agreement under specified circumstances, Petrohawk would be required to pay Parent a mutual breaktermination fee of US$275.5 million payable in395 million.
The foregoing description of the event that either party: announces that itOffer, the Merger and the Merger Agreement does not intendpurport to proceed withbe complete and is qualified in its entirety by reference to the joint venture; after satisfactionMerger Agreement.
Completion of the key regulatory approvals, fails to recommend the joint venture to its shareholders or fails to take the steps necessary to obtain the approval of its shareholders; or breaches the exclusivity provisions. It also set out core principles that would apply to the establishment of the joint venture.
Description of binding agreementsOffer
On 5 December 2009, BHP Billiton21 August 2011, we announced that at the end of Friday, 19 August 2011, approximately 293.9 million Petrohawk shares had been validly tendered and Rio Tinto signed binding agreements that set out the terms that will regulate the establishment of the joint venture and its ongoing operation. Those terms are consistent with the core principles set out in the Framework Agreement, except that the joint marketing of 15 per cent of output contemplatednot withdrawn, including approximately 36 million Petrohawk shares tendered by the core principles will not take place: all output will be sold by BHP Billiton and Rio Tinto separately.
Scope of joint venture
guaranteed delivery. The joint venture will encompass the management and operation of the economic interests of BHP Billiton and Rio Tinto in all current and future iron ore operations in Western Australia, including exploration interests, leases, mines, rail lines, ports and associated infrastructure, and all related employees and contractors. However, the joint venture will not include BHP Billiton’s Hot Briquetted Iron plant (HBI) or Rio Tinto’s interest in HIsmelt™, and its application to other secondary processing activities will be limited. Marketing activities and business development outside Western Australia are also outside the scope of the joint venture.
The parties to the joint venture will share the economic burden of all related liabilities, other than material undisclosed liabilities (with a minimum claim of US$300 million and a maximum claim period of 10 years) and certain pre-July 2009 tax liabilities. It is intended that the joint venture will continue in perpetuity.
Conditions precedent
The binding agreements remain subject to satisfaction of certain conditions precedent, including satisfying relevant anti-trust requirements, obtaining Australian foreign investment clearance from the Commonwealth Treasurer and favourable rulings from the Australian Taxation Office and State revenue authorities, obtaining certain other government approvals, and obtaining the approval of BHP Billiton and Rio Tinto shareholders. The Framework Agreement and the binding agreements will terminate if the conditions precedent are not satisfied by 31 December 2010, unless extended by agreement of Rio Tinto and BHP Billiton.
Financial adjustments
The economic interests of BHP Billiton and Rio Tinto in the joint venture will be equal. The joint venture is a contractual arrangement and the parties will not be acquiringtendered shares in each other’s iron ore companies or legal or beneficial interests in each other’s iron ore assets. The parties will obtain an economic exposure to each other’s iron ore production assets through each of them subscribing for debentures in an interposed company in the other’s group that holds shares in the other’s asset holding subsidiaries.
To equalise the net value of the parties’ asset contributions to the joint venture, BHP Billiton will also subscribe US$5.8 billion in cash for additional debentures in the Rio Tinto interposed company. This amount will be inflated from 1 July 2009 to completion at a rate of 6.5 per cent per annum, and will also be adjusted to reflect equalisation of net cash flows from 1 July 2009 in the manner described below.
The parties have agreed that they will bear the economic benefit and burden of the after-tax cash flows of their respective assets in the period from 1 July 2009 to commencement of the joint venture. To achieve this, the BHP Billiton cash subscription payment described above will be adjusted for 50represented 97.4 per cent of the difference betweenoutstanding shares of Petrohawk, thus satisfying the net cash flows (after tax) from the Rio Tinto operations and the BHP Billiton operations during the period from 1 July 2009 until completion, inflated at a rate of 6.5 per cent per annum.
GovernanceShort-Form Threshold provision of the joint venture
Management of the joint venture will be overseen byMerger Agreement. We also announced that following payment for all shares validly tendered and not withdrawn, we expected to effect a ‘nonexecutive’ Owners’ Council comprised of four representatives of each party. All decisions of the Owners’ Council must be approved by both parties, subject to certain deadlock-breaking mechanisms.
short-form merger under Delaware law as promptly as possible. The initial chairman of the Owners’ Council will be Sam Walsh (Rio Tinto’s Chief Executive Iron Ore and Australia), who will hold that office for a period of four years. The Owners’ Council will have the power to approve high-level policies (such as accounting, business conduct, communities and health, safety and environment) relating to the joint venture, review the conduct of activities undertaken by the manager and give general direction to the manager.
The Owners’ Council will also have powers and functions, much like a board of directors, in relation to other matters, including: approval of business and synergy plans; approving major contracts and capital projects; reviewing performance of the joint venture; approving major asset acquisitions, disposals and closures; approving strategies for dealing with third party access requests; approving product types, volumes and specifications; approving entry into or amendment of State Agreements; and approving the appointment and remuneration of senior executive team members. Standing and ad hoc committees comprised of an equal number of representatives of BHP Billiton and Rio Tinto will be established to advise the Owners’ Council in relation to the exercise of some of its powers and functions.
Overview
Management
The joint venture manager, a new entity owned equally by BHP Billiton and Rio Tinto, will, subject to the powers held by the Owners’ Council, manage all day to day activities of the joint venture without interference from BHP Billiton and Rio Tinto. In addition, the manager will develop plans for realisation of synergies and will present the Owners’ Council with annual business plans and budgets designed to achieve full utilisation of system capacity and options for maximisation of production capacity through expansion. The manager must ensure joint venture operations are conducted safely at all times, act equitably and fairly to the parties, and act in accordance with business plans and budgets approved by the Owners’ Council.
Senior management of the manager will be selected jointly, with broadly equal participation from BHP Billiton and Rio Tinto. The initial chief executive officer of the joint venture will be BHP Billiton Iron Ore President Ian Ashby, who will hold that office for a period of four years. Future chief executive officers will be appointed by the Owners’ Council.
Funding and default
The joint venture will operate with a minimum cash balance and will be financed entirely by the parties, through money subscribed for debentures and money advanced by loan to the relevant iron ore companies conducting operations. The manager of the joint venture will call for cash from BHP Billiton and Rio Tintoshort-form merger was effected on a regular basis to fund the joint venture and capital expenditure programs. The parties may elect to fund their proportionate share of an expansion or acquisition by way of project financing and may use their interests in the joint venture to secure corporate debt.
Failure to advance funds to meet calls made by the manager will give rise to a suspension of the defaulting party’s Owners’ Council voting rights and may trigger dilution of the defaulting party’s interest in the joint venture or a right to buy out the defaulting party.
Expansions and acquisitions
Sole risk rights will exist for expansion projects which involve capital expenditure exceeding US$250 million (indexed). Disagreements in relation to preferred expansion pathways (where more than one option exists) will be resolved by the manager determining which expansion pathway has the highest net present value.
Proposals for new iron ore acquisitions or investments in Western Australia will be referred to the Owners’ Council and, if both parties agree, be undertaken within the joint venture. Absent this agreement, the opportunity may be undertaken by the proposing party as a sole risk project.
Marketing of product and adjustments and tonnage supply
BHP Billiton and Rio Tinto will continue to compete and market iron ore to their customers separately. A separation protocol will ensure that the manager has no knowledge of BHP Billiton’s and Rio Tinto’s marketing strategies or sale terms relating to production from the joint venture. The manager will supply equal product volumes and specifications of product to each party to the extent possible. Where equal supply is not possible, adjustments will be made to ensure that each party receives equal value. These adjustments may include differential distributions on the debentures.
Disposal of interests
The parties will both be free to sell some or all of their respective interests in the joint venture without any pre-emptive rights or change of control restrictions applying (although certain principles and restrictions will apply depending on the nature and extent of the disposal). The right to vote on the Owners’ Council can, however, only be exercised by a person with an economic interest of more than 25 per cent of the joint venture, except in the unlikely scenario where no party holds an economic interest above 25 per cent. Neither party will be entitled to sell the underlying assets or interests separately from the joint venture interest, and rights to create security interests over the underlying assets and interests are limited.
2.12.3 Facility Agreement
On 18 August 2010, we entered into a multicurrency term and revolving facility and subscription agreement (the ‘facility agreement’) with, among others, Banco Santander, S.A., London Branch, Barclays Bank PLC, BNP Paribas, JPMorgan Chase Bank, N.A., The Royal Bank of Scotland plc and The Toronto-Dominion Bank as lenders (the ‘Lenders’) to, among other things, meet potential funding requirements in relation to our offer to acquire PotashCorp. The facility agreement provides for four credit facilities in an aggregate amount of US$45 billion as follows:
a US$25 billion term loan facility with a term of 364 days, which may be extended by BHP Billiton for a further 12 months subject to the payment of an extension fee;
a US$10 billion term loan facility with a term of three years;
a US$5 billion revolving facility with a term of three years; and
a US$5 billion revolving facility with a term of four years, incorporating a US dollar swingline facility and a euro swingline facility.
The proceeds of loans drawn under the credit facilities may be used for the following purposes:
financing the acquisition of the outstanding common shares of PotashCorp pursuant to the offer and any subsequent acquisition or pursuant to a plan of arrangement;
payments to holders of options, warrants or other rights to receive the outstanding common shares of PotashCorp;
the payment of fees, costs and expenses relating to the acquisition of PotashCorp and the credit facilities;
refinancing the indebtedness of PotashCorp or its subsidiaries; and
in the case of the revolving credit facilities, the general corporate purposes of the Group.
Loans drawn down under the credit facilities bear interest at a margin over the London Interbank Offered Rate (LIBOR).
The ability to draw down under the credit facilities is subject to certain conditions being met on the date of drawdown, including, among other things, all conditions to the consummation of the offer having been met without being amended, varied or waived (or otherwise treated as satisfied in circumstances where they have not been satisfied) except as permitted under the terms of the facility agreement. The facility agreement contains customary representations and warranties, affirmative and negative covenants (including requirements relating to the financial indebtedness of PotashCorp and certain restrictions on disposals and subsidiary indebtedness), indemnities and events of default, each with applicable qualifications or carve-outs. The facility agreement also contains a net borrowing to EBITDA financial covenant.
The facility agreement contains a requirement to use the net cash proceeds arising from certain disposals, debt issuances or equity issuances, to prepay or cancel the US$25 billion term facility, subject to certain exceptions and thresholds.
Each of BHP Billiton Limited and BHP Billiton Plc is a guarantor under the facility agreement. The credit facilities are unsecured. The facility agreement also contains certain other terms including treatment of withholding tax, quarterly commitment fees and increased costs payable to the Lenders and the giving of certain indemnities.2011.
The following text summarises the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc. The effect of the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc is, so far as possible, identical. Where the term ‘BHP Billiton’ is used in this description of the Constitution and Articles of Association, it can be read to mean either BHP Billiton Limited or BHP Billiton Plc.
Certain provisions of the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc can only be amended where such amendment is approved by special resolution either:
by approval as a Class Rights Action, where the amendment results in a change to an ‘Entrenched Provision’; or
otherwise, as a Joint Electorate Action.
A description of Joint Electorate Actions and Class Rights Actions is contained under the heading ‘Equalisation of economic and voting rights’ in section 2.11.22.10.2 of this Report. The objects of BHP Billiton Plc are contained in clause 4 of its Memorandum of Association.
2.13.12.12.1 Directors
The management and control of the business and affairs of BHP Billiton are vested in the Board of Directors, which may exercise all powers and do everything that is within the power of BHP Billiton, other than what isthose which are required to be exercised or done by BHP Billiton in a general meeting.
2.13.22.12.2 Power to issue securities
BHP Billiton may, pursuant to the Constitution and Articles of Association, issue any shares or other securities (including redeemable shares) with preferred, deferred or other special rights, obligations or restrictions as and when the Directors may determine and on any other terms the Directors consider appropriate, provided that any such issue:that:
any such issue does not affect any special rights conferred on the holders of any shares;
any such issue is subject to the provisions regarding shareholder approval in the Constitution and Articles of Association.Association;
The
the rights attaching to a class other than ordinary shares are expressed at the date of issue.
2.13.32.12.3 Restrictions on voting by Directors
A Director may not vote in respect of any contract or arrangement or any other proposal in which he or she has a material personal interest. A Director shall not be counted in the quorum at a meeting in relation to any resolution on which he or she is not entitled to vote.
In addition, under the UK Companies Act 2006, a Director has a duty to avoid a situation in which he or she has (or can have) a direct or indirect interest that conflicts (or may conflict) with the interests of the company. The duty is not infringed, if among other things, the situation is authorised by non-interested Directors. In 2008, theThe Articles of Association of BHP Billiton Plc were amended to enable the Board to authorise a matter that might otherwise involve a Director breaching his or her duty to avoid conflicts of interest. An interested Director may not vote or be counted towards a quorum for a resolution authorising such a situation. Where the Board gives such authorisation, the Board may prohibit, or may establish regulations which prohibit, the relevant Director from voting on any matter relating to the conflict. The Board has adopted procedures to manage these voting restrictions.
Subject to applicable laws, a Director is entitled to vote, and be counted in the quorum, in respect of any resolution concerning any of the following matters, namely where the material personal interest:
arises because the Director is a shareholder of BHP Billiton and is held in common with the other shareholders of BHP Billiton;
arises in relation to the Director’s remuneration as a Director of BHP Billiton;
relates to a contract BHP Billiton is proposing to enter into that is subject to approval by the shareholders and will not impose any obligation on BHP Billiton if it is not approved by the shareholders;
arises merely because the Director is a guarantor or has given an indemnity or security for all or part of a loan, or proposed loan, to BHP Billiton;
arises merely because the Director has a right of subrogation in relation to a guarantee or indemnity referred to above;
relates to a contract that insures, or would insure, the Director against liabilities the Director incurs as an officer of BHP Billiton, but only if the contract does not make BHP Billiton or a related body corporate the insurer;
relates to any payment by BHP Billiton or a related body corporate in respect of an indemnity permitted by law, or any contract relating to such an indemnity; or
is in a contract, or proposed contract with, or for the benefit of, or on behalf of, a related body corporate and arises merely because the Director is a director of a related body corporate.
2.13.42.12.4 Loans by Directors
Any Director may lend money to BHP Billiton at interest with or without security or may, for a commission or profit, guarantee the repayment of any money borrowed by BHP Billiton and underwrite or guarantee the subscription of shares or securities of BHP Billiton or of any corporation in which BHP Billiton may be interested without being disqualified as a Director and without being liable to account for BHP Billiton for any commission or profit.
2.13.52.12.5 Retirement of Directors
At every Annual General Meeting one-third ofIn 2011, the Directors or, if their number is not a multiple of three, then the number nearest to but not less than one-third, must retire from office. The Directors to retire are those longest in office since last being elected. As between Directors who were elected on the same day, the Directors to retire are determined by lot (in default of agreement between them). Further, a Director must retire from office at the conclusion of the third Annual General Meeting after which the Director was elected or re-elected. A retiring director is eligible for re-election.
The Board continues to haveadopted a policy that requires a non-executive Director who has servedconsistent with the UK Corporate Governance Code, under which all Directors must, if they wish to remain on the Board, for nine years fromseek re-election by shareholders annually. This policy took effect at the date of their first election to stand for annual re-election from the first2011 Annual General Meeting afterMeetings, and replaced the expirationprevious system, as set out in the Constitution and Articles of their current term.Association, under which Directors were required to submit themselves to shareholders for re-election at least every three years.
2.13.62.12.6 Rights attaching to shares
Dividend rights
Under English law, dividends on shares may only be paid out of profits available for distribution. Under Australian law, dividends on shares may only be paid out of net assets, provided that the payment is fair and reasonable to the company’s shareholders as a whole and the payment of the dividend does not materially prejudice the company’s ability to pay its creditors. The Constitution and Articles of Association provide that payment of any dividend may be made in any manner, by any means and in any currency determined by the Board.
All unclaimed dividends may be invested or otherwise used by the Board for the benefit of whichever of BHP Billiton Limited or BHP Billiton Plc declared that dividend, until claimed or, in the case of BHP Billiton Limited, otherwise disposed of according to law. In the case of BHP Billiton Plc, any dividend unclaimed after a period of 12 years from the date on which such dividend was declared or became due for payment shall be forfeited and shall revert to BHP Billiton Plc.
Voting rights
Voting at any general meeting of BHP Billiton Limited shareholders iscan, in the first instance, to be conducted by a show of hands unless a poll is demanded by any of the following (except in relation to the election of a chairman of a meeting or, unless the Chairman otherwise determines, the adjournment of a meeting), or is otherwise required (as outlined below):
the Chairman;
any shareholder under the law; or
the holder of the BHP Billiton Limited Special Voting Share.
Voting at any general meeting of BHP Billiton Plc iscan, in the first instance, to be conducted by a show of hands unless a poll is demanded by any of the following:following, (except in relation to the election of a chairman of a meeting or, unless the Chairman otherwise determines, the adjournment of a meeting), or is otherwise required (as outlined below):
the Chairman;
not less than five members present in person or by proxy and entitled to vote;
a member or members present in person or by proxy and representing not less than five per cent of the total voting rights of all the members having the right to vote at the meeting; or
the holder of the BHP Billiton Plc Special Voting Share.
As described under the heading ‘Equalisation of economic and voting rights’ in section 2.11.22.10.2 of this Report, certain matters may be decided as Joint Electorate Actions or Class Rights Actions. Any matter considered by shareholders at an Annual General Meeting of BHP Billiton Limited or BHP Billiton Plc constitutes a Joint Electorate Action and shall therefore be decided on a poll. Therefore, in practice, generally all items of business at Annual General Meetings proceed directly to poll.
In addition, at any general meeting a resolution, other than a procedural resolution, put to the vote of the meeting on which the holder of the relevant BHP Billiton Special Voting Share is entitled to vote shall be decided on a poll.
For the purposes of determining which shareholders are entitled to attend or vote at a meeting of BHP Billiton Plc or BHP Billiton Limited, and how many votes such shareholder may cast, the relevant company will specify
in any notice of meeting a time, not more than 48 hours before the time fixed for the meeting, by which a shareholder must be entered on the Register of Shareholders in order to have the right to attend or vote at the relevant meeting.
Shareholders who wish to appoint a proxy to attend, vote or speak at a meeting of BHP Billiton Plc or BHP Billiton Limited (as appropriate) on their behalf, must deposit the relevant form appointing a proxy in accordance with the instructions contained in any notice of meeting, so as to be received in the specified manner not less than 48 hours before the time appointed for holding the meeting to which the appointment of a proxy relates.
Rights to share in BHP Billiton Limited’s profits
The rights attached to the shares of BHP Billiton Limited, as regards the participation in the profits available for distribution, are as follows:
The holders of any preference shares shall be entitled, in priority to any payment of dividend to the holders of any other class of shares, to a preferred right to participate as regards dividends up to but not beyond a specified amount in distribution.
Subject to the special rights attaching to any preference shares, but in priority to any payment of dividends on all other classes of shares, the holder of the Equalisation Share (if any) shall be entitled to be paid such dividends as are declared.declared or paid thereon.
Any surplus remaining after payment of the distributions above shall be payable to the holders of BHP Billiton Limited ordinary shares and the BHP Billiton Limited Special Voting Share in equal amounts per share.
Rights to share in BHP Billiton Plc’s profits
The rights attached to the shares of BHP Billiton Plc, in relation to the participation in the profits available for distribution, are as follows:
The holders of the cumulative preference shares shall be entitled, in priority to any payment of dividend to the holders of any other class of shares, to be paid a fixed cumulative preferential dividend (Preferential Dividend) at a rate of 5.5 per cent per annum, to be paid annually in arrears on 31 July in each year or, if any such date shall be a Saturday, Sunday or public holiday in England, on the first business day following such date in each year. Payments of Preferential Dividends shall be made to holders on the register at any date selected by the Directors up to 42 days prior to the relevant fixed dividend date.
Subject to the rights attaching to the cumulative preference shares, but in priority to any payment of dividends on all other classes of shares, the holder of the BHP Billiton Plc Special Voting Share shall be entitled to be paid a fixed dividend of US$0.01 per annum, payable annually in arrears on 31 July.
Subject to the rights attaching to the cumulative preference shares and the BHP Billiton Plc Special Voting Share, but in priority to any payment of dividends on all other classes of shares, the holder of the Equalisation Share shall be entitled to be paid such dividends as the Board may decide to pay thereupon.thereon.
Any surplus remaining after payment of the distributions above shall be payable to the holders of the BHP Billiton Plc ordinary shares in equal amounts per BHP Billiton Plc ordinary share.
2.13.72.12.7 Right on a return of assets on liquidation
On a return of assets on liquidation of BHP Billiton Limited, subject to the payment of all prior ranking amounts owed to all creditors of BHP Billiton Limited and preference shareholders, the assets of BHP Billiton Limited remaining available for distribution among shareholders, after giving effect to the payment of all prior ranking amounts owed to all creditors and holders of preference shares, and to all prior ranking statutory entitlements, shall be applied in paying to the holders of the BHP Billiton Limited Special Voting Share and the Equalisation Share (if
any) an amount of up to A$2.00 on each such share, on an equal priority with any amount paid to the holders of BHP Billiton Limited ordinary shares, and any surplus remaining shall be applied in making payments solely to the holders of BHP Billiton Limited ordinary shares in accordance with their entitlements.
On a return of assets on liquidation of BHP Billiton Plc, subject to the payment of all prior ranking amounts owed to the creditors of BHP Billiton Plc and to all prior ranking statutory entitlements, the assets of BHP Billiton Plc to be distributed on a winding-up shall be distributed to the holders of shares in the following order of priority:
To the holders of the cumulative preference shares, the repayment of a sum equal to the nominal capital paid up or credited as paid up on the cumulative preference shares held by them and accrual, if any, of the Preferential Dividend, whether such dividend has been earned or declared or not, calculated up to the date of commencement of the winding-up.
To the holders of the BHP Billiton Plc ordinary shares and to the holders of the BHP Billiton Plc Special Voting Share and the Equalisation Share, (if any), the payment out of surplus, if any, remaining after the distribution above of an equal amount for each BHP Billiton Plc ordinary share, the BHP Billiton Plc Special Voting Share and the Equalisation Share, if issued, subject to a maximum in the case of the BHP Billiton Plc Special Voting Share and the Equalisation Share of the nominal capital paid up on such shares.
2.13.82.12.8 Redemption of preference shares
If BHP Billiton Limited at any time proposes to create and issue any preference shares, the preference shares may be issued on the terms that they are to be redeemed or, at the option of either or both BHP Billiton Limited and the holder, are liable to be redeemed, whether out of share capital, profits or otherwise.
The preference shares confer on the holders the right to convert the preference shares into ordinary shares if, and on the basis, the Board determines at the time of issue of the preference shares.
The preference shares are to confer on the holders:
the right (on redemption and on a winding up) to payment in cash in priority to any other class of shares of (i) the amount paid or agreed to be considered as paid on each of the preference shares; (ii) the amount, if any, equal to the aggregate of any dividends accrued but unpaid and of any arrears of dividends;
the right, in priority to any payment of dividend on any other class of shares, to the preferential dividend.
There is no equivalent provision in the Articles of Association of BHP Billiton Plc.Plc although as noted in section 2.12.2 above, BHP Billiton can issue preference shares which are subject to a right of redemption on terms the Board considers appropriate.
2.13.92.12.9 Capital calls
Subject to the terms on which any shares may have been issued, the Board may make calls on the shareholders in respect of all monies unpaid on their shares. BHP Billiton has a lien on every partly paid share for all amounts payable in respect of that share. Each shareholder is liable to pay the amount of each call in the manner, at the time and at the place specified by the Board (subject to receiving at least 14 daysdays’ notice specifying the time and place for payment). A call is considered to have been made at the time when the resolution of the Board authorising the call was passed.
2.13.102.12.10 Borrowing powers
Subject to relevant law, the Directors may exercise all powers of BHP Billiton to borrow money, and to mortgage or charge its undertaking, property, assets (both present and future) and all uncalled capital or any part or parts thereof and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of BHP Billiton or of any third party.
2.13.112.12.11 Changes to rights of shareholders
Rights attached to any class of shares issued by either BHP Billiton Limited or BHP Billiton Plc can only be varied (whether as a Joint Electorate Action or a Class Rights Action) where such variation is approved both:
by the Company that issued the relevant shares, as a special resolution;
by the holders of the issued shares of the affected class, either by a special resolution passed at a separate meeting of the holders of the issued shares of the class affected, or with the written consent of members with at least 75 per cent of the votes of that class.
2.13.122.12.12 Conditions governing general meetings
All provisions relating to general meetings apply with any necessary modifications to any special meeting of any class of shareholders that may be held. Therefore, the following information relates equally to general meetings and any special meeting of any class of shareholders.
The Board may and shall on requisition in accordance with applicable laws call a general meeting of the shareholders at the time and place or places and in the manner determined by the Board. No shareholder may convene a general meeting of BHP Billiton except where entitled under law to do so. Any Director may convene a general meeting whenever the Director thinks fit. General meetings can also be cancelled, postponed or adjourned.adjourned, where permitted by law or the Constitution or Articles of Association. Notice of a general meeting must be given to each shareholder entitled to vote at the meeting and such notice of meeting must be given in the form and manner in which the Board thinks fit. Five shareholders of the relevant company present in person or by proxy constitute a quorum for a meeting. A shareholder who is entitled to attend and cast a vote at a general meeting of BHP Billiton Limited may appoint a person as a proxy to attend and vote for the shareholder in accordance with the law.
2.13.132.12.13 Limitations on rights to own securities
Neither the Constitution of BHP Billiton Limited nor the Articles of Association of BHP Billiton Plc impose any limitations on the rights to own securities other than restrictions that reflect the takeovers codes under relevant Australian and UK law. In addition, the Australian Foreign Acquisitions and Takeovers Act 1975 imposes a number of conditions that restrict foreign ownership of Australian-based companies.
Share control limits imposed by the Constitution and the Articles of Association, as well as relevant laws, are described in section 2.7sections 2.7.2 and 2.11.22.10.2 of this Report.
2.13.142.12.14 Documents on display
You can consult reports and other information about BHP Billiton Limited that it has filed pursuant to the rules of the ASX atwww.asx.com.au. You can consult reports and other information filed for publication by BHP Billiton Plc pursuant to the rules of the UK Listing Authority at the Authority’s document viewing facility.facility (the National Storage Mechanism). Information filed on the ASX, or pursuant to the rules of the UK Listing Authority is not incorporated by reference into this Annual Report. The documents referred to in this Annual Report as being available on our website,www.bhpbilliton.com, are not incorporated by reference and do not form part of this Annual Report.
BHP Billiton Limited and BHP Billiton Plc both file annual and special reports and other information with the SEC. These filings are available on the SEC website atwww.sec.gov. You may also read and copy any document that either BHP Billiton Limited or BHP Billiton Plc files at the SEC’s public reference room located at 100 F Street, NE, Room 1,580, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 or access the SEC website atwww.sec.gov for further information on the public reference room. The SEC filings of BHP Billiton Limited since November 2002, and those of BHP Billiton Plc since April 2003, are also available on the SEC website.
2.14.12.13.1 Petroleum reserves
Reserves and production
BHP Billiton Petroleum reserves are estimated and reported according to SEC standards. For FY2010,FY2012, our proved oil and gas reserves have been determined in accordance with recent revisions to SEC Rule 4-10(a) of Regulation S-X. Proved oil and gas reserves are those quantities of crude oil, natural gas and natural gas liquids (NGL), which, by analysis of geoscience and engineering data can be estimated with reasonable certainty to be economically producible from a given date forward from known reservoirs, and under existing economic conditions, operating methods, operating contracts and government regulations. Unless evidence indicates that renewal of existing operating contracts is reasonably certain, estimates of economically producible reserves only reflect the period before the contracts providing the right to operate expire. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence within a reasonable time. Developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods and through installed extraction equipment and infrastructure operational at the time of the reserve estimate if the extraction is by means not involving a well. As specified in the revised regulation,Rule 4-10(a) of Regulation S-X, oil and gas prices are taken as the unweighted average of the corresponding first day of the month prices for the twelve months prior to the ending date of the period covered.
Estimates of oil and gas reserves are inherently imprecise, require the application of judgement and are subject to future revision. Accordingly, financial and accounting measures (such as the standardised measure of discounted cash flows, depreciation, depletion and amortisation charges, the assessment of impairments and the assessment of valuation allowances against deferred tax assets) that are based on reserve estimates are also subject to change.
Proved reserves are estimated by reference to available seismic, well and reservoir information, including production and pressure trends for producing reservoirs and, in some cases, to similar data from other analogous, producing reservoirs. Proved reserves estimates are attributed to future development projects only where there is a significant commitment to project funding and execution, and for which applicable governmentalgovernment and regulatory approvals have been secured or are reasonably certain to be secured. Furthermore, estimates of proved reserves only include volumes for which access to market is assured with reasonable certainty. All proved reserve estimates are subject to revision, either upward or downward, based on new information, such as from development drilling and production activities or from changes in economic factors, including product prices, contract terms or development plans.
The Petroleum Reserves Group (PRG), organised separately from the operating organisation, is a dedicated group that provides overall oversight of the reserves assessment and reporting processes. It is independent of the various asset teams directly responsible for development and production activities. The PRG is staffed by individuals averaging over 30 yearsyears’ experience in the Oiloil and Gasgas industry. The Managermanager of the Petroleum Reserves GroupPRG, Tina Obut, a full-time employee of BHP Billiton, is the individual primarily responsible for overseeing the preparation of the reserves estimate. Heestimates and compiling the information for inclusion in this Report. She has an advanced degree in engineering and over 3020 years of diversified industry experience in reservoir engineering, reserves assessment, and technical management. Hemanagement and is a 30+ year25-year member of the Society of Petroleum Engineers (SPE). The PRG manager has reviewed and agrees with the information included in section 2.13.1 of this Report. No part of the individual compensation for members of this groupthe PRG is dependent on reported reserves.
Production for FY2012 totalled 222 MMboe in sales and an additional 6 MMboe in non-sales production, typically fuel, consumed in our petroleum operations. During FY2012, Petroleum added a total of 953 MMboe(1) of proved oil and gas reserves. The largest component was the acquisition of the Petrohawk Energy Corporation onshore conventional and shale assets accounting for 617 MMboe of proved reserves. Additional minor property acquisitions and sales added a net 6.5 MMboe.
(1) | Total boe conversion is based on the following: 6,000 scf of natural gas equals 1 boe. |
Excluding purchases and sales of reserves, Petroleum added a total of 330 MMboe to proved reserves, replacing 148 per cent of production sales, through extensions, discoveries, revisions and improved recovery. Additions from extensions and discoveries were 36 MMboe and include new development projects planned in the Pyrenees offshore complex in Australia and development drilling in the Fayetteville and Eagle Ford fields located onshore US. Additions from revisions were 259 MMboe and are mostly related to infill drilling, since acquisition, in the Eagle Ford field. Additions from improved recovery were 35 MMboe and are associated with water injection projects in Mad Dog and Shenzi fields in the offshore US Gulf of Mexico (GOM).
Petroleum’s reserves are estimated as of 30 June 2012. Reserve assessments arefor all Petroleum properties were conducted by technical staff within the operating organisation. These individuals meet the professional qualifications outlined by the Society of Petroleum Engineers, are trained in the fundamentals of SEC reserves reporting and the corporate reserves processes and are endorsed by the PRG. Each reserve assessment is reviewed annually by the PRG to ensure technical quality, adherence to internally published Petroleum CSG Guidelines and compliance with SEC reporting requirements. Once endorsed by the PRG, all reserves receive final endorsement by senior management and the Risk and Audit Committee prior to public reporting. Our internal Group Audit Services provides secondary assurance of the oil and gas reserve reporting processes through annual audits.
During FY2010, Petroleum added 172 million barrel oil equivalent (boe)1 of proved oil and gas reserves, replacing 108 per cent of production of 159 million barrel oil equivalent. These additions were primarily revisions of 84 million boe due to infill drilling results and analysis of performance in producing properties, and extensions of 65 million boe. The largest of these extensions occurredare summarised in the Mad Dog field and was supported by the integration of wireline log and pressure data, core information and high resolution seismic interpretation, as well as data from other portions of the field and relevant analogous fields.
These changes are summarised (on a barrel oil equivalent basis) in the table below. These tables below, which detail estimated oil, condensate, NGL and natural gas reserves at 30 June 2010,2012, 30 June 20092011 and 30 June 2008,2010, with a reconciliation of the changes in each year. Reserves have been calculated using the economic interest method and represent net interest volumes after deduction of applicable royalty, fuel and flare volumes.royalty. Reserves include quantities of oil, condensate, NGL and natural gas that will be produced under severaltwo production and risk sharingrisk-sharing arrangements that involve the BHP Billiton Group in upstream risks and rewards without transfer of ownership of the products. At 30 June 2010,2012, approximately sixfour per cent (2009: seven per cent; 2008: six per cent) of proved developed and undeveloped oil, condensate and NGL reserves and fivetwo per cent (2009: five per cent; 2008: five per cent) of natural gas reserves are attributable to those arrangements. Reserves also include volumes calculated by probabilistic aggregation of certain fields that share common infrastructure. These aggregation procedures result in enterprise-wide proved reserves volumes which may not be realised upon divestment on an individual property basis.
Millions of barrels | Australia | United States | Other | Total | ||||||||||||
Proved developed and undeveloped oil, condensate and NGL reserves (a)(b) | ||||||||||||||||
Reserves at 30 June 2009 | 333.1 | 195.9 | 56.6 | 585.6 | ||||||||||||
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Improved Recovery | 11.0 | 0.0 | 0.0 | 11.0 | ||||||||||||
Revisions of previous estimates | 5.9 | 73.4 | (2.4 | ) | 76.9 | |||||||||||
Extensions and discoveries | 6.9 | 49.2 | 7.5 | 63.6 | ||||||||||||
Purchase/sales of reserves | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Production(c) | (40.2 | ) | (44.1 | ) | (12.8 | ) | (97.1 | ) | ||||||||
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Total changes | (16.4 | ) | 78.5 | (7.7 | ) | 54.4 | ||||||||||
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Reserves at 30 June 2010 | 316.7 | 274.4 | 48.9 | 640.0 | ||||||||||||
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Improved Recovery | 0.7 | 22.0 | 0.0 | 22.7 | ||||||||||||
Revisions of previous estimates | 2.0 | 1.6 | 3.7 | 7.3 | ||||||||||||
Extensions and discoveries | 3.2 | 1.6 | 0.2 | 5.0 | ||||||||||||
Purchase/sales of reserves | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Production(c) | (48.4 | ) | (32.2 | ) | (11.3 | ) | (91.9 | ) | ||||||||
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Total changes | (42.5 | ) | (7.0 | ) | (7.4 | ) | (56.9 | ) | ||||||||
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Reserves at 30 June 2011 | 274.2 | 267.4 | 41.5 | 583.1 | ||||||||||||
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Improved Recovery | 0.0 | 34.1 | 0.0 | 34.1 | ||||||||||||
Revisions of previous estimates | 9.0 | 170.3 | 5.0 | 184.3 | ||||||||||||
Extensions and discoveries | 8.8 | 5.0 | 0.0 | 13.8 | ||||||||||||
Purchase/sales of reserves | 0.0 | 73.9 | 0.0 | 73.9 | ||||||||||||
Production(c) | (39.1 | ) | (36.6 | ) | (9.6 | ) | (85.3 | ) | ||||||||
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Total changes | (21.3 | ) | 246.8 | (4.6 | ) | 220.9 | ||||||||||
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Reserves at 30 June 2012(d) | 252.8 | 514.3 | 36.9 | 804.0 | ||||||||||||
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Developed | ||||||||||||||||
Proved developed oil, condensate and NGL reserves | ||||||||||||||||
as of 30 June 2009 | 182.2 | 98.7 | 51.5 | 332.4 | ||||||||||||
as of 30 June 2010 | 217.1 | 108.9 | 44.4 | 370.4 | ||||||||||||
as of 30 June 2011 | 176.3 | 94.8 | 39.2 | 310.3 | ||||||||||||
Developed Reserves as of 30 June 2012 | 155.3 | 171.1 | 36.7 | 363.2 | ||||||||||||
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Undeveloped | ||||||||||||||||
Proved undeveloped oil, condensate and NGL reserves | ||||||||||||||||
as of 30 June 2009 | 150.9 | 97.2 | 5.1 | 253.2 | ||||||||||||
as of 30 June 2010 | 99.6 | 165.5 | 4.5 | 269.6 | ||||||||||||
as of 30 June 2011 | 97.9 | 172.6 | 2.3 | 272.8 | ||||||||||||
Undeveloped Reserves as of 30 June 2012 | 97.5 | 343.2 | 0.1 | 440.8 | ||||||||||||
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Petroleum Reserves
Millions of barrels | Australia | United States | Other | Total | ||||||||
Proved developed and undeveloped oil, condensate and NGL reserves(a) (b) | ||||||||||||
Reserves at 30 June 2007 | 329.7 | 169.4 | 66.0 | 565.1 | ||||||||
Improved Recovery | 17.6 | 0.0 | 0.0 | 17.6 | ||||||||
Revisions of previous estimates | 20.1 | 17.6 | (3.7 | ) | 34.0 | |||||||
Extensions and discoveries | 26.6 | 23.2 | 0.2 | 50.0 | ||||||||
Purchase/sales of reserves | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||
Production(c) | (39.7 | ) | (12.4 | ) | (16.0 | ) | (68.1 | ) | ||||
Total changes | 24.7 | 28.4 | (19.6 | ) | 33.5 | |||||||
Reserves at 30 June 2008 | 354.3 | 197.8 | 46.5 | 598.6 | ||||||||
Improved Recovery | 0.0 | 0.0 | 1.2 | 1.2 | ||||||||
Revisions of previous estimates | 13.3 | 5.0 | 24.0 | 42.3 | ||||||||
Extensions and discoveries | 5.9 | 14.0 | 0.0 | 19.9 | ||||||||
Purchase/sales of reserves | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||
Production (c) | (40.4 | ) | (20.9 | ) | (15.1 | ) | (76.4 | ) | ||||
Total changes | (21.3 | ) | (1.9 | ) | 10.1 | (13.1 | ) | |||||
Reserves at 30 June 2009 | 333.1 | 195.9 | 56.6 | 585.6 | ||||||||
Improved Recovery | 11.0 | 0.0 | 0.0 | 11.0 | ||||||||
Revisions of previous estimates | 5.9 | 73.4 | (2.4 | ) | 76.9 | |||||||
Extensions and discoveries | 6.9 | 49.2 | 7.5 | 63.6 | ||||||||
Purchase/sales of reserves | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||
Production(c) | (40.2 | ) | (44.1 | ) | (12.8 | ) | (97.1 | ) | ||||
Total changes | (16.4 | ) | 78.5 | (7.7 | ) | 54.4 | ||||||
Reserves at 30 June 2010(d) | 316.7 | 274.4 | 48.9 | 640.0 | ||||||||
Developed | ||||||||||||
Proved developed oil, condensate and NGL reserves | ||||||||||||
at 30 June 2007 | 178.6 | 20.5 | 63.0 | 262.1 | ||||||||
at 30 June 2008 | 189.1 | 90.0 | 42.0 | 321.1 | ||||||||
at 30 June 2009 | 182.2 | 98.7 | 51.5 | 332.4 | ||||||||
Developed Reserves as of 30 June 2010 | 217.1 | 108.9 | 44.4 | 370.4 | ||||||||
Undeveloped | ||||||||||||
Proved undeveloped oil, condensate and NGL reserves | ||||||||||||
at 30 June 2007 | 151.1 | 148.9 | 3.0 | 303.0 | ||||||||
at 30 June 2008 | 165.2 | 107.8 | 4.5 | 277.5 | ||||||||
at 30 June 2009 | 150.9 | 97.2 | 5.1 | 253.2 | ||||||||
Undeveloped Reserves as of 30 June 2010 | 99.6 | 165.5 | 4.5 | 269.6 | ||||||||
Small differences are due to rounding to first decimal place. |
(b) | NGL is extracted separately from crude oil and natural gas and reported as a liquid. |
(c) | Production for reserves reconciliation differs slightly from marketable production due to timing of sales and corrections to previous estimates. |
(d) | Total proved oil, condensate and NGL reserves include |
Billions of cubic feet | Australia (b) | United States | Other | Total | Australia (b) | United States | Other | Total | ||||||||||||||||||||
Proved developed and undeveloped natural gas reserves | ||||||||||||||||||||||||||||
Reserves at 30 June 2007(a) | 3,735.9 | 103.8 | 887.5 | 4727.2 | ||||||||||||||||||||||||
Reserves at 30 June 2009(a)(e) | 3,789.7 | 92.8 | 892.0 | 4,774.5 | ||||||||||||||||||||||||
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Improved Recovery | 0.0 | 0.0 | 0.0 | 0.0 | 40.5 | 0.0 | 23.6 | 64.1 | ||||||||||||||||||||
Revisions of previous estimates | 42.8 | 1.7 | (1.9 | ) | 42.6 | 94.2 | 2.2 | (51.5 | ) | 44.9 | ||||||||||||||||||
Extensions and discoveries | 239.9 | 5.9 | 11.1 | 256.9 | 1.6 | 9.3 | 0.0 | 10.9 | ||||||||||||||||||||
Purchase/sales of reserves | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||||||||||
Production(c) | (262.6 | ) | (11.8 | ) | (94.1 | ) | (368.5 | ) | (259.7 | ) | (17.7 | ) | (91.3 | ) | (368.7 | ) | ||||||||||||
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Total changes | 20.1 | (4.2 | ) | (84.9 | ) | (69.0 | ) | (123.4 | ) | (6.1 | ) | (119.2 | ) | (248.8 | ) | |||||||||||||
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Reserves at 30 June 2008 | 3,756.0 | 99.6 | 802.6 | 4,658.2 | ||||||||||||||||||||||||
Reserves at 30 June 2010(e) | 3,666.3 | 86.6 | 772.8 | 4,525.7 | ||||||||||||||||||||||||
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Improved Recovery | 0.0 | 0.0 | 179.5 | 179.5 | 0.0 | 3.5 | 0.0 | 3.5 | ||||||||||||||||||||
Revisions of previous estimates | 24.5 | 1.5 | 2.7 | 28.7 | 582.8 | 197.9 | 12.4 | 793.1 | ||||||||||||||||||||
Extensions and discoveries | 267.5 | 7.5 | 0.0 | 275.0 | 63.7 | 0.3 | 31.6 | 95.6 | ||||||||||||||||||||
Purchase/sales of reserves | 0.0 | (2.4 | ) | 0.0 | (2.4 | ) | 0.0 | 2,490.6 | 0.0 | 2,490.6 | ||||||||||||||||||
Production(c) | (258.3 | ) | (13.4 | ) | (92.9 | ) | (364.6 | ) | (274.7 | ) | (49.1 | ) | (81.2 | ) | (405.0 | ) | ||||||||||||
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Total changes | 33.7 | (6.8 | ) | 89.3 | 116.2 | 371.8 | 2,613.1 | (37.2 | ) | 2,977.7 | ||||||||||||||||||
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Reserves at 30 June 2009 | 3,789.7 | 92.8 | 892.0 | 4,774.5 | ||||||||||||||||||||||||
Reserves at 30 June 2011 | 4,038.1 | 2,729.8 | 735.6 | 7,503.5 | ||||||||||||||||||||||||
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Improved Recovery | 40.5 | 0.0 | 23.6 | 64.1 | 0.0 | 3.3 | 0.0 | 3.3 | ||||||||||||||||||||
Revisions of previous estimates | 94.2 | 2.2 | (51.5 | ) | 44.9 | 90.1 | 328.1 | 29.1 | 447.3 | |||||||||||||||||||
Extensions and discoveries | 1.6 | 9.3 | 0.0 | 10.9 | 6.6 | 128.3 | 0.0 | 134.9 | ||||||||||||||||||||
Purchase/sales of reserves | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 3,297.3 | 0.0 | 3,297.3 | ||||||||||||||||||||
Production(c) | (259.7 | ) | (17.7 | ) | (91.3 | ) | (368.7 | ) | ||||||||||||||||||||
Production(c)(f) | (276.1 | ) | (458.4 | ) | (122.6 | ) | (857.2 | ) | ||||||||||||||||||||
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Total changes | (123.4 | ) | (6.1 | ) | (119.2 | ) | (248.8 | ) | (179.5 | ) | 3,298.7 | (93.5 | ) | 3,025.7 | ||||||||||||||
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Reserves at 30 June 2010(d) | 3,666.3 | 86.6 | 772.8 | 4,525.7 | ||||||||||||||||||||||||
Reserves at 30 June 2012(d) | 3,858.6 | 6,028.5 | 642.1 | 10,529.2 | ||||||||||||||||||||||||
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Developed | ||||||||||||||||||||||||||||
Proved developed natural gas reserves | ||||||||||||||||||||||||||||
at 30 June 2007 | 1,804.0 | 15.9 | 495.8 | 2,315.7 | ||||||||||||||||||||||||
at 30 June 2008 | 1,882.3 | 46.4 | 441.4 | 2,370.1 | ||||||||||||||||||||||||
at 30 June 2009 | 1,899.0 | 38.5 | 383.7 | 2,321.2 | ||||||||||||||||||||||||
Developed Reserves as of 30 June 2010 | 1,724.8 | 30.3 | 236.8 | 1,991.9 | ||||||||||||||||||||||||
as of 30 June 2009(e) | 1,899.0 | 38.5 | 383.7 | 2,321.2 | ||||||||||||||||||||||||
as of 30 June 2010 | 1,724.8 | 30.3 | 236.8 | 1,991.9 | ||||||||||||||||||||||||
as of 30 June 2011 | 1,754.0 | 1,122.1 | 719.9 | 3,596.0 | ||||||||||||||||||||||||
Developed Reserves as of 30 June 2012 | 1,619.0 | 2,742.5 | 634.5 | 4,996.0 | ||||||||||||||||||||||||
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Undeveloped | ||||||||||||||||||||||||||||
Proved undeveloped natural gas reserves | ||||||||||||||||||||||||||||
at 30 June 2007 | 1,931.9 | 87.9 | 391.7 | 2,411.5 | ||||||||||||||||||||||||
at 30 June 2008 | 1,873.7 | 53.2 | 361.2 | 2,288.1 | ||||||||||||||||||||||||
at 30 June 2009 | 1,890.7 | 54.3 | 508.3 | 2,453.3 | ||||||||||||||||||||||||
Undeveloped Reserves as of 30 June 2010 | 1,941.5 | 56.3 | 536.0 | 2,533.8 | ||||||||||||||||||||||||
as of 30 June 2009(e) | 1,890.7 | 54.3 | 508.3 | 2,453.3 | ||||||||||||||||||||||||
as of 30 June 2010 | 1,941.5 | 56.3 | 536.0 | 2,533.8 | ||||||||||||||||||||||||
as of 30 June 2011 | 2,284.1 | 1,607.7 | 15.7 | 3,907.4 | ||||||||||||||||||||||||
Undeveloped Reserves as of 30 June 2012 | 2,239.6 | 3,286.0 | 7.6 | 5,533.2 | ||||||||||||||||||||||||
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(a) | Small differences are due to rounding to first decimal place. |
(b) | Production for Australia includes gas sold as LNG. |
(c) | Production for reserves reconciliation differs slightly from marketable production due to timing of sales and corrections to previous estimates. |
(d) | Total proved natural gas reserves include |
Millions of barrels oil equivalent(a) Proved developed and undeveloped oil, condensate and NGL reserves (b) Reserves at 30 June 2007 Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(c) Total changes Reserves at 30 June 2008 Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production (c) Total changes Reserves at 30 June 2009 Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(c) Total changes Reserves at 30 June 2010(d) Developed Proved developed oil, condensate and NGL reserves at 30 June 2007 at 30 June 2008 at 30 June 2009 Developed Reserves as of 30 June 2010 Undeveloped Proved undeveloped oil, condensate and NGL reserves at 30 June 2007 at 30 June 2008 at 30 June 2009 Undeveloped Reserves as of 30 June 2010 Australia United States Other Total 952.4 186.7 213.9 1353.0 17.6 0.0 0.0 17.6 27.2 17.9 (4.0 ) 41.1 66.6 24.2 2.1 92.8 0.0 0.0 0.0 0.0 (83.5 ) (14.4 ) (31.7 ) (129.5 ) 28.0 27.6 (33.7 ) 22.0 980.3 214.4 180.3 1,375.0 0.0 0.0 31.1 31.1 17.4 5.3 24.5 47.1 50.5 15.3 0.0 65.7 0.0 (0.4 ) 0.0 (0.4 ) (83.5 ) (23.1 ) (30.6 ) (137.2 ) (15.7 ) (3.0 ) 25.0 6.4 964.7 211.4 205.3 1,381.4 17.8 0.0 3.9 21.7 21.6 73.8 (11.0 ) 84.4 7.2 50.8 7.5 65.4 0.0 0.0 0.0 0.0 (83.5 ) (47.1 ) (28.0 ) (158.6 ) (36.9 ) 77.5 (27.6 ) 12.9 927.8 288.8 177.7 1,394.3 479.3 23.2 145.6 648.1 502.8 97.7 115.6 716.1 498.7 105.1 115.5 719.3 504.6 114.0 83.9 702.4 473.1 163.6 68.3 704.9 477.5 116.7 64.7 658.9 466.0 106.3 89.8 662.1 423.2 174.9 93.8 691.9
Does not include volumes expected to be consumed by operations. |
(f) | Production includes volumes consumed by operations. |
Millions of barrels of oil equivalent(a) Proved developed and undeveloped oil, condensate, natural gas and NGL reserves(b) Reserves at 30 June 2009(e) Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(c) Total changes Reserves at 30 June 2010(e) Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(c) Total changes Reserves at 30 June 2011(e) Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(c)(f) Total changes Reserves at 30 June 2012(d) Developed Proved developed oil, condensate, natural gas and NGL reserves as of 30 June 2009(e) as of 30 June 2010 as of 30 June 2011 Developed Reserves as of 30 June 2012 Undeveloped Proved undeveloped oil, condensate, natural gas and NGL reserves as of 30 June 2009(e) as of 30 June 2010 as of 30 June 2011 Undeveloped Reserves as of 30 June 2012 Australia United
States Other Total 964.7 211.4 205.3 1,381.4 17.8 0.0 3.9 21.7 21.6 73.8 (11.0 ) 84.4 7.2 50.8 7.5 65.4 0.0 0.0 0.0 0.0 (83.5 ) (47.1 ) (28.0 ) (158.6 ) (36.9 ) 77.5 (27.6 ) 12.9 927.7 288.8 177.7 1,394.3 0.7 22.6 0.0 23.3 99.1 34.5 5.9 139.5 13.9 1.6 5.4 20.9 0.0 415.1 0.0 415.1 (94.2 ) (40.3 ) (24.9 ) (159.4 ) 19.5 433.5 (13.6 ) 439.4 947.2 722.4 164.1 1,833.7 0.0 34.7 0.0 34.7 23.9 225.0 9.9 258.8 9.9 26.4 0.0 36.3 0.0 623.5 0.0 623.5 (85.1 ) (113.0 ) (30.1 ) (228.2 ) (51.3 ) 796.6 (20.2 ) 725.2 895.9 1,519.0 143.9 2,558.8 498.7 105.1 115.5 719.3 504.6 114.0 83.9 702.4 468.6 281.9 159.2 909.7 425.1 628.2 142.5 1,195.8 466.0 106.3 89.8 662.1 423.2 174.9 93.8 691.9 478.6 440.5 4.9 924.0 470.8 890.8 1.4 1,363.0
(a) | Barrel oil equivalent conversion based on 6,000 scf of natural gas equals 1 boe. |
(b) | Small differences are due to rounding to first decimal place. |
(c) | Production for reserves reconciliation differs slightly from marketable production due to timing of sales and corrections to previous estimates. |
(d) | Total proved reserves include |
(e) | Does not include volumes expected to be consumed by operations. |
(f) | Production includes volumes consumed by operations. |
Proved undeveloped reserves
At year-end, Petroleum had 692 million boe1,363 MMboe of proved undeveloped reserves, as compared with 662 million boeto 924 MMboe at the end of FY2009. During this period, Petroleum moved 70 million boeFY2011.
The largest component in the increase in proved undeveloped reserves was through the acquisition of Petrohawk Energy Corporation, which included a total of 337 MMboe in proved undeveloped reserves. Subsequent minor acquisitions added 6.0 MMboe in proved undeveloped reserves. Extensions and discoveries added 19 MMboe associated with a discovery in the Mad Dog field and new developments planned in the Upper Pyrenees and Moondyne fields in the Pyrenees development. Revisions added 112 MMboe, primarily through the extension of proved reservesareas in the Eagle Ford field. Improved recovery added 34 MMboe through water injection projects in Mad Dog and Shenzi fields in the offshore US GOM. A total of 69 MMboe was converted from proved undeveloped to proved developed, withas a result of drilling in the startupFayetteville field, the implementation of water injection programs at Shenzi and Atlantis, the start-up of a compression project in the Minerva gas field and the re-start of the Pyrenees projectoil production of the North West Shelf oil fields in Western Australia and several individual wells elsewhere in the Company. This was more than offset by the additions due to revisions and extensions described above.which we have an interest. During FY2010,FY2012, Petroleum spent $2,006 millionUS$6.2 billion progressing development of proved undeveloped reserves in the Northwest Shelf Oil and Gas Projects, the Bass Strait field, and the Macedon field in Australia; in Pakistan’s Zamzama gas field; on the Angostura Gas Project in Trinidad; and in the Atlantis, Mad Dog, Neptune, and Shenzi developments in the Gulf of Mexico.worldwide.
Most of the Group’sPetroleum’s offshore development projects require significant capital expenditure and multi-year lead times before initial production can be achieved with the associated movementprogression of reserves from undeveloped to developed. Based on current project schedules, more than 95approximately 93 per cent of the 6921,363 MMboe currently classified as undeveloped are actively being pursued and are scheduled to be on stream within the next five years. The remaining undeveloped reserves are located in active fields expected to produce well into the next decade and will be brought on stream in a phased manner to best optimise the use of production facilities and to meet long-term gas supply contracts. PetroleumThe CSG has a dependable history of progressing large undeveloped volumes from undeveloped to developed, evidenced by the past three years, which have averaged 90 million boeover 75 MMboe per year.
2.14.22.13.2 Ore Reserves
Introduction
Ore Reserves are estimates of the amount of ore that can be economically and legally extracted and processed from our mining properties. In order to estimate reserves, assumptions are required about a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates. Estimating the quantity and/or grade of reservesOre Reserves requires the size, shape and depth of ore bodies to be determined by analysing geological data such as drilling samples. Because the economic assumptions used to estimate reserves change from period to period and because additional geological and operational data is generated during the course of operations, estimates of reserves may change from period to period. All of the Ore Reserve figures presented are reported in 100 per cent terms and represent estimates at 30 June 20102012 (unless otherwise stated). All tonnes and grade information has been rounded, hence small differences may be present in the totals. Reserve life is calculatedTonnes are reported as Total Ore Reserve divided by the current nominal capacity of the operation.dry metric tonnes unless otherwise stated.
Our mineral leases are of sufficient duration (or convey a legal right to renew for sufficient duration) to enable all reservesOre Reserves on the leased properties to be mined in accordance with current production schedules. Our Ore Reserves may include areas where some additional approvals remain outstanding but where, based on the technical investigations we carry out as part of our mine planning process and our knowledge and experience of the approvals process, we expect that such approvals will be obtained as part of the normal course of business and within the timeframe required by the current life-of-minelife of mine schedule.
The reported reservesOre Reserves contained in this annual reportAnnual Report do not exceed the quantities that we estimate could be extracted economically if future prices for each commodity were at similar levelsequal to the average historical prices for traded metals for the three years to 31 December 2009, or for bulk commodities the three year historical contracted prices.2011, using current operating costs. However, we do not use a bauxite, aluminium or alumina price to determine bauxite reserves. The primary criteria for determining bauxite reserves are the feed specifications required by the captive alumina refinery. In addition to these specifications a number of modifying
factors are used to differentiate bauxite reserves from other mineralised material. For our Hotazel Manganese assets, historical price is used to determine reserves at only one asset (GEMCO). GeologicalMine, geological stratigraphic controls, cut-off grade and plant feed requirements are used to determine reserves at ourreserves.
Also, in some cases where commodities are produced as by-products (or co-products) with other Manganese assets.
Current operating costs have been matched tometals, we use the three-year average historical prices for the combination of commodities produced at the relevant mine in ourorder to verify that each ore reserve is economic. The three-year historical average prices used for each traded commodity to test for impairment of the Ore Reserves contained in accordance with Industry Guide 7. this Annual Report are as follows:
Commodity Price | US$ | |||
Copper | 3.26/lb | |||
Gold | 1,256/oz | |||
Nickel | 9.00/lb | |||
Silver | 23.34/oz | |||
Lead | 0.95/lb | |||
Zinc | 0.91/lb | |||
Uranium | 49.61/lb | |||
Iron Ore – Fines Iron Ore – Lump | 1.993/dmtu 2.216/dmtu | |||
Metallurgical Coal(1) | 214.1/t | |||
Thermal Coal(2) | 97.2/t |
(1) | Metallurgical Coal is on the basis of an average of the Peak Downs Contract, Hay Point FOB, Japanese Financial Year Contract Price for 2009, and the BHP Billiton Quarterly Contract Price for 2010 and 2011. |
(2) | Thermal coal is on the basis of an average of the Contract, Newcastle FOB, 6700 kcal/tonne Gross Air Dried. |
The reported reserves may differ in some respects from the reserves we report in our home jurisdictions of Australia and the UK. Those jurisdictions require the use of the Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves, December 2004 (the JORC Code), which contemplates the use of reasonable investment assumptions in calculating reserve estimates.
The three-year historical average prices used for each commodity to test for impairment of the reserves of traded metals contained in this annual report are as follows:
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Aluminium Customer Sector Group
Ore Reserves in accordance with Industry Guide 7
Ore Reserves
The table below details the total Ore Reserves for the Aluminium Customer Sector Group estimated as at 30 June 2010 in 100 per cent terms (unless otherwise stated).
As at 30 June 2010
As at 30 June 2009 | BHP Billiton Interest % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As at 30 June 2012 | As at 30 June 2012 | As at 30 June 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Proved Ore Reserve | Probable Ore Reserve | Total Ore Reserve | Total Ore Reserve | Proven Ore Reserves | Probable Ore Reserves | Total Ore Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity | Ore Type | Millions of dry metric tonnes | % A.Al2O3 | % R.SiO2 | % Fe2O3 | Millions of dry metric tonnes | % A.Al2O3 | % R.SiO2 | % Fe2O3 | Millions of dry metric tonnes | % A.Al2O3 | % R.SiO2 | % Fe2O3 | Reserve Life (years) | Millions of dry metric tonnes | % A.Al2O3 | % R.SiO2 | % Fe2O3 | Reserve Life (years) | BHP Billiton Interest % | Ore Type | Mt | % A. Al2O3 | % R. SiO2 | Mt | % A. Al2O3 | % R. SiO2 | Mt | % A. Al2O3 | % R. SiO2 | Mt | % A. Al2O3 | % R. SiO2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bauxite | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Worsley | Laterite | 252 | 31.1 | 1.8 | — | 59 | 30.4 | 1.8 | — | 311 | 31.0 | 1.8 | — | 19 | 324 | 31.0 | 1.8 | — | 19 | 86 | Laterite | 263 | 31.1 | 1.8 | 49 | 30.5 | 1.8 | 312 | 31.0 | 1.8 | 18 | 86 | 299 | 31.0 | 1.8 | 18 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brazil | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MRN | MRN Washed | 27 | 49.8 | 4.8 | — | — | — | — | — | 27 | 49.8 | 4.8 | — | 2 | 200 | 50.6 | 3.8 | — | 13 | 14.8 | MRN Washed | 52 | 50.8 | 4.1 | 22 | 50.4 | 4.4 | 74 | 50.7 | 4.2 | 5 | 14.8 | 13 | 50.3 | 4.6 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Suriname(6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Coermotibo | Laterite | — | — | — | — | — | — | — | — | — | — | — | — | — | 0.6 | 42.4 | 3.5 | 17.5 | 0.4 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Onverdacht | Laterite | — | — | — | — | — | — | — | — | — | — | — | — | — | 5.9 | 47.2 | 4.4 | 10.9 | 4 | — |
(1) | Approximate drill hole spacings used to classify the reserves |
Deposit |
| Probable Ore Reserves | ||
Worsley | Maximum 80m | Maximum 160m | ||
MRN | A bauxite intersection grid of 200m, plus at least 10 samples reached by searching ellipsoid. Mining and metallurgical characterisation (test pit/bulk sample), plus a reliable suite of chemical and size distribution | Those areas with a bauxite intersection grid spacing of less than 400m and/or a 400m spaced grid with a 200m offset fill in, plus a minimum of seven samples reached by searching ellipsoid, |
(2) | Metallurgical recoveries for the operations |
Deposit | Estimated Metallurgical Recovery of A.Al2O3 | |
Worsley (Worsley Refinery) | ||
MRN (Alumar Refinery) | 94% |
(3) |
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October 2011. The MRN |
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Base Metals Customer Sector Group
Ore Reserves in accordance with Industry Guide 7
Ore Reserves
The table below details the total Ore Reserves for the Base Metals Customer Sector Group estimated as at 30 June 2010 in 100 per cent terms (unless otherwise stated).
As at 30 June 2010
As at 30 June 2012 | As at 30 June 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit(1)(2) | Ore Type | Proven Ore Reserves | Probable Ore Reserves | Total Ore Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % TCu | % SCu | Mt | % TCu | % SCu | Mt | % TCu | % SCu | Mt | % TCu | % SCu | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copper | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Escondida (3) | Oxide | 76 | 0.90 | – | 40 | 0.88 | – | 116 | 0.89 | – | 54 | 57.5 | 121 | 0.87 | – | 35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide | 2,779 | 0.80 | – | 2,148 | 0.59 | – | 4,928 | 0.71 | – | 2,012 | 0.97 | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide Leach | 1,150 | 0.50 | – | 827 | 0.44 | – | 1,977 | 0.47 | – | 3,540 | 0.50 | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerro Colorado (4) | Oxide | 27 | 0.62 | 0.46 | 104 | 0.61 | 0.44 | 131 | 0.61 | 0.44 | 10 | 100 | 149 | 0.62 | 0.45 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide | 23 | 0.74 | 0.13 | 48 | 0.61 | 0.13 | 71 | 0.65 | 0.13 | 54 | 0.70 | 0.13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Spence(5) | Oxide | 31 | 0.86 | 0.62 | 4.3 | 0.76 | 0.62 | 36 | 0.85 | 0.62 | 11 | 100 | 26 | 0.89 | 0.75 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oxide Low Solubility | 15 | 1.13 | 0.59 | 8.3 | 0.88 | 0.46 | 23 | 1.04 | 0.54 | 37 | 1.09 | 0.60 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide | 131 | 0.99 | 0.13 | 35 | 0.73 | 0.11 | 165 | 0.94 | 0.12 | 201 | 0.93 | 0.14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM | – | – | – | 62 | 0.42 | 0.10 | 62 | 0.42 | 0.10 | 39 | 0.50 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pinto Valley (6) | Sulphide | 27 | 0.37 | – | 48 | 0.41 | – | 75 | 0.40 | – | 4 | 100 | 89 | 0.40 | – | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Low-grade Leach | 6.0 | 0.21 | – | 7.0 | 0.21 | – | 13 | 0.21 | – | 13 | 0.21 | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Cu | kg/t U3O8 | g/t Au | g/t Ag | Mt | % Cu | kg/t U3O8 | g/t Au | g/t Ag | Mt | % Cu | kg/t U3O8 | g/t Au | g/t Ag | Mt | % Cu | kg/t U3O8 | g/t Au | g/t Ag | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copper Uranium | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Olympic Dam(7) | Sulphide | 161 | 1.92 | 0.59 | 0.69 | 4.05 | 469 | 1.71 | 0.56 | 0.75 | 3.12 | 629 | 1.76 | 0.57 | 0.73 | 3.36 | 57 | 100 | 552 | 1.84 | 0.57 | 0.76 | 3.41 | 50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Cu | % Zn | g/t Ag | % Mo | Mt | % Cu | % Zn | g/t Ag | % Mo | Mt | % Cu | % Zn | g/t Ag | % Mo | Mt | % Cu | % Zn | g/t Ag | % Mo | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copper Zinc | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Antamina | Sulphide Cu Only | 82 | 1.04 | 0.16 | 8.1 | 0.032 | 467 | 0.94 | 0.14 | 8.9 | 0.026 | 549 | 0.96 | 0.15 | 8.7 | 0.027 | 16 | 33.75 | 580 | 0.97 | 0.2 | 8.8 | 0.03 | 17 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide Cu-Zn | 39 | 0.80 | 1.86 | 14.6 | 0.006 | 175 | 0.83 | 1.99 | 14.3 | 0.006 | 214 | 0.82 | 1.96 | 14.4 | 0.006 | 223 | 0.83 | 2.0 | 14.5 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | g/t Ag | % Pb | % Zn | Mt | g/t Ag | %Pb | % Zn | Mt | g/t Ag | % Pb | % Zn | Mt | g/t Ag | % Pb | % Zn | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Silver Lead Zinc | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cannington | UG Sulphide | 20 | 275 | 7.2 | 3.7 | 3.8 | 217 | 6.0 | 3.8 | 23 | 266 | 7.0 | 3.7 | 8 | 100 | 25 | 278 | 7.1 | 3.7 | 8 |
As at 30 June 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
Proved Ore Reserve | Probable Ore Reserve | Total Ore Reserve | Total Ore Reserve | BHP Billiton Interest % | ||||||||||||||||||||||||||||||||||||||||||||
Commodity | Ore Type | Millions of dry metric tonnes | % TCu | % SCu | Millions of dry metric tonnes | % TCu | % SCu | Millions of dry metric tonnes | % TCu | % SCu | Reserve Life (years) | Millions of dry metric tonnes | % TCu | % SCu | Reserve Life (years) | |||||||||||||||||||||||||||||||||
Copper | ||||||||||||||||||||||||||||||||||||||||||||||||
Escondida(4) | Oxide | 81 | 0.73 | — | 58 | 0.89 | — | 139 | 0.80 | — | 30 | 142 | 0.82 | — | 21 | 57.5 | ||||||||||||||||||||||||||||||||
Sulphide | 765 | 1.15 | — | 873 | 0.91 | — | 1,638 | 1.02 | — | 1,699 | 1.07 | — | ||||||||||||||||||||||||||||||||||||
Sulphide leach | 801 | 0.52 | — | 1,742 | 0.53 | — | 2,543 | 0.53 | — | 2,421 | 0.54 | — | ||||||||||||||||||||||||||||||||||||
Cerro Colorado(5) | Oxide | 77 | 0.60 | 0.44 | 63 | 0.66 | 0.47 | 141 | 0.63 | 0.45 | 11 | 117 | 0.63 | 0.46 | 9 | 100 | ||||||||||||||||||||||||||||||||
Sulphide | 26 | 0.70 | 0.13 | 34 | 0.70 | 0.13 | 60 | 0.70 | 0.13 | 51 | 0.71 | 0.13 | ||||||||||||||||||||||||||||||||||||
Spence | Oxide | 22 | 0.97 | 0.81 | 5.9 | 0.82 | 0.71 | 28 | 0.94 | 0.79 | 16 | 37 | 1.09 | 0.82 | 18 | 100 | ||||||||||||||||||||||||||||||||
Oxide - low solubility | 25 | 1.29 | 0.72 | 10 | 0.94 | 0.47 | 35 | 1.19 | 0.65 | 28 | 1.19 | 0.60 | ||||||||||||||||||||||||||||||||||||
Sulphide | 128 | 1.08 | — | 81 | 0.72 | — | 209 | 0.94 | — | 219 | 0.99 | — | ||||||||||||||||||||||||||||||||||||
ROM | — | — | — | 39 | 0.51 | 0.07 | 39 | 0.51 | 0.07 | 33 | 0.50 | 0.10 | ||||||||||||||||||||||||||||||||||||
Pinto Valley(6) | Low-grade leach | 6.0 | 0.22 | — | 7.0 | 0.21 | — | 13 | 0.21 | — | 4 | 13 | 0.21 | — | 4 | 100 | ||||||||||||||||||||||||||||||||
Sulphide | 36 | 0.37 | — | 53 | 0.42 | — | 89 | 0.40 | — | 89 | 0.40 | — | ||||||||||||||||||||||||||||||||||||
Millions of dry metric tonnes | % Cu | kg/ tonne U3O8 | g/t Au | g/t Ag | Millions of dry metric tonnes | % Cu | kg/ tonne U3O8 | g/t Au | g/t Ag | Millions of dry metric tonnes | % Cu | kg/ tonne 0U3O8 | g/t Au | g/t Ag | Millions of dry metric tonnes | % Cu | kg/ tonne U3O8 | g/t Au | g/t Ag | |||||||||||||||||||||||||||||
Copper Uranium | ||||||||||||||||||||||||||||||||||||||||||||||||
Olympic Dam | Sulphide | 182 | 1.97 | 0.59 | 0.61 | 3.88 | 416 | 1.78 | 0.58 | 0.75 | 3.25 | 598 | 1.84 | 0.58 | 0.71 | 3.44 | 54 | 589 | 1.81 | 0.59 | 0.66 | 3.36 | 54 | 100 | ||||||||||||||||||||||||
Millions of dry metric tonnes | % Cu | % Zn | g/t Ag | % Mo | Millions of dry metric tonnes | % Cu | % Zn | g/t Ag | % Mo | Millions of dry metric tonnes | % Cu | % Zn | g/t Ag | % Mo | Millions of dry metric tonnes | % Cu | % Zn | g/t Ag | % Mo | |||||||||||||||||||||||||||||
Copper Zinc | ||||||||||||||||||||||||||||||||||||||||||||||||
Antamina | Sulphide Cu only | 75 | 1.10 | 0.2 | 8.6 | 0.04 | 441 | 1.05 | 0.2 | 9.7 | 0.03 | 516 | 1.06 | 0.2 | 9.5 | 0.03 | 20 | 536 | 1.05 | 0.2 | 9.5 | 0.03 | 21 | 33.75 | ||||||||||||||||||||||||
Sulphide Cu-Zn | 29 | 0.92 | 1.8 | 17.0 | 0.01 | 131 | 1.06 | 2.0 | 17.6 | 0.01 | 161 | 1.03 | 2.0 | 17.5 | 0.01 | 181 | 1.02 | 2.1 | 18.0 | 0.01 | ||||||||||||||||||||||||||||
Millions of dry metric tonnes | g/t Ag | % Pb | % Zn | Millions of dry metric tonnes | g/t Ag | % Pb | % Zn | Millions of dry metric tonnes | g/t Ag | % Pb | % Zn | Millions of dry metric tonnes | g/t Ag | % Pb | % Zn | |||||||||||||||||||||||||||||||||
Silver Lead Zinc | ||||||||||||||||||||||||||||||||||||||||||||||||
Cannington(7) | Sulphide | 23 | 297 | 7.5 | 3.7 | 4.5 | 210 | 5.5 | 3.6 | 27 | 283 | 7.2 | 3.7 | 9 | 24 | 324 | 8.0 | 4.1 | 8 | 100 |
(1) |
|
Approximate drill hole spacings used to classify the reserves |
Deposit |
| Probable Ore Reserves | ||
Escondida | Oxide: 35m x 35m Mixed: 60m x 60m Sulphide: 50m x 50m
| Oxide: Mixed: 115m x 115m Sulphide:
| ||
Cerro Colorado | 55m x 55m on first kriging pass | 120m x 120m on second kriging pass | ||
Spence |
| Oxide and continuous square grid | ||
Pinto Valley | 60m x 120m | 200m x 200m | ||
Olympic Dam | Drilling grid of 20m to 30m | Drilling grid of 30m to 70m | ||
Antamina |
| |||
Cannington | 12.5m sectional x 15m vertical | 25m sectional x 25m vertical |
Metallurgical recoveries for the operations |
Deposit | Metallurgical Recovery | |||||||||||||
Cu | Ag | Pb | Zn | Au | U3O8 | Mo | ||||||||
Escondida | Oxide: 68% Sulphide: 82% Sulphide leach: 32% | |||||||||||||
Cerro Colorado | Sulphide and Oxide: 73% of TCu | |||||||||||||
Spence | Oxide: 81% of TCu Oxide - low solubility: 70% of TCu Sulphide: 70% of TCu ROM: 30% of TCu | |||||||||||||
Pinto Valley | Low-grade leach: 25% Sulphide: 86% | |||||||||||||
Olympic Dam | 94% | 65% | 65% | 72% | ||||||||||
Antamina | Sulphide Cu: 94% Sulphide Cu-Zn: 82% | Sulphide Cu: 70% Sulphide Cu-Zn: 59% | Sulphide Cu: 0% Sulphide Cu-Zn: 80% | Sulphide Cu: 71% Sulphide Cu-Zn: 0% | ||||||||||
Cannington | 88% | 90% | 74% | |||||||||||
|
|
|
|
Diamonds and Specialty Products Customer Sector Group
Ore Reserves
The table below details the total Ore Reserves for the Diamonds and Specialty Products Customer Sector Group estimated as at 30 June 2010 in 100 per cent terms (unless otherwise stated).
As at 30 June 2010
As at 30 June 2009 | BHP Billiton Interest % | |||||||||||||||||||||||
Commodity Deposit(1)(2)(3) | Proved Ore Reserve | Probable Ore Reserve | Total Ore Reserve | Reserve Life (years) | Total Ore Reserve | Reserve Life (years) | ||||||||||||||||||
Ore Type | Millions of dry metric tonnes | Carats per tonne | Millions of dry metric tonnes | Carats per tonne | Millions of dry metric tonnes | Carats per tonne | Millions of dry metric tonnes | Carats per tonne | ||||||||||||||||
Diamonds | ||||||||||||||||||||||||
EKATI Core Zone(4) | OC | 14 | 0.3 | 6.5 | 0.4 | 20 | 0.3 | 5 | 31 | 0.4 | 8 | 80 | ||||||||||||
UG | 2.5 | 0.6 | 3.2 | 0.8 | 5.7 | 0.7 | 7.3 | 0.8 | ||||||||||||||||
SP | 0.1 | 0.4 | — | — | 0.1 | 0.4 | 0.2 | 0.5 | ||||||||||||||||
Millions of tonnes | Millions of tonnes | Millions of tonnes | Millions of tonnes | |||||||||||||||||||||
Mineral Sands | ||||||||||||||||||||||||
Richards Bay Minerals(5) | TiO2 slag | 9.5 | 15 | 25 | 25 | 24 | 24 | 37.76 |
|
|
|
| ||
|
Deposit | Metallurgical Recovery | |
| Oxide: 69% Sulphide: 84% Sulphide Leach: 36% | |
| ||
Spence | Oxide: 73% Oxide Low Solubility: 70% Sulphide: 70% ROM: 30% | |
Pinto Valley | Mill: 86% Leach: 25% | |
Olympic Dam | Cu 94%, U3O8 72%, Au 70%, Ag 66% | |
Antamina | Sulpide Cu Only: Cu 92%, Zn 0%, Ag 65%, Mo 75% Sulpide Cu-Zn: Cu 81%, Zn 82% , Ag 55% , Mo 0% | |
Cannington | Ag 86%, Pb 87%, Zn 74% |
(3) |
|
(4) |
|
(5) |
|
(6) | Pinto Valley – The Pinto Valley mine and mill remained on care and maintenance throughout FY2012. Restart of the |
(7) | Olympic Dam – The increase in reserves was mainly due to the addition of mine development material. |
Stainless Steel MaterialsDiamonds Customer Sector Group
Ore Reserves in accordance with Industry Guide 7
Ore Reserves
The table below details the total Ore Reserves for the Stainless Steel Materials Customer Sector Group estimated as at 30 June 2010 in 100 per cent terms (unless otherwise stated).
As at 30 June 2010
As at 30 June 2009 | BHP Billiton Interest % | |||||||||||||||||||||||
Proved Ore Reserve | Probable Ore Reserve | Total Ore Reserve | Total Ore Reserve | |||||||||||||||||||||
Commodity | Ore Type | Millions of dry metric tonnes | % Ni | Millions of dry metric tonnes | % Ni | Millions of dry metric tonnes | % Ni | Reserve Life (years) | Millions of dry metric tonnes | % Ni | Reserve Life (years) | |||||||||||||
Nickel - Colombia | ||||||||||||||||||||||||
Cerro Matoso(4) | Laterite | 48 | 1.3 | 40 | 1.2 | 89 | 1.2 | 39 | 96 | 1.27 | 40 | 99.94 | ||||||||||||
SP | 32 | 1.4 | — | — | 32 | 1.4 | 29 | 1.38 | ||||||||||||||||
MNR Ore | 21 | 0.2 | — | — | 21 | 0.2 | 23 | 0.20 | ||||||||||||||||
Nickel West | ||||||||||||||||||||||||
Leinster(5) | OC | 2.9 | 1.3 | 0.2 | 0.90 | 3.1 | 1.3 | 8 | 3.1 | 1.3 | 6 | 100 | ||||||||||||
UG | 6.1 | 1.9 | 6.4 | 1.8 | 12 | 1.8 | 9.1 | 1.9 | ||||||||||||||||
SP | 1.4 | 1.0 | — | — | 1.4 | 1.0 | — | — | ||||||||||||||||
SP Oxidised | — | — | 1.9 | 1.7 | 1.9 | 1.7 | — | — | ||||||||||||||||
Mt Keith | OC | 117 | 0.56 | 2.1 | 0.45 | 119 | 0.56 | 14 | 129 | 0.57 | 15 | 100 | ||||||||||||
SP | 32 | 0.53 | — | — | 32 | 0.53 | 24 | 0.53 | ||||||||||||||||
Cliffs | UG | 0.2 | 2.9 | 1.1 | 3.0 | 1.2 | 3.0 | 3 | 1.4 | 3.9 | 4 | 100 |
As at 30 June 2012 | As at 30 June 2011 | |||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit | Ore Type | Proven Ore Reserves | Probable Ore Reserves | Total Ore Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||
Mt | cpt | Mt | cpt | Mt | cpt | Mt | cpt | |||||||||||||||||||||||||||||||||||||||
Diamonds | ||||||||||||||||||||||||||||||||||||||||||||||
EKATI Core Zone(1)(2) | OC | – | – | 13 | 1.2 | 13 | 1.2 | 3 | 80 | 20 | 0.9 | 5 | ||||||||||||||||||||||||||||||||||
SP | – | – | 0.2 | 0.3 | 0.2 | 0.3 | 0.3 | 0.4 | ||||||||||||||||||||||||||||||||||||||
UG | – | – | 4.2 | 0.6 | 4.2 | 0.6 | 4.8 | 0.6 |
(1) | Approximate drill hole spacings used to classify the reserves |
Deposit |
| Probable Ore Reserves | ||
EKATI Core Zone | ||||
60m | ||||
(2) |
|
|
| |
|
|
|
Iron OreStainless Steel Materials Customer Sector Group
Ore Reserves in accordance with Industry Guide 7
Ore Reserves
The table below details the total Ore Reserves for the Iron Ore Customer Sector Group estimated as at 30 June 2010 in 100 per cent terms (unless otherwise stated).
As at 30 June 2010
Proved Ore Reserve | Probable Ore Reserve | As at 30 June 2009 | ||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit(1)(2)(3)(4)(5) | Ore Type | Total Ore Reserve | Reserve life (years) | Total Ore Reserve | Reserve life (years) | BHP Billiton Interest % | ||||||||||||||||||||||||||||||||||||||||
Millions of wet metric tonnes | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Millions of wet metric tonnes | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Millions of wet metric tonnes | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Millions of wet metric tonnes | ||||||||||||||||||||||||||||
Iron Ore(6) | ||||||||||||||||||||||||||||||||||||||||||||||
Mt Newman JV(7) | BKM | 328 | 63.7 | 0.07 | 4.3 | 2.0 | 2.0 | 776 | 62.7 | 0.10 | 4.3 | 2.0 | 3.3 | 1,104 | 63.0 | 0.09 | 4.3 | 2.0 | 2.9 | 32 | 868 | 28 | 85 | |||||||||||||||||||||||
MM | 6.1 | 61.1 | 0.07 | 2.6 | 1.5 | 7.8 | 60 | 61.9 | 0.07 | 3.0 | 1.8 | 6.0 | 66 | 61.8 | 0.07 | 2.9 | 1.8 | 6.2 | 63 | |||||||||||||||||||||||||||
Jimblebar(8) | BKM | 92 | 63.1 | 0.09 | 3.5 | 2.4 | 3.4 | 282 | 62.8 | 0.11 | 3.1 | 2.3 | 4.3 | 375 | 62.9 | 0.11 | 3.2 | 2.3 | 4.1 | 72 | 420 | 92 | 100 | |||||||||||||||||||||||
MM | — | — | — | — | — | — | 131 | 62.1 | 0.08 | 2.8 | 1.8 | 5.8 | 131 | 62.1 | 0.08 | 2.8 | 1.8 | 5.8 | 131 | |||||||||||||||||||||||||||
Mt Goldsworthy JV Northern | NIM | 6.5 | 61.0 | 0.06 | 7.9 | 1.6 | 2.6 | 16 | 61.1 | 0.05 | 8.3 | 1.1 | 2.2 | 22 | 61.1 | 0.06 | 8.2 | 1.2 | 2.3 | 11 | 27 | 14 | 85 | |||||||||||||||||||||||
Mt Goldsworthy JV Area C(9) | BKM | 72 | 63.3 | 0.14 | 2.4 | 1.8 | 4.8 | 192 | 61.8 | 0.13 | 3.7 | 2.1 | 5.2 | 264 | 62.2 | 0.13 | 3.4 | 2.0 | 5.1 | 14 | 182 | 13 | 85 | |||||||||||||||||||||||
MM | 180 | 62.3 | 0.06 | 2.9 | 1.7 | 5.8 | 206 | 61.4 | 0.06 | 3.8 | 1.8 | 5.9 | 385 | 61.8 | 0.06 | 3.4 | 1.8 | 5.9 | 372 | |||||||||||||||||||||||||||
Yandi JV | CID | 612 | 57.1 | 0.04 | 5.7 | 1.5 | 10.7 | 385 | 57.1 | 0.05 | 5.9 | 1.5 | 10.6 | 996 | 57.1 | 0.04 | 5.8 | 1.5 | 10.6 | 20 | 1,051 | 23 | 85 | |||||||||||||||||||||||
Millions of wet metric tonnes | % Fe | % Pc | Millions of wet metric tonnes | % Fe | % Pc | Millions of wet metric tonnes | % Fe | % Pc | Millions of dry metric tonnes | |||||||||||||||||||||||||||||||||||||
Samarco JV(10) | ROM | 1,146 | 42.5 | 0.05 | 932 | 39.8 | 0.05 | 2,078 | 41.3 | 0.05 | 42 | 1,590 | 39 | 50 |
As at 30 June 2012 | As at 30 June 2011 | |||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit(1)(2) | Ore Type | Proven Ore Reserves | Probable Ore Reserves | Total Ore Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||
Mt | % Ni | Mt | % Ni | Mt | % Ni | Mt | % Ni | |||||||||||||||||||||||||||||||||||||||
Nickel Colombia | ||||||||||||||||||||||||||||||||||||||||||||||
Cerro Matoso(3) | Laterite | 41 | 1.3 | 16 | 1.0 | 57 | 1.2 | 32 | 99.94 | 48 | 1.3 | 31 | ||||||||||||||||||||||||||||||||||
SP | 34 | 1.2 | – | – | 34 | 1.2 | 38 | 1.3 | ||||||||||||||||||||||||||||||||||||||
MNR Ore | 19 | 0.2 | – | – | 19 | 0.2 | 20 | 0.2 | ||||||||||||||||||||||||||||||||||||||
Low-grade Stockpile | – | – | – | – | – | – | 7.1 | 1.0 | ||||||||||||||||||||||||||||||||||||||
Nickel West | ||||||||||||||||||||||||||||||||||||||||||||||
Leinster | OC | 2.9 | 1.3 | 0.2 | 0.9 | 3.1 | 1.3 | 8 | 100 | 3.1 | 1.3 | 8 | ||||||||||||||||||||||||||||||||||
UG | 3.8 | 1.9 | 6.4 | 1.7 | 10 | 1.8 | 12 | 1.8 | ||||||||||||||||||||||||||||||||||||||
SP | – | – | – | – | – | – | 1.4 | 1.0 | ||||||||||||||||||||||||||||||||||||||
SP Oxidised | – | – | – | – | – | – | 1.8 | 1.7 | ||||||||||||||||||||||||||||||||||||||
Mt Keith | OC | 91 | 0.57 | 8.0 | 0.50 | 99 | 0.56 | 13 | 100 | 105 | 0.56 | 13 | ||||||||||||||||||||||||||||||||||
SP | 17 | 0.54 | 11 | 0.50 | 28 | 0.52 | 33 | 0.53 | ||||||||||||||||||||||||||||||||||||||
Cliffs | UG | 0.5 | 3.2 | 1.0 | 3.1 | 1.5 | 3.1 | 3 | 100 | 1.6 | 2.9 | 3 |
(1) | Approximate drill hole spacings used to classify the reserves |
Deposit |
| Probable Ore Reserves | ||
Cerro Matoso | 35m or less with three drill holes | 35m to 100m with three drill holes | ||
Leinster | 25m x 25m | 25m x 50m | ||
Mt Keith | 60m x 40m | 80m x 80m | ||
Cliffs | 25m x 25m (and development) | 50m x 50m | ||
(2) Metallurgical recoveries for the operations were: | ||||
Deposit | Metallurgical Recovery | |||
Cerro Matoso | 84% (reserve to metal) | |||
Leinster | 85% based on blended plant recovery curves and 11% Ni in concentrate | |||
Mt Keith | 67% at 19% concentrate grade | |||
Cliffs | 88% at 11% concentrate grade |
(3) | Cerro Matoso – The increase in Ore Reserves followed review of the geological model and reserves estimation. Low-grade Stockpile was no longer included in the Ore Reserve estimate. The mining concessions are due to expire on 30 September 2012 and we have applied for an extension of these. If this extension is not granted, Cerro Matoso S.A. has an underlying mining agreement with the Colombian Government that grants Cerro Matoso S.A. the rights to continue mining and producing through to 2029 with a further extension of 15 years possible. |
Iron Ore Customer Sector Group
Ore Reserves in accordance with Industry Guide 7
As at 30 June 2012 | As at 30 June 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity | Proven Ore Reserves | Probable Ore Reserves | Total Ore Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserves | Reserve Life (years) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ore Type | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Iron Ore | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt Newman JV (7) | BKM | 360 | 63.8 | 0.08 | 4.2 | 2.0 | 1.8 | 773 | 62.5 | 0.11 | 4.0 | 2.0 | 3.9 | 1,133 | 62.9 | 0.10 | 4.1 | 2.0 | 3.2 | 24 | 85 | 1,198 | 62.9 | 0.10 | 4.1 | 2.0 | 3.2 | 29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MM | 11 | 61.2 | 0.07 | 2.8 | 1.5 | 7.5 | 67 | 61.7 | 0.06 | 3.1 | 1.8 | 6.3 | 78 | 61.6 | 0.06 | 3.1 | 1.8 | 6.4 | 83 | 61.6 | 0.07 | 3.0 | 1.8 | 6.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jimblebar | BKM | 192 | 62.6 | 0.12 | 3.2 | 2.4 | 4.3 | 307 | 62.3 | 0.11 | 3.5 | 2.5 | 4.3 | 499 | 62.4 | 0.11 | 3.4 | 2.4 | 4.3 | 44 | 100 | 374 | 62.8 | 0.11 | 3.3 | 2.3 | 4.1 | 42 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MM | – | – | – | – | – | – | 92 | 61.3 | 0.08 | 3.2 | 2.2 | 6.2 | 92 | 61.3 | 0.08 | 3.2 | 2.2 | 6.2 | 92 | 61.3 | 0.08 | 3.2 | 2.2 | 6.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt Goldsworthy JV Northern | NIM | 8.5 | 60.1 | 0.06 | 8.4 | 1.7 | 3.3 | 17 | 60.3 | 0.05 | 9.7 | 1.1 | 2.1 | 26 | 60.2 | 0.06 | 9.3 | 1.3 | 2.5 | 15 | 85 | 25 | 60.8 | 0.06 | 8.2 | 1.3 | 2.6 | 13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt Goldsworthy JV Area C | BKM | 104 | 63.1 | 0.14 | 2.6 | 1.8 | 4.8 | 277 | 61.9 | 0.13 | 3.7 | 2.1 | 5.3 | 381 | 62.2 | 0.13 | 3.4 | 2.0 | 5.2 | 15 | 85 | 361 | 62.2 | 0.13 | 3.4 | 2.0 | 5.2 | 17 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MM | 171 | 62.6 | 0.06 | 2.9 | 1.6 | 5.5 | 191 | 61.6 | 0.06 | 3.8 | 1.8 | 5.8 | 362 | 62.1 | 0.06 | 3.4 | 1.7 | 5.7 | 399 | 62.1 | 0.06 | 3.4 | 1.7 | 5.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Yandi JV(7) | CID | 593 | 57.0 | 0.05 | 5.6 | 1.5 | 10.9 | 273 | 57.4 | 0.04 | 5.9 | 1.4 | 10.3 | 867 | 57.2 | 0.04 | 5.7 | 1.5 | 10.7 | 14 | 85 | 940 | 57.2 | 0.04 | 5.7 | 1.5 | 10.7 | 21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Fe | % Pc | Mt | % Fe | % Pc | Mt | % Fe | % Pc | Mt | % Fe | % Pc | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Samarco JV(8) | ROM | 1,094 | 42.3 | 0.05 | 927 | 39.8 | 0.05 | 2,021 | 41.1 | 0.05 | 31 | 50 | 2,048 | 41.2 | 0.05 | 41 |
(1) | Approximate drill hole spacings used to classify the reserves were: |
Deposit | Proven Ore Reserves | Probable Ore Reserves | ||
Mt Newman JV | 50m x 50m | |||
Jimblebar | 50m x 50m | |||
Mt Goldsworthy JV Northern | 25m x 25m | 50m x 50m | ||
Mt Goldsworthy JV Area C | ||||
50m x 50m | 150m x | |||
Yandi JV | 50m x 50m | 200m x 100m | ||
Samarco JV | 200m x 200m x 16m | 400m x 400m x 16m |
(2) |
|
For Western Australia Iron Ore (WAIO) |
(3) | Metallurgical recovery was 100%, except for Mt Newman JV BKM where recovery was 96% (tonnage basis) and Samarco JV where recovery was 82% (metal basis). |
(4) | The reserve grades listed |
(5) | Cut-off grades used to estimate reserves: Mt Newman |
(6) | Our WAIO reserves are all located on State Agreement mining leases that guarantee the right to mine, except |
(7) | Mt Newman JV and Yandi JV – |
(8) |
|
|
|
Manganese Customer Sector Group
Ore Reserves in accordance with Industry Guide 7
Ore Reserves
The table below details the total Ore Reserves for the Manganese Customer Sector Group estimated as at 30 June 2010 in 100 per cent terms (unless otherwise stated)
As at 30 June 2010
As at 30 June 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As at 30 June 2012 | As at 30 June 2012 | As at 30 June 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit | Ore Type | Proved Ore Reserve | Probable Ore Reserve | Total Ore Reserve | Reserve Life (years) | Total Ore Reserve | Reserve Life (years) | BHP Billiton Interest % | Ore Type | Proven Ore Reserves | Probable Ore Reserves | Total Ore Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Millions of dry metric tonnes | % Mn | % Yield | Millions of dry metric tonnes | % Mn | % Yield | Millions of dry metric tonnes | % Mn | % Yield | Millions of dry metric tonnes | % Mn | % Yield | Mt | % Mn | % Yield | Mt | % Mn | % Yield | Mt | % Mn | % Yield | Mt | % Mn | % Yield | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Manganese | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GEMCO | ROM | 66 | 46.8 | 50 | 43 | 46.4 | 48 | 109 | 46.7 | 49 | 13 | 114 | 46.7 | 49 | 14 | 60 | ROM | 78 | 45.2 | 55 | 25 | 45.2 | 55 | 103 | 45.2 | 55 | 12 | 60 | 109 | 46.3 | 54 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Millions of dry metric tonnes | % Mn | % Fe | Millions of dry metric tonnes | % Mn | % Fe | Millions of dry metric tonnes | % Mn | % Fe | Millions of dry metric tonnes | % Mn | % Fe | Mt | % Mn | % Fe | Mt | % Mn | % Fe | Mt | % Mn | % Fe | Mt | % Mn | % Fe | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wessels | Lower Body-HG | 1.9 | 47.0 | 11.0 | 6.0 | 47.2 | 11.9 | 7.9 | 47.2 | 11.7 | 49 | 8.2 | 47.1 | 11.7 | 49 | 44.4 | Lower Body-HG | 2.2 | 47.8 | 11.1 | 9.9 | 47.8 | 11.2 | 12 | 47.8 | 11.2 | 46 | 44.4 | 15 | 47.8 | 11.2 | 48 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lower Body-LG | 1.9 | 42.2 | 12.2 | 8.2 | 41.4 | 14.5 | 10 | 41.6 | 14.1 | 10 | 41.6 | 14.0 | Lower Body-LG | 2.2 | 42.3 | 11.6 | 7.5 | 41.9 | 11.9 | 9.7 | 42.0 | 11.8 | 10 | 41.6 | 12.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NTS-Lower Body-HG | 1.0 | 48.8 | 11.2 | 5.9 | 48.5 | 11.4 | 6.9 | 48.5 | 11.4 | 6.9 | 48.5 | 11.4 | Upper Body | – | – | – | 48 | 42.0 | 17.9 | 48 | 42.0 | 17.9 | 47 | 42.0 | 17.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mamatwan(4)(5) | M, C, N Zones | 40 | 37.2 | 4.4 | 29 | 37.1 | 4.5 | 69 | 37.2 | 4.4 | 21 | 44.4 | 46 | 37.1 | 4.4 | 22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NTS-Lower body-LG | 0.1 | 44.5 | 12.5 | 0.9 | 42.8 | 16.6 | 1.0 | 42.9 | 16.3 | 1.0 | 42.9 | 16.3 | X Zone | 3.7 | 36.7 | 4.8 | 2.4 | 36.7 | 4.6 | 6.1 | 36.7 | 4.7 | 3.1 | 36.8 | 4.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Upper Body | — | — | — | 47 | 42.1 | 17.3 | 47 | 42.1 | 17.3 | 47 | 42.1 | 17.3 | NTS-M,C,N Zones | – | – | – | – | – | – | – | – | – | 24 | 37.2 | 4.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NTS-X Zone | – | – | – | – | – | – | – | – | – | 3.3 | 36.9 | 4.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Millions of dry metric tonnes | % Mn | % Fe | Millions of dry metric tonnes | % Mn | % Fe | Millions of dry metric tonnes | % Mn | % Fe | Millions of wet metric tonnes | % Mn | % Fe | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mamatwan(5)(6) | M, C, N Zones | 39 | 37.8 | 4.5 | 9.1 | 36.6 | 4.6 | 48 | 37.6 | 4.5 | 22 | 51 | 37.6 | 4.5 | 22 | 44.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
X Zone | 3.8 | 37.5 | 4.8 | 0.3 | 36.4 | 4.4 | 4.1 | 37.4 | 4.8 | 4.5 | 37.4 | 4.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NTS-M,C,N Zones | 8.2 | 37.8 | 4.5 | 14 | 37.6 | 4.5 | 22 | 37.7 | 4.5 | 22 | 37.7 | 4.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NTS-X Zone | 1.2 | 37.5 | 4.8 | 1.8 | 37.4 | 4.7 | 3.0 | 37.4 | 4.7 | 3.0 | 37.4 | 4.7 |
(1) | Approximate |
Deposit |
| Probable Ore Reserves | ||
GEMCO | 60m x 120m and 60m x 60m | 120m x 120m | ||
Wessels | Defined as rim ±30m wide around mined-out areas, | |||
Mamatwan | 80m x 80m | 160m x 160m |
(2) | Metallurgical recoveries for the operations |
Deposit | Metallurgical Recovery | |
GEMCO | See yield in | |
Wessels | 88% | |
Mamatwan | 96% |
(3) |
|
GEMCO – Tonnes are stated as ROM, manganese grades are given as per washed ore samples and should be read together with their respective tonnage yields. |
(4) | Wessels and Mamatwan – Tonnes are stated as wet tonnes. |
(5) |
|
|
Metallurgical Coal Customer Sector Group
Coal Reserves in accordance with Industry Guide 7
Coal Reserves
The table below details the total Coal Reserves for the Metallurgical Coal Customer Sector Group estimated as at 30 June 2010 in 100 per cent terms (unless otherwise stated).
As at 30 June 2010
As at 30 June 2009 | BHP Billiton Interest % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Proved Coal Reserve | Probable Coal Reserve | Total Coal Reserve | Total Marketable Coal Reserve | Total Marketable Coal Reserve | Reserve Life (years) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As at 30 June 2012 | As at 30 June 2012 | As at 30 June 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit(1)(2)(3) | Mining Method | Coal Type | Millions of metric tonnes | Millions of metric tonnes | Millions of metric tonnes | Millions of metric tonnes | % Ash | % VM | % S | Reserve Life (years) | Millions of metric tonnes | % Ash | % VM | % S | Reserve Life (years) | BHP Billiton Interest % | Mining | Coal | Proven Coal Reserves | Probable Coal Reserves | Total Coal Reserves | Total Marketable Coal Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Marketable Coal Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Queensland Coal, Reserves at operating mines - CQCA JV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goonyella Riverside(4) | OC | Met | 327 | 191 | 518 | 387 | 9.8 | 23.0 | 0.50 | 32 | 391 | 8.9 | 23.0 | 0.50 | 32 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit(1)(2)(3) | Mining | Coal | Mt | Mt | Mt | Mt | % Ash | % VM | % S | Reserve Life (years) | BHP Billiton Interest % | Mt | % Ash | % VM | % S | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goonyella Riverside Broadmeadow (4) | OC | Met | 350 | 224 | 574 | 426 | 9.8 | 22.7 | 0.50 | 36 | 50 | 437 | 9.7 | 22.7 | 0.50 | 35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UG | Met | 38 | 114 | 152 | 130 | 6.9 | 23.9 | 0.51 | 110 | 6.6 | 23.6 | 0.50 | UG | Met | 47 | 135 | 182 | 149 | 7.0 | 24.2 | 0.52 | 132 | 7.0 | 23.9 | 0.51 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peak Downs | OC | Met | 412 | 620 | 1,032 | 581 | 9.1 | 21.0 | 0.60 | 65 | 577 | 9.3 | 20.9 | 0.60 | 66 | 50 | OC | Met | 529 | 548 | 1,077 | 634 | 10.5 | 22.1 | 0.60 | 35 | 50 | 574 | 9.1 | 21.0 | 0.60 | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Saraji | OC | Met | 364 | 157 | 521 | 308 | 10.2 | 18.1 | 0.63 | 39 | 315 | 10.2 | 18.1 | 0.63 | 38 | 50 | OC | Met | 412 | 153 | 565 | 343 | 10.6 | 18.1 | 0.63 | 40 | 50 | 350 | 10.2 | 18.1 | 0.62 | 41 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Norwich Park | OC | Met | 176 | 99 | 275 | 196 | 10.2 | 16.9 | 0.69 | 30 | 159 | 9.8 | 17.6 | 0.70 | 24 | 50 | OC | Met | 156 | 62 | 218 | 154 | 10.3 | 16.7 | 0.70 | 25 | 50 | 194 | 10.3 | 16.9 | 0.70 | 29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Blackwater | OC | Met/Th | 106 | 397 | 503 | 448 | 9.9 | 24.8 | 0.40 | 33 | 460 | 9.8 | 24.8 | 0.40 | 34 | 50 | OC | Met/Th | 170 | 379 | 549 | 483 | 8.8 | 26.3 | 0.40 | 36 | 50 | 494 | 8.7 | 26.3 | 0.40 | 36 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Daunia(7) | OC | Met | 94 | 50 | 145 | 117 | 8.2 | 20.7 | 0.34 | 26 | 50 | 117 | 8.2 | 20.7 | 0.34 | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gregory JV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gregory Crinum | OC | Met | 11 | 2.5 | 14 | 11 | 7.7 | 32.8 | 0.60 | 6 | 10 | 7.5 | 33.2 | 0.60 | 7 | 50 | OC | Met | 8.6 | 1.2 | 9.8 | 8.0 | 7.4 | 33.0 | 0.60 | 4 | 50 | 9.2 | 7.4 | 33.0 | 0.60 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UG | Met | — | 26 | 26 | 20 | 6.8 | 33.2 | 0.60 | 24 | 7.5 | 33.1 | 0.60 | UG | Met | – | 23 | 23 | 19 | 7.5 | 33.7 | 0.60 | 22 | 6.5 | 33.7 | 0.59 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BHP Mitsui | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Walker Creek(6) | OC | Met/Th | 58 | 66 | 124 | 98 | 9.3 | 13.1 | 0.30 | 23 | 101 | 8.4 | 11.1 | 0.21 | 25 | 80 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Poitrel -Winchester | OC | Met/Th | 32 | 34 | 66 | 47 | 8.9 | 23.8 | 0.40 | 17 | 51 | 8.6 | 23.7 | 0.40 | 17 | 80 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Illawarra Coal Reserves at operating mines | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Appin(7) | UG | Met/Th | 5.3 | 73 | 78 | 69 | 8.9 | 24.0 | 0.37 | 19 | 44 | 8.9 | 23.5 | �� | 0.36 | 14 | 100 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
West Cliff(8) | UG | Met/Th | 11 | 3.3 | 14 | 10 | 8.9 | 21.3 | 0.36 | 4 | 13 | 8.9 | 21.5 | 0.37 | 5 | 100 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dendrobium(9) | UG | Met/Th | 3.0 | 55 | 58 | 40 | 9.7 | 24.0 | 0.59 | 13 | 33 | 9.7 | 23.6 | 0.59 | 13 | 100 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Walker Creek (8) | OC | Met/Th | 74 | 45 | 119 | 88 | 9.1 | 13.2 | 0.30 | 21 | 80 | 91 | 9.1 | 13.0 | 0.34 | 23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Poitrel-Winchester(7) | OC | Met | 30 | 29 | 58 | 44 | 8.0 | 23.5 | 0.35 | 14 | 80 | 42 | 8.1 | 23.0 | 0.34 | 14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Illawarra Coal | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Appin(9) | UG | Met/Th | 11 | 110 | 121 | 103 | 8.9 | 24.2 | 0.36 | 31 | 100 | 68 | 8.9 | 23.9 | 0.37 | 19 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
West Cliff | UG | Met/Th | 5.7 | 4.8 | 11 | 7.9 | 8.9 | 21.0 | 0.36 | 4 | 100 | 8.8 | 8.9 | 21.4 | 0.36 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dendrobium(10) | UG | Met/Th | 6.1 | 41 | 47 | – | – | – | – | 15 | 100 | 38 | 9.7 | 24.0 | 0.59 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UG | Met | – | – | – | 21 | 9.7 | 24.0 | 0.59 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UG | Th | – | – | – | 12 | 23.0 | – | – | – | – | – | – |
(1) | Only geophysically logged, fully analysed cored holes with greater than 95% recovery |
Deposit |
| Probable | ||
Goonyella Riverside Broadmeadow | 500m to | |||
Peak Downs | ||||
Saraji | ||||
Norwich Park | ||||
Blackwater | 500m | |||
Daunia | 500m to 1,000m | 1,000m to 2,000m | ||
Gregory Crinum | 850m plus 3D seismic coverage for UG | 850m to | ||
South Walker | 500m to 800m | |||
Poitrel-Winchester | 300m to 950m | 550m to | ||
Appin | 700m | |||
West Cliff | 700m | 1,500m | ||
Dendrobium | 700m | 1,500m |
(2) |
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Energy Coal Customer Sector Group
Coal Reserves
The table below detail the total Coal Reserves for the Energy Coal Customer Sector Group estimated as at 30 June 2010 in 100 per cent terms (unless otherwise stated).
As at 30 June 2010
As at 30 June 2009 | BHP Billiton Interest % | |||||||||||||||||||||||||||||||||||||||
Proved Coal Reserve | Probable Coal Reserve | Total Coal Reserve | Total Marketable Coal Reserve | Total Marketable Coal Reserve | ||||||||||||||||||||||||||||||||||||
Deposit | Mining Method | Coal Type | Millions of metric tonnes | Millions of metric tonnes | Millions of metric tonnes | Millions of metric tonnes | % Ash | % VM | % S | kcal/ kg CV | %Total Moisture | Reserve Life (years) | Millions of metric tonnes | % Ash | % VM | % S | kcal/kg CV | %Total Moisture | Reserve Life (years) | |||||||||||||||||||||
New Mexico - Operating mines | ||||||||||||||||||||||||||||||||||||||||
San Juan | UG | Th | 55 | 7.0 | 62 | 62 | 19.1 | — | 0.74 | 5,600 | 10.0 | 10 | 68 | 19.1 | — | 0.70 | 5,600 | 9.9 | 11 | 100 | ||||||||||||||||||||
Navajo | OC | Th | 152 | 10 | 162 | 162 | 23.0 | — | 0.90 | 4,800 | 13.0 | 21 | 172 | 23.1 | — | 0.90 | 4,700 | 13.0 | 22 | 100 | ||||||||||||||||||||
South Africa - Operating mines | ||||||||||||||||||||||||||||||||||||||||
Khutala(6) | OC | Met | 14 | — | 14 | 12 | 17.2 | 31.1 | 1.57 | 5,600 | 7.0 | 22 | 13 | 18.0 | 30.5 | 1.57 | 6,300 | 8.0 | 22 | 100 | ||||||||||||||||||||
OC | Th | 141 | 9.0 | 150 | 150 | 38.3 | 19.4 | 0.99 | 4,400 | 7.0 | 102 | 36.3 | 20.1 | 1.03 | 4,400 | 8.0 | ||||||||||||||||||||||||
UG | Th | 93 | — | 93 | 93 | 34.2 | 20.5 | 0.86 | 4,500 | 7.0 | 139 | 35.5 | 21.0 | 0.80 | 4,600 | 8.0 | ||||||||||||||||||||||||
Douglas-Middelburg | OC | Th | 477 | 130 | 607 | 436 | 20.2 | 22.9 | 0.59 | 6,000 | 7.4 | 24 | 431 | 21.3 | 23.4 | 0.61 | 6,000 | 7.1 | 22 | 100 | ||||||||||||||||||||
Klipspruit | OC | Th | 75 | 10 | 84 | 70 | 21.6 | 22.5 | 0.58 | 5,700 | 7.6 | 11 | 75 | 20.1 | 24.0 | 0.59 | 6,000 | 8.8 | 12 | 100 | ||||||||||||||||||||
Australia - Operating mine | ||||||||||||||||||||||||||||||||||||||||
Mt Arthur Coal(7) | OC | Th | 568 | 527 | 1,095 | 869 | 16.9 | 30.3 | 0.55 | 6,400 | 8.2 | 55 | 753 | 15.1 | 29.6 | 0.60 | 6,300 | 8.5 | 51 | 100 | ||||||||||||||||||||
Colombia - Operating mine | ||||||||||||||||||||||||||||||||||||||||
Cerrejon Coal Company(8) | OC | Th | 630 | 51 | 681 | 655 | 9.4 | 32.9 | 0.59 | 6,200 | 12.0 | 21 | 720 | 7.8 | 33.0 | 0.60 | 6,200 | 12.0 | 23 | 33.33 |
|
Deposit |
| |||
Goonyella Riverside Broadmeadow | 76% | |||
Peak Downs |
Caval Ridge: 56% | |||
Saraji | ||||
Norwich Park | ||||
Blackwater | ||||
Daunia | ||||
Gregory Crinum | ||||
South Walker Creek | ||||
Poitrel-Winchester | ||||
Appin | ||||
West Cliff | ||||
Dendrobium | ||||
|
(3) | Total Coal |
(4) |
|
(5) |
|
(6) | Norwich Park – Change in reserves was due to cost and revenue assumption changes. |
(7) | Daunia and Poitrel-Winchester- Coal type previously called Met/Th is now called Met based on product specifications. |
(8) | South Walker Creek- Total Marketable Coal Reserves are Pulverised Coal Injection (PCI) coal |
(9) | Appin- Total reserve increased following the granting of state government development consent in December 2011. This enabled the conversion of exploration title to mining title in the northern areas. As this process is ongoing, all reserves declared in the extended areas were classified as Probable Coal Reserve. |
(10) | Dendrobium- Change in reserves was due to detailed review of current equipment extraction capabilities. |
Energy Coal Customer Sector Group
Coal Reserves in accordance with Industry Guide 7
As at 30 June 2012 | As at 30 June 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit(1)(2) | Mining | Coal | Proven Coal Reserves | Probable Coal Reserves | Total Coal Reserves | Total Marketable Coal Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Marketable Coal Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | Mt | Mt | Mt | % Ash | % VM | % S | KCal/ kg CV | % Total Moisture (3) | Mt | % Ash | % VM | % S | KCal/kg CV | % Total Moisture (3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Mexico | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
San Juan(4) | UG | Th | 31 | – | 31 | 31 | 22.4 | – | 0.80 | 5,300 | 8.5 | 6 | 100 | 45 | 19.0 | – | 0.70 | 5,600 | 8.5 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Navajo(4) | OC | Th | 30 | – | 30 | 30 | 23.2 | – | 0.76 | 4,800 | 13.0 | 4 | 100 | 36 | 23.0 | – | 0.90 | 4,800 | 13.0 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Africa | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Khutala(5) | OC | Met | – | – | – | – | – | – | – | – | – | 8 | 100 | 9.5 | 18.9 | 29.1 | 1.90 | 6,100 | 7.0 | 16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OC | Th | – | – | – | – | – | – | – | – | – | 139 | 33.5 | 21.7 | 1.22 | 4,700 | 7.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UG | Th | 58 | – | 58 | 58 | 34.8 | 20.1 | 0.73 | 4,400 | 7.0 | 75 | 34.5 | 20.4 | 0.80 | 4,400 | 7.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wolvekrans(6) | OC | Th | 347 | 117 | 465 | 348 | 19.9 | 22.3 | 0.76 | 5,800 | 7.5 | 24 | 100 | 281 | 20.0 | 23.5 | 0.66 | 6,000 | 7.2 | 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Middelburg(7) | OC | Th | 146 | – | 146 | 104 | 20.9 | 22.7 | 0.63 | 6,000 | 7.5 | 29 | 100 | 106 | 20.4 | 23.1 | 0.63 | 6,000 | 7.2 | 23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Klipspruit (8) | OC | Th | 64 | 1.5 | 65 | 53 | 17.5 | 23.8 | 0.53 | 6,200 | 7.6 | 8 | 100 | 61 | 18.8 | 23.3 | 0.50 | 6,100 | 7.6 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt Arthur Coal (9) | OC | Th | 578 | 469 | 1,046 | 808 | 16.4 | 30.4 | 0.56 | 6,500 | 8.3 | 45 | 100 | 877 | 16.1 | 30.5 | 0.55 | 6,500 | 8.3 | 50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Colombia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerrejon Coal Company(10) | OC | Th | 702 | 86 | 788 | 763 | 8.8 | 33.0 | 0.60 | 6,200 | 12.7 | 21 | 33.33 | 718 | 9.4 | 32.9 | 0.60 | 6,200 | 12.0 | 23 |
(1) | Approximate drill hole spacings used to classify the reserves were: |
Deposit | Proven Ore Reserves | Probable Ore Reserves | ||
San Juan | <500m (250m radius from drill hole) | 500m to 1,000m (250m to 500m radius from drill hole) | ||
Navajo | <500m (250m radius from drill hole) | 500m to 1,000m (250m to 500m radius from drill hole) | ||
Khutala | >8 boreholes per 100ha | 4 to 8 boreholes per 100ha | ||
Wolvekrans | >8 boreholes per 100ha | 4 to 8 boreholes per 100ha | ||
Middelburg | >8 boreholes per 100ha | 4 to 8 boreholes per 100ha | ||
Klipspruit | >8 boreholes per 100ha | 4 to 8 boreholes per 100ha | ||
Mt Arthur Coal | <500m | 500m to 1,000m | ||
Cerrejon Coal Company | >6 boreholes per 100ha | 2 to 6 boreholes per 100ha |
(2) | Processing recoveries for the operations were: |
Deposit | Processing Recovery | |
San Juan | 100% | |
Navajo | 100% | |
Khutala | 93% | |
Wolvekrans | 74% | |
Middelburg | 83% | |
Klipspruit | 82% | |
Mt Arthur Coal | 70% | |
Cerrejon Coal Company | 97% |
(3) | Total moisture is for Total Marketable Coal Reserves product. |
(4) | San Juan and Navajo- Coal Reserves have been reduced following review of the mine plans. |
(5) | Khutala – Open-cut thermal coal reserves have been excluded because the anticipated capital from Eskom to enable mining to commence has not yet been approved. |
(6) | Wolvekrans – The increase in |
(7) | Middelburg- A decrease in the stated production by 1mtpa has resulted in an extension of the reserve life by six years. |
(8) | Klipspruit- Additional drilling allowed the reclassification of Probable Ore Reserves to Proven Ore Reserves. |
(9) | Mt Arthur |
Cerrejon Coal |
3 Operating and financial review and prospects
This ‘Operating and financial review and prospects’ section is intended to convey management’s perspective of the BHP Billiton Group and its operational and financial performance as measured and prepared in accordance with IFRS as issued by the International Accounting Standards Board (‘IFRS’).performance. We intend this disclosure to assist readers to understand and interpret the financial statements prepared in accordance with International Financial Reporting Standards (IFRS) included in this Report. This sectionThe basis of preparation of the financial statements is set out in note 1 ‘Accounting policies’ to the financial statements. The Operating and financial review and prospects should be read in conjunction with the financial statements, together with the accompanying notes.
We are the world’s largest diversified natural resources company, with a combined market capitalisation of approximately US$165.6160.6 billion as at 30 June 2010.2012. We generated revenueRevenue of US$52.872.2 billion and profitProfit attributable to shareholders of US$12.715.4 billion for FY2010.FY2012.
We extract and process minerals, oil and gas from our production operations located primarily in Australia, the Americas and southern Africa. We sell our products globally with sales and marketing taking place principally through our hubshub in The Hague and Singapore.
The following table shows the revenue by location of our customers:customers.
Revenue by location of customer | ||||||
US$M | 2010 | 2009 | 2008 | |||
Australia | 4,515 | 4,621 | 5,841 | |||
United Kingdom | 1,289 | 3,042 | 3,091 | |||
Rest of Europe | 8,554 | 7,764 | 11,258 | |||
China | 13,236 | 9,873 | 11,670 | |||
Japan | 5,336 | 7,138 | 6,885 | |||
Other Asia | 9,840 | 9,280 | 10,111 | |||
North America | 5,547 | 4,020 | 4,771 | |||
South America | 2,013 | 1,652 | 2,640 | |||
Southern Africa | 1,227 | 1,374 | 2,003 | |||
Rest of world | 1,241 | 1,447 | 1,203 | |||
BHP Billiton Group | 52,798 | 50,211 | 59,473 | |||
Revenue by location of customer | ||||||||||||
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||
US$M | US$M | US$M | ||||||||||
Australia | 5,318 | 5,487 | 4,515 | |||||||||
United Kingdom | 956 | 1,043 | 1,289 | |||||||||
Rest of Europe | 7,419 | 8,370 | 8,554 | |||||||||
China | 21,617 | 20,261 | 13,236 | |||||||||
Japan | 8,920 | 9,002 | 5,336 | |||||||||
Rest of Asia | 15,035 | 15,805 | 9,840 | |||||||||
North America | 8,099 | 6,167 | 5,547 | |||||||||
South America | 2,013 | 2,592 | 2,013 | |||||||||
Southern Africa | 1,437 | 1,548 | 1,227 | |||||||||
Rest of world | 1,412 | 1,464 | 1,241 | |||||||||
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Total revenue | 72,226 | 71,739 | 52,798 | |||||||||
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We operate ninethrough Customer Sector Groups (CSGs), which are generally aligned with the commodities we extract and market, reflecting the structuremarket. In May 2012, we use to assess the performance of the Group:announced that our Stainless Steel Materials and Aluminium CSGs would consolidate into a single CSG named Aluminium and Nickel. In this Report, Aluminium and Stainless Steel Materials are separate reportable segments.
Customer Sector | Principal activities | |
Petroleum | Exploration, development and production of oil and gas | |
Aluminium | Mining of bauxite, refining of bauxite into alumina and smelting of alumina into aluminium metal | |
Base Metals | Mining of copper, silver, lead, zinc, molybdenum, uranium and gold | |
Diamonds and Specialty Products | Mining of diamonds and titanium minerals; potash development | |
Stainless Steel Materials | Mining and production of nickel products | |
Iron Ore | Mining of iron ore | |
Manganese | Mining of manganese ore and production of manganese metal and alloys | |
Metallurgical Coal | Mining of metallurgical coal | |
Energy Coal | Mining of thermal (energy) coal |
The work of our nine CSGs is supported by our Minerals Exploration and Marketing teams and Group-wide functions.Group Functions.
A detailed discussion on our CSGs is located in section 2.2 of this Report.‘Business overview’. A detailed discussion of our Marketing and Minerals Exploration functions is located in sections 2.4 ‘Marketing’ and 2.5 respectively of this Report.‘Minerals exploration’, respectively.
Our objectivepurpose as a corporation is to create long-term shareholder value for shareholders through the discovery, acquisition, development and conversionmarketing of natural resources. We sell into globally integrated markets and wherever possible operate at full capacity. Our unique position in the resources and the provision of innovative customer and market-focused solutions.industry is due to our proven strategy.
To achieve this, we aimOur strategy is to own and operate a portfolio of upstream, large, long-life, low-cost, expandable, export-orientedupstream assets across a diversified geographicby commodity, geography and commodity base,market, and to pursue growth opportunities consistent with our core skills by:
discovering resources through our exploration activities;
developing and converting them in our CSGs;
developing customer and market-focused solutions through our Marketing arm;teams;
adding shareholder value beyond the capacity of these groups through the activities of the Group Functions.
In pursuing our objective,strategy, we are guided by our commitment to safety, simplicityOur BHP Billiton Charter values of Sustainability, Integrity, Respect, Performance, Simplicity and accountability.Accountability.
Our overriding commitment is to safety: ensuring the safety of our people, respecting our environment and the communities in which we work. This commitment transcends everything we do and guides every aspect of our work.
Our commitment to simplicity and accountability allows us to focus on the most important drivers of value while empowering our people to operate within their authority and make a difference.
Our objectivepurpose and commitments are pursued through our six strategic drivers:
• | People – the foundation of our business is our people. We require people to find resources, develop those resources, operate the businesses that produce our products, and then deliver those products to our customers. Talented and motivated people are our most precious resource. |
• | Licence to operate – we aim to ensure that the communities in which we operate value our citizenship. Licence to operate means win-win relationships and partnerships. This includes a central focus on health, safety, environment and the community, and making a positive difference to our host communities. |
• | World-class assets – our world-class assets provide the cash flows that are required to build new projects, to contribute to the economies of the countries in which we operate, to meet our obligations to our employees, suppliers and partners, and ultimately to pay dividends to our shareholders. We maintain high-quality assets by managing them in the most effective and efficient way. |
• | Financial strength and discipline – we |
To return excess capital to shareholders.
To reinvest in our extensive pipeline of world-class projects that carry attractive rates of return regardless of the economic climate.climate;
To ensure a solid balance sheet.sheet;
return excess capital to shareholders.
• | Project pipeline – we are focused on delivering an enhanced resource endowment to underpin future generations of growth. We have an abundance of tier one resources in stable countries that provide us with a unique set of options to deliver brownfield growth. |
• | Growth options – we use exploration, technology and our global footprint to look beyond our current pipeline to secure a foundation of growth for future generations. We pursue growth options in several ways |
Our management and Board monitor a range of financial and operational performance indicators, reported on a monthly basis, to measure performance over time.
Overall financial success
We use several financial measures to monitor the financial success of our overall strategy.
2010 | 2009 | 2008 | |||||||
Profit attributable to members | 12,722 | 5,877 | 15,390 | ||||||
Profit from operations | 20,031 | 12,160 | 24,145 | ||||||
Underlying EBIT(1) | 19,719 | 18,214 | 24,282 | ||||||
Net operating cash flow (US$M) | 17,920 | 18,863 | 17,817 | ||||||
Gearing(2) | 6.3 | % | 12.1 | % | 17.8 | % | |||
Basic earnings per share (US cents) | 228.6 | 105.6 | 275.3 |
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The two key measures are profitUnderlying EBIT and Profit after taxation attributable to members of the BHP Billiton Group and Underlying EBIT. Underlying EBIT is the internally defined key financial measure used by management for monitoring the performance of our operations. We explain the calculations and why we use this measure in section 3.6.1.(Attributable profit).
Year ended 30 June US$M except where stated | 2012 | 2011 | 2010 | |||||||||
Revenue | 72,226 | 71,739 | 52,798 | |||||||||
Profit from operations | 23,752 | 31,816 | 20,031 | |||||||||
Underlying EBIT(1) | 27,238 | 31,980 | 19,719 | |||||||||
Attributable profit | 15,417 | 23,648 | 12,722 | |||||||||
Net operating cash flow(2) | 24,384 | 30,080 | 16,890 | |||||||||
Underlying EBIT margin(1)(3)(6) | 39.4 | % | 47.0 | % | 40.7 | % | ||||||
Underlying return on capital(4)(6) | 23.0 | % | 38.5 | % | 26.4 | % | ||||||
Gearing | 26.0 | % | 9.2 | % | 6.3 | % | ||||||
Basic earnings per share (US cents) | 289.6 | 429.1 | 228.6 |
(1) | Underlying EBIT is earnings before net finance costs, taxation and any exceptional items. Underlying EBIT is not an IFRS measure of profitability, financial performance, or liquidity and may be defined and used in differing ways by different entities. Underlying EBIT is included in the 2012 Consolidated Financial Statements as required by IFRS 8 ‘Operating Segments’. We believe that Underlying EBIT provides useful information, but should not be considered as an indication of, or alternative to, Attributable profit as an indicator of operating performance. Our use of Underlying EBIT is explained in section 3.6.2. |
(2) | Net operating cash flows are after net interest and taxation. |
(3) | Underlying EBIT margin is a non-IFRS measure. It comprises Underlying EBIT, excluding third party EBIT, divided by revenue, excluding third party product revenue. |
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||
US$M | US$M | US$M | ||||||||||
Revenue – Group production | 68,747 | 67,903 | 48,193 | |||||||||
Underlying EBIT | 27,238 | 31,980 | 19,719 | |||||||||
Profit from operations (EBIT) – Third party products | (126 | ) | (98 | ) | (111 | ) | ||||||
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Profit from operations – Group production, excluding exceptional items | 27,112 | 31,882 | 19,608 | |||||||||
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Underlying EBIT margin | 39.4 | % | 47.0 | % | 40.7 | % | ||||||
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(4) | Underlying return on capital is a non-IFRS measure. It represents net profit after tax, excluding exceptional items and net finance costs (after tax), divided by average capital employed. Capital employed is net assets plus net debt. |
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||
US$M | US$M | US$M | ||||||||||
Profit after taxation excluding exceptional items and net finance costs: | ||||||||||||
Profit after taxation | 15,532 | 23,946 | 13,009 | |||||||||
Net exceptional items after taxation | 1,741 | (1,964 | ) | (253 | ) | |||||||
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Profit after taxation excluding exceptional items(5)(6) | 17,273 | 21,982 | 12,756 | |||||||||
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Net finance costs | 730 | 561 | 459 | |||||||||
Income tax benefit of net finance costs(a) | (239 | ) | (153 | ) | (139 | ) | ||||||
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Net finance costs (after taxation) | 491 | 408 | 320 | |||||||||
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Profit after taxation excluding exceptional items and net finance costs (6) | 17,764 | 22,390 | 13,076 | |||||||||
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Capital employed: | ||||||||||||
Net assets | 67,085 | 57,755 | 49,329 | |||||||||
Net debt (b) | 23,607 | 5,823 | 3,308 | |||||||||
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Capital employed | 90,692 | 63,578 | 52,637 | |||||||||
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Average capital employed | 77,135 | 58,108 | 49,467 | |||||||||
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Underlying return on capital | 23.0 | % | 38.5 | % | 26.4 | % | ||||||
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(a) | Calculated at a nominal tax rate of 30 per cent adjusted for non-deductibility/assessability of exchange variations on net debt of US$(65) million (2011: US$51 million; 2010: US$(5) million). Refer to note 6 ‘Net finance costs’ to the financial statements. |
(b) | Net debt comprising Interest bearing liabilities less Cash and cash equivalents at 30 June 2012 includes US$120 million Cash in Assets classified as held for sale and US$178 million Interest bearing liabilities in Liabilities classified as held for sale. |
(5) | Profit after taxation excluding exceptional items is a non-IFRS measure. It comprises Profit after taxation excluding exceptional items as defined in section 3.6.5. |
(6) | Non-IFRS measures have not been subject to audit or review. |
The following are other measures that assist us to monitor our overall performance.
People and licence to operate
These foundational strategic drivers bring together health,Health, safety, environment and community (HSEC) related measures. These measures are a subset of the HSEC Targets Scorecard, which can be found in each corresponding section of our Sustainability Report at www.bhpbilliton.com.
We monitor a comprehensive set of health, safety, environment and community contribution indicators.(HSEC) indicators, and we seek to be transparent in the reporting of our performance. Two key measures are the Total Recordable Injury Frequency (TRIF)total recordable injury frequency and community investment.
2010 | 2009 | 2008 | ||||
People and licence to operate – health, safety, environment and community | ||||||
Total Recordable Injury Frequency (TRIF)(1) | 5.3 | 5.6 | 5.9 | |||
Community investment (US$M)(1) | 200.5 | 197.8 | 141.0 |
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||
Total recordable injury frequency | 4.7 | 5.0 | 5.3 | |||||||||
Community investment (US$M) | 214.1 | 195.5 | 200.5 |
Further information about these measures can be found in section 2.8 ‘Sustainability’. These measures are a subset of Our Performance, which can be found in our Sustainability Report 2012 at www.bhpbilliton.com.
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SafetyProduction
Despite strong performance improvement across the organisation, sadly we experienced the loss of five colleagues at our operations during the year.
We made an incremental improvement in Total Recordable Injury Frequency (which comprises fatalities, lost-time cases, restricted work cases and medical treatment cases per million hours worked) from 5.6 to 5.3 per million hours worked. This is over halfway towards our target of a 50 per cent reduction on 2007 TRIF performance of 7.4 by 2012.
Health
We are progressing well with our health performance objectives. We had 164 new cases of occupational disease reported in FY2010, 52 fewer new cases compared with the FY2007 base year. The overall reduction in occupational disease since FY2007 is 27 per cent, which is on track to meet our target of a 30 per cent reduction in incidences in occupational disease among our employees by June 2012.
It is mandatory for our employees who may be potentially exposed to airborne substances or noise in excessA summary of our occupational exposure limits (OELs) to wear personal protective equipment. Compared with the FY2007 base year there was a 3.9 per cent reduction in the proportion of employees potentially exposed in excess of OELs in FY2010, which is behind schedule to meet our target of a 15 per cent reduction in potential employee exposures over our occupational exposure limits.
Environment
In FY2010, we reduced absolute greenhouse gas emissions by more than three million tonnes compared with FY2009.
We have five-year targets of a six per cent reduction in our greenhouse gas emissions intensity index and a 13 per cent reduction in our carbon-based energy intensity index, both by 30 June 2012. Our greenhouse intensity index is currently tracking at seven per cent below our FY2006 base year. Our carbon-based energy intensity index is currently tracking at six per cent below our FY2006 base year.
3. Operating and financial review and prospectscontinued
We have a five-year target of a 10 per cent improvement in our land rehabilitation index by 2012. This index is based on a ratio of land rehabilitated compared with our land footprint. In FY2010, the index improved by one per cent due to the development of new green and brownfield projects and the divestment of a number of operations, including Optimum Colliery in 2008, which had large areas of land under rehabilitation.
We have a five-year target of a 10 per cent improvement in the ratio of water recycled to high-quality water consumed by 30 June 2012. This water use index has improved seven per cent on our FY2007 base year.
We define a significant environmental incident as one with a severity rating of four or above based on our internal severity rating scale (tiered from one to five by increasing severity). One significant incident occurred during FY2010 at our Pinto Valley Operations (US) involving a tailings release. The majority of the eroded tailings and cover material were recovered. Metal concentrations in surface water and sediments appear to be well below levels that could present a hazard.
Community
We continue to invest one per cent of our pre-tax profits in community programs, based on the average of the previous three years’ pre-tax profit publicly reported in each of those years. During FY2010, our voluntary investment totalled US$200.5 million comprising cash, in-kind support and administrative costs and includes a US$80 million contribution to BHP Billiton Sustainable Communities.
Despite the global financial crisis, our direct expenditure on community programs during the year was similar to our expenditure in FY2009.
World-class assets
Actualactual production volumes for our most significant commodities for this yearFY2012 and the previous two financial years areis shown below. Further details appear in section 2.3 of this Report.‘Production’.
30 June 2010 | 30 June 2009 | 30 June 2008 | ||||
World-class assets | ||||||
Production | ||||||
Total Petroleum Production (millions of barrels of oil equivalent) | 158.56 | 137.97 | 130.07 | |||
Alumina (‘000 tonnes) | 3,841 | 4,396 | 4,554 | |||
Aluminium (‘000 tonnes) | 1,241 | 1,233 | 1,298 | |||
Copper (‘000 tonnes) | 1,075.2 | 1,207.1 | 1,375.5 | |||
Nickel (‘000 tonnes) | 176.2 | 173.1 | 167.9 | |||
Iron ore (‘000 tonnes) | 124,962 | 114,415 | 112,260 | |||
Metallurgical coal (‘000 tonnes) | 37,381 | 36,416 | 35,193 | |||
Manganese alloys (‘000 tonnes) | 583 | 513 | 775 | |||
Manganese ores (‘000 tonnes) | 6,124 | 4,475 | 6,575 | |||
Energy coal (‘000 tonnes) | 66,131 | 66,401 | 80,868 |
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||
Total Petroleum production (millions of barrels of oil equivalent) | 222.3 | 159.4 | 158.6 | |||||||||
Alumina (’000 tonnes) | 4,152 | 4,010 | 3,841 | |||||||||
Aluminium (’000 tonnes) | 1,153 | 1,246 | 1,241 | |||||||||
Copper (’000 tonnes) | 1,094.5 | 1,139.4 | 1,075.2 | |||||||||
Nickel (’000 tonnes) | 157.9 | 152.7 | 176.2 | |||||||||
Iron ore (’000 tonnes) | 159,478 | 134,406 | 124,962 | |||||||||
Manganese alloys (’000 tonnes) | 602 | 753 | 583 | |||||||||
Manganese ores (’000 tonnes) | 7,931 | 7,093 | 6,124 | |||||||||
Metallurgical coal (’000 tonnes) | 33,230 | 32,678 | 37,381 | |||||||||
Energy coal (’000 tonnes) | 71,111 | 69,500 | 66,131 |
Financial strength and discipline
Financial strength is measured by attributableAttributable profit and Underlying EBIT as overall measures, along with liquidity and capital management. Our solid ‘A’ credit rating, and gearing and net debt are discussed in section 3.7.3 of this Report.3.7.3. The final dividend declared for FY2010FY2012 maintains our progressive dividend policy.
3. Operating and financial review and prospectscontinued
Project pipeline and growth options
Our project pipeline focuses on high-margin commodities that are expected to be high-margin and create significant future value. The details of our project pipeline are located in sectionsections 3.7.2 of this Report,and 2.2 ‘Business overview’, with a summary presented below.
30 June 2010 | 30 June 2009 | 30 June 2008 | ||||||||||||||||
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||||||||
Project pipeline and growth options (major projects) | ||||||||||||||||||
Number of projects approved during the year | 2 | 4 | 7 | 8 | 11 | 2 | ||||||||||||
Number of projects currently under development (approved in prior years) | 8 | 8 | 6 | 12 | 7 | 8 | ||||||||||||
Number of completed projects | 5 | 7 | 10 | 6 | 3 | 5 | ||||||||||||
Budgeted capital expenditure for projects (approved in the year) (US$M) | 695 | 5,850 | 5,175 | 7,468 | 12,942 | 695 | ||||||||||||
Budgeted capital expenditure for projects under development (approved in prior years) (US$M) | 10,075 | 8,115 | 6,265 | 15,323 | 11,575 | 10,075 | ||||||||||||
Capital expenditure of completed projects (US$M) | 4,738 | 4,061 | 7,549 | 9,160 | 1,202 | 4,738 |
We expanded our shale oil and gas operations during FY2012 when we acquired Petrohawk Energy Corporation (Petrohawk). The purchase price was US$12.0 billion, excluding the assumption of net debt of US$3.8 billion. Petrohawk’s operations have been combined with the operations of our Fayetteville shale gas interests, which we acquired in FY2011 for US$4.8 billion, to form our Onshore US business.
3.4 External factors and trends affecting our results
The following section describes some of the external factors and trends that have had a material impact on our financial condition and results of operations. We operate our business in a dynamic and changing environment and with information that is rarely complete and exact. We primarily manage the risks discussed in this section under our portfolio management approach, which relies on the effects of diversification, rather than individual price risk management programs. Details of our risk factors may be found in section 1.5.1 ‘Risk factors’. Details of our financial risk management strategies and financial instruments outstanding at 30 June 20102012 may be found in section 1.5.2 ‘Management of principal risks’ and in note 28 ‘Financial risk management’ into the financial statements.
Management monitors particular trends arising in thefrom external factors with a view to managing the potential impact on our future financial condition and results of operations. The following external factors could have a material adverse effect on our business and areas where we make decisions on the basis of information that is incomplete or uncertain.
3.4.1 Commodity prices
Prices for mostDuring FY2012, commodity markets were influenced by ongoing, unresolved sovereign debt concerns in Europe, a continuing gradual slowdown in China and uncertainty about the pace and sustainability of the US recovery, among other factors. In the case of steelmaking raw materials, Chinese demand growth decelerated, and combined with robust supply growth from seaborne sources, resulted in lower raw material prices than the previous year. The metals commodities attracted lower prices than the previous year as a result of declining demand in our portfolio increased substantially during FY2010, ranging from 41 to 149 per cent for steel making commodities, eight to 60 per cent forEurope and slower demand growth in China. For energy commodities, geopolitical tensions provided price support for crude oil, while US gas prices declined with unfavourable supply and 19demand conditions, despite significant coal to 28 per cent for metal commodities. Price recovery began slowly, as markets warmed togas switching in the theme of a broad global economic recovery following the global economic downturn, which impacted FY2009. Developed market demand growth was significantly slower than the more robust demand recovery seen in emerging markets, specifically China and India.
Our commodities continued to trade in a volatile, but upward trending range, with peaks in prices for most commodities in April 2010. In late April, the rating agencies downgraded credit ratings for several European countries on concerns over their ability to repay sovereign debt. This marked the peak in commodity prices, and triggered a turn in market sentiment as investors pursued more risk-averse assets on fears of debt contagion. In April, the Chinese Government also introduced tighter credit and liquidity measures in an attempt to slow down the high levels of growth in some commodity intensive sectors, including residential property. These macroeconomic factors resulted in a re-tracement of prices over the remainder of FY2010.
3. Operating and financial review and prospectscontinued
power sector.
The following table shows prices of our most significant commodities for the years ended 30 June 2010, 20092012, 2011 and 2008.2010. These prices represent selected quoted prices from the averagerelevant sources as indicated. These prices will differ from the realised prices on the sale of the Group’s production due to differences in quotational periods, quality of products, delivery terms and the range of quoted price except where otherwise indicated.prices that are used for contracting sales in different markets.
Commodity | 2010 | 2009 | 2008 | |||
Crude oil (WTI) (US$/bbl) | 75.14 | 70.29 | 96.93 | |||
Aluminium (LME cash)(1) (US$/t) | 2,018 | 1,862 | 2,668 | |||
Alumina(2) (US$/t) | 314 | 255 | 391 | |||
Copper (LME)(1) (cash) (US$/lb) | 3.04 | 2.23 | 3.53 | |||
Nickel (LME)(1) (US$/lb) | 8.81 | 6.03 | 12.90 | |||
Iron ore(3)(4) (US$/dmt) | 118.61 | 89.83 | 141.76 | |||
Energy coal (API4) (US$/t) | 75.93 | 95.16 | 94.60 | |||
Metallurgical coal(5) (US$/t) | 146.75 | 257.25 | 148.50 | |||
Manganese alloys(6) (US$/t) | 1,328 | 1,854 | 2,208 | |||
Manganese ores(7) (US$/dmtu) | 6.46 | 9.43 | 11.20 | |||
Gas (US$/MMBtu)(8) | 4.21 | 5.96 | 8.24 |
Year ended 30 June | 2012 Closing | 2011 Closing | 2012 Average | 2011 Average | 2010 Average | |||||||||||||||
Aluminium (LME cash) (US$/t) | 1,835 | 2,509 | 2,168 | 2,375 | 2,018 | |||||||||||||||
Alumina(1)(2) (US$/t) | 305 | 386 | 334 | 369 | 314 | |||||||||||||||
Copper (LME cash) (US$/lb) | 3.45 | 4.22 | 3.71 | 3.92 | 3.04 | |||||||||||||||
Crude oil (WTI)(3) (US$/bbl) | 84.96 | 95.42 | 94.97 | 89.47 | 75.14 | |||||||||||||||
Energy coal(4) (US$/t) | 89.22 | 120.97 | 111.95 | 120.42 | 86.00 | |||||||||||||||
Natural gas Henry Hub(5) (US$/MMBtu) | 2.81 | 4.39 | 3.05 | 4.16 | 4.21 | |||||||||||||||
Natural gas Asian Spot LNG(6) (US$/MMBtu) | 14.95 | 13.80 | 16.25 | 10.41 | 6.12 | |||||||||||||||
Iron ore(7) (US$/dmt) | 135.25 | 170.75 | 151.17 | 162.98 | 118.61 | |||||||||||||||
Manganese Alloys(8) (US$/t) | 1,250 | 1,320 | 1,260 | 1,319 | 1,328 | |||||||||||||||
Manganese Ores(9) (US$/dmtu) | 5.06 | 5.24 | 4.90 | 6.29 | 6.46 | |||||||||||||||
Metallurgical coal(10)(11) (US$/t) | 176.5 | 272.5 | 210.45 | 244.47 | 146.75 | |||||||||||||||
Nickel (LME cash) (US$/lb) | 7.47 | 10.49 | 8.77 | 10.86 | 8.78 |
(1) |
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(2) | 2011 and 2010 CRU |
(3) |
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(4) |
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(5) | Platts Gas based on Henry Hub – typically applies to gas sales in the US gas market. |
(6) | Platts Liquefied Natural Gas Delivery Ex-Ship (DES) Japan/Korea Marker – typically applies to Asian LNG spot sales. |
(7) | Platts 62 per cent Fe |
Bulk FerroAlloy high-carbon ferromanganese (HCFeMn) US ex-warehouse. |
(9) | CRU Cost Insurance Freight (CIF) China import (M+1) 43 per cent contained. |
(10) | 2012 and 2011 Platts 64 Mid Volatile Index Hard coking coal FOB Australia. |
(11) | 2010 Tex Reports Hard coking coal FOB Australia. |
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The following summarises the pricing trends of our most significant commodities for FY2010.FY2012. Where prices have decreased by more than 10 per cent since 30 June 2012, a more current price as at 31 August 2012 is indicated in the discussion below.
Aluminium: The London Metals Exchange (LME) aluminium cash settlement price decreased 27 per cent during FY2012. Ongoing macroeconomic weakness underpinned by slow Chinese growth and instability of the Eurozone, coupled with a well-supplied market, have contributed to falling price levels. Despite several Western smelter capacity curtailments, global supply has risen through the year, with production up seven per cent, driven predominantly by Chinese operations. Amidst stable underlying demand, LME aluminium stocks rose by nine per cent during FY2012 as warehouse financing deals remained attractive for investors.
Alumina: The Platts FOB Australia price decreased 21 per cent during FY2012 against a backdrop of macroeconomic uncertainty and oversupply of alumina in the market. The alumina market remained oversupplied, with the increase in demand more than offset by increased refinery production, predominantly in China.
Copper: The LME copper cash settlement price decreased 18 per cent during FY2012 mainly driven by weakening Chinese end-use demand growth and decreased consumption in developed countries. Mine supply growth has been relatively flat due to a high level of disruptions in the first half of FY2012, which has provided some support to prices. Chinese refined imports grew strongly during FY2012 following a major de-stock in FY2011, leading to a build-up of inventories in China and a relatively tight ex-China global market.
Crude oil: Prices improved over FY2010 with theThe New York Mercantile Exchange West Texas Intermediate (NYMEX WTI)(WTI) crude oil price increasing fromdecreased 11 per cent during FY2012. Broader macroeconomic uncertainty and increased US crude oil production were key drivers of this lower price. Geopolitical tensions supported WTI prices above US$69.82/100/bbl at the start of FY2010, to US$75.59/bbl at year-end. The annual average NYMEX WTI price in FY2010 was US$75.14/bbl, compared with the FY2009 average of US$70.29/bbl. Oil prices fluctuated from lows of US$59.62/bbl in mid-July 2009 to highs of US$86.54/bbl in early April 2010. The correction post April 2010 was driven by market concerns over European sovereign debt issues and mixed sentiment about the longevity of the sustainable global economic recovery. Despite the market price volatility, the average oil price was US$6.24/bbl higher induring the second half of FY2010 compared with the first half of FY2010.
Aluminium: LME prices increased from US$1,616/t at the start of FY2010 to US$1,924/t at year-end. The average spot cash aluminium priceFY2012 but had decreasing impact in FY2010 was US$2,018/t,May and June. An eight per cent aboveincrease in US commercial crude oil inventories over FY2012 added further downward pressure to the average for FY2009.WTI price.
Energy coal: The Global Coal Newcastle FOB price decreased by 26 per cent during FY2012. In the energy coal market, FY2012 saw a strong supply side performance by all major producing regions that combined with favourable freight rates to ease the delivered cost of coal. Compounding this was the deterioration in the global economy, which underpinned the weakness in overall demand, albeit partially offset by significant Chinese coal imports and better than anticipated European demand.
Gas: The Platts US Henry Hub natural gas price decreased by 36 per cent during FY2012. This was driven by seasonal demand as a result of the fourth mildest winter on record in the United States and high production output. June 2012 storage levels were 27 per cent higher than the same time last year and were 25 per cent higher than the five-year average. The Asian liquefied natural gas spot LME low in FY2010price increased by eight per cent during FY2012, principally driven by incremental Japanese demand, as gas fired power generation was US$1,532/t in July 2009,increasingly used to substitute suspended nuclear power capacity. The supply environment was also tight, driven by delays to greenfield projects, Middle East plant maintenance and disruptions and the high waslimited availability of shipping to divert Atlantic cargoes to the Asian market. Since 30 June 2012, the Asian liquefied natural gas spot price has decreased to US$2,448/t in mid-April 2010, which was reached13.10/MMBtu on the back of stronger market demand. These higher prices encouraged production re-starts, with the International Aluminium Institute (IAI) reporting a global aluminium production increase of seven31 August 2012.
Iron ore: The Platts 62 per cent year-on-year, mostly lediron ore CFR China price decreased by Chinese producers. Aluminium prices declined over May21 per cent during FY2012, driven principally by increasing supply from traditional sources (Australia and June 2010Brazil). In absolute terms, global iron ore demand increased in line with rising pig iron production, as global economic concerns resurfaced. Regional physical premiumsChina maintained high levels, principally due to ongoing tightnesssteel output. In India, iron ore exports fell sharply following an export ban in spotthe Karnataka state and a rise in export duties. Market transparency was enhanced by the launch of two new trading platforms for physical markets with more than 70iron ore, namely GlobalOre and China Beijing Metals Exchange. Since 30 June 2012, the Platts 62 per cent of total exchange stocks tied up in financing deals.iron ore CFR China price has decreased to US$90.50/dmt on 31 August 2012.
Manganese: During January 2010, LME stocks peaked at 4.6 million tonnes before dropping back to 4.4 million tonnes atFY2012, the end of FY2010.
Alumina: At the start of FY2010, spot prices were trading between US$245 and US$255/t FOB Australia and had increased to around US$320/t at the end of FY2010. The average FY2010 alumina price was US$314/t, 23CRU CIF China 43 per cent above the average FY2009 price. Strong Chinese alumina imports were drivenore import price (M+1) decreased by the reactivation of idled and newly commissioned Chinese smelting capacity, ensuring prices increased steadily throughout the year. Global alumina production increased three per cent year-on-year. April wasand the high point forUS spot prices, with prompt material changing hands for US$350/t FOB. At the year-end, the increased domestic volumes in China reduced the need for additional imports from Australia, putting some downward pressure on prices.
3. Operating and financial review and prospectscontinued
Copper: LME prices increased 28high-carbon ferromanganese alloy price decreased by five per cent, from US$2.32/lb at the start of FY2010, to US$2.96/lb at year-end. The FY2010 average LME copper price was US$3.04/lb, 36 per cent above the FY2009 average price. The trading range through the year was volatile with a low of US$2.18/lb in July 2009as global steel production growth rates fell amid weakening macroeconomic conditions. Manganese ore and rising to a monthly peak of US$3.51/lb in April 2010. Pricesalloy demand weakened in the first half of FY2010 were driven by positive sentiment from stronger Chinese demandFY2012 as steel output contracted and restricted supply-side delivery, underpinning strong fundamentals for copper cathode. Demand improved slowly ex-China throughmajor alloy exporters made production cuts in response to April 2010, with longer order lead timesrising power costs and generally stronger premiums. June average copperfalling alloy prices. Rising ore prices were US$2.95/lb, reflectingsupported during the last quarter of the year by a level of solid support given increasing physical demandrecovery in Chinese steel output and a tighter ore supply market, particularly from Asian economiesexporters in Australia, Gabon and material supply tightness. The spot copper concentrate market remained tight during FY2010 driven by lower than expected output from existing and recently commissioned mines, and strong ChineseBrazil. Lower import demand.availability led to a large decline in ore inventory levels at the ports.
NickelMetallurgical coal:: Prices increased 21 per cent in FY2010, finishing the year at US$8.81/lb. The daily price low was US$6.51/lb in July 2009, and the peak was US$12.52/lb in mid-April 2010. The average nickel price in FY2010 was US$8.81/lb, 46 per cent above the average FY2009 price. FY2010 started off positively for nickel on the back of improved underlying demand and worldwide stainless steel re-stocking. Chinese nickel imports were particularly strong in the first quarter of FY2010. In the second quarter of FY2010, most major mills reduced production, signalling the conclusion of the re-stocking phase. In the second half of FY2010, the stainless steel and nickel markets rallied on strong end-user demand, renewed re-stock requirements and tight scrap availability. The mill utilisation rate in western countries increased to high levels whilst Chinese stainless capacity and production continued to expand. On the supply side, strong nickel pig iron production was partly offset by the continuation of the Vale Sudbury strike action, together with a number of other unplanned production disruptions. LME stocks increased to a historic high of 166 kilotonnes in February 2010 before declining to 124 kilotonnes by the end of FY2010.
Iron ore: The Platts Iron Ore64 Mid Volatile Index increased from US$79/dmt at the start of FY2010, to US$134/dmt at the year-end. The average spot price, based on the Platts Index in FY2010 was US$118.6/dmt, 32 per cent above the average price for FY2009. Global iron ore demand reached record levelshard coking coal FOB Australia decreased by February 2010, driven primarily by the overall steel and iron ore re-stocking cycles in developed economies, and continuing strong growth in China. During the same period, traditional supply sources struggled to ramp-up production to meet demand, with marginal high cost supply from India and China, required to balance the market. Platts Index prices peaked at US$186/dmt in mid-April 2010, reflecting this strong demand and supply-side constraints. Prices then fell back to US$134/dmt at 30 June 2010. Annual benchmark pricing of iron ore ceased from April 2010, with the majority of global sales from major producers moving to quarterly, or shorter-term, pricing.
Energy coal: Amsterdam Rotterdam Antwerp quoted prices for delivery in Europe (API2) increased from lows of US$63.48/t at the start of FY2010 due to the low coal burn and high port stockpiles in Europe, rising to US$94.47/t at the year-end. This price appreciation was driven by a steady recovery in global industrial production as developed economy demand slowly improved, plus strong Asian demand. Richards Bay coal terminal FOB (API4) prices increased 6035 per cent during FY2010, supportedFY2012, driven principally by recovering supply from Australia after flooding and strong demandsupply from India and China. Newcastle FOB (API3) prices gained 42 per cent during FY2010, with a peak of US$109/t in April 2010, driventhe United States, incentivised by weather-induced supply restrictions. Whilst prices did soften from peaks in April 2010, they remained at relatively strong levels through to 30 June 2010 on the back of high metallurgical coal prices, incentivising producers to switch high-grade energy coal into metallurgical coal markets.
Metallurgical coal: The market moved from annual benchmark to quarterly reference pricing from 1 April 2010. The premium for Hard Coking Coal (HCC), increased to US$200/t for the quarter ending in June 2010 compared with a Japanese financial year ending 31 March 2010 benchmark of US$129/t. Several new independentelevated coking coal indexes were first publishedprices. Metallurgical coal demand weakened in March 2010, reflecting the transition of this industry to shorter-term pricing mechanisms. The higher prices were driven by growth in globalline with steel production in traditional coking coal importing countries during the first half of FY2010, as well as continued strong import demand from China, which has traditionally been self-sufficient. Spot pricesFY2012, and remained ahead of quarterly reference pricing throughout the fourth quarter of FY2010 as coal producers were unable to meet stronger demand requirements, incentivising US marginal cost producers to swing more tonnage to Asia.
Manganese alloy and ore: Manganese alloy prices correlated well with the global economic recovery over the course of the year, increasing by 41 per cent for silico-manganese (SiMn) alloy in Europe and 84 per cent for SiMn alloy in the US over FY2009 prices. July 2009 coincided with a renewed level of confidence in the recovery and an end to de-stocking. Prices increased through November 2009 when demand diminished as consumers looked to minimise their year-end inventories. January 2010 saw increased demand as re-stocking resumed and prices generally increased and peaked in May 2010. FY2010 ended with a slight downturn in prices as buyer confidence waned in advance of the seasonally weaker northern summer. Manganese ore markets registered strong performance in FY2010 driven by growing steel and alloy production. Prices for manganese ore delivered to China recorded a marked increase from US$3.50/dmtu at the start of FY2010 to US$8.70/dmtu at the year-end.
3. Operating and financial review and prospectscontinued
Gas: US gas markets recovered during FY2010 with Henry Hub prices rising from monthly average lows of US$2.90/MMBtu in September 2009 to peak at US$5.83/MMBtu in January 2010. The FY2010 starting price was US$3.885/MMBtu and the closing price on 30 June 2010 was US$4.680/MMBtu. Despite this positive price trajectory over the year, the average FY2010 Henry Hub price was still 29 per cent below the average price in FY2009 due to the high gas prices observed before the global economic slowdown. National Balancing Point for UK Natural Gas (NBP) prices recovered from a six-month low of US$3.18/MMBtu in September 2009 to rise to a peak of US$6.30/MMBtu in June 2010, supported by higher gas demand from the industrial sector coupled with unplanned supply outages. NBP prices increased 58 per cent year-on-year. Asian LNG demand rose overinto the second half of FY2010, mainlyFY2012 particularly as non-Chinese steel production remained soft. Despite some lingering constraints to supply from Australia, availability of coking coal from the United States and Canada remained ample amid subdued demand. Since 30 June 2012, the Platts 64 Mid Volatile Index for hard coking coal FOB Australia price has decreased to US$136.50/t on 31 August 2012.
Nickel: LME cash settlement nickel prices decreased 29 per cent during FY2012. Demand for nickel continued to grow, but at lower rates in light of weaker macroeconomic conditions and slower growth in China. Price declined due to colder than normal temperatures and faster than expected economic recovery in Korea and Taiwan.the fact that this demand growth was outpaced by increasing supply tonnages coming from Chinese nickel pig iron as well as new production from greenfield projects which began ramping-up.
The following table indicates the estimated impact on FY2010 profitFY2012 Profit after taxation of changes in the prices of our most significant commodities. With the exception of price-linked costs, the sensitivities below assume that all other variables, such as exchange rate, costs, volumes and taxation, remain constant. There is an inter-relationship between changes in commodity prices and changes in currencies that is not reflected in the sensitivities below. Volumes are based on FY2010FY2012 actual results and salessale prices of our commodities under a mix of short-, medium- and long-term contracts. Movements in commodity prices can cause movements in exchange rates and vice versa. These sensitivities should therefore be used with care.
Estimated impact on | US$M | |||
US$1/bbl on oil price | 49 | |||
US¢10/MMBtu on US gas price | 31 | |||
US¢1/lb on aluminium price | 18 | |||
US¢1/lb on copper price | 17 | |||
US¢1/lb on nickel price | 2 | |||
US$1/t on iron ore price | 110 | |||
US$1/t on manganese alloy | 0.5 | |||
US¢10/dmtu on manganese ore | 21 | |||
US$1/t on metallurgical coal price | 23 | |||
US$1/t on energy coal price | ||||
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The impact of the commodity price movements in FY2010 is discussed in section 3.6 ‘Operating results’.
3.4.2 Freight markets
There was a two-paced freight market in FY2010. The Capesize market showed substantially more volatility than the more stable markets of the smaller vessels. Capesize charter prices fell 70 per cent during the year, whilst the Panamax market was neutral. Year-on-year the Supramax market reported a gain. For the Capesize market, the year started with rates of US$80,000/day and peaked at US$88,560/day in November 2009 on record congestion and increased iron ore volumes to China. However, Capesize freight rates then proceeded to decline again from January 2010. Iron ore volumes ex-Brazil to China fell substantially in the second half of FY2010 when compared with the first half of FY2010, and the impact of accelerating new building deliveries took their toll – pushing the market into over supply and Capesize rates to a low of US$24,000/day at 30 June 2010. Capesize rates fell to such an extent that for a time the daily hire for a Capesize vessel cost less than a Supramax (one third the size). In comparison, both the Panamax and Supramax markets have been firm throughout FY2010. These markets have been supported by fewer new building deliveries combined with a record grain season in both the US and South America, in addition to energy coal, metallurgical coal and iron ore cargoes from India, which all use smaller vessels.
The bulk freight market is typically categorised by the size of the vessel. Capesize vessels have a deadweight capacity of between 150kdwt and 200kdwt compared with Panamax and Supramax vessels which are 60 to 100kdwt and 50 to 60kdwt respectively.
3.4.3 Exchange rates
We are exposed to exchange rate transaction risk on foreign currency sales and purchases as we believe that active currency hedging does not provide long-term benefits to our shareholders. Because a majority of our sales are denominated in US dollars, and the US dollar plays a dominant role in our business, we borrow and hold surplus cash predominantly in US dollars to provide a natural hedge. Operating costs and costs of local equipment are influenced by the fluctuations in local currencies, primarily the Australian dollar, South African rand,Brazilian real, Chilean peso and Brazilian real.South African rand. Foreign exchange gains and losses reflected in operating costs owing to fluctuations in the abovementionedlocal currencies relative to the US dollar may potentially offset one another. The Australian dollar, Brazilian real, Chilean peso and South African rand strengthenedweakened against the US dollar during FY2010, while the Chilean peso weakened.FY2012.
3. Operating and financial review and prospectscontinued
We are also exposed to exchange rate translation risk in relation to net monetary liabilities, being our foreign currency denominated monetary assets and liabilities, including debt and other long-term liabilities (other than closure and rehabilitation provisions at operating sites where foreign currency gains and losses are capitalised in property, plant and equipment).
Details of our exposure to foreign currency fluctuations are contained within note 28 ‘Financial risk management’ to the financial statements.
3.4.4 Interest rates
We are exposed to interest rate risk on our outstanding borrowings and investments. Our policy on interest rate exposure is for interest on our borrowings to be on a US dollar floating interest rate basis. Deviation from our policy requires the prior approval of our Financial Risk Management Committee, and is managed within our Cash Flow at Risk (CFaR) limit, which is described in note 28 ‘Financial risk management’ in the financial statements. When required under this strategy, we use interest rate swaps, including cross currency interest rate swaps, to convert a fixed rate exposure to a floating rate exposure. As at 30 June 2010, we had US$2.6 billion of fixed interest borrowings that had not been swapped to floating rates, arising principally from debt raised during FY2009 that has not been swapped to floating rates and legacy positions that were in existence prior to the merger that created the DLC structure. Our strategy has not changed and the remainder of the fixed interest rate debt raised during FY2009 has been swapped to floating rates since 30 June 2010.
3.4.53.4.3 Changes in product demand and supply
We remain cautious onConcerns surrounding the short-term outlook forstability of the global economy. After a period of rapid recovery in the developing world, economies such as Brazil and India have returned to full outputEurozone and the focus has now shifted away from supportingdecline in economic activity that accompanied the managed slowdown of growth towards controlling inflation.in China led to significant market volatility in FY2012. In China, the government has implemented meaningfulintroduced stimulatory measures aimed at controlling rapidsupporting sustainable growth. The successful containment of inflation, looser monetary policy and evidence of a recovery in infrastructure investment should be positive for commodities demand in the short to medium term. Similarly, there are encouraging signs that the US housing market may have stabilised, which should benefit the world’s largest economy if it leads to an improvement in consumer and business confidence.
Our positive longer-term view is unchanged as urbanisation and industrialisation across the developing world is expected to remain the primary driver of global economic growth. While the rate of expansion within China has adjusted to a more sustainable level as its economy has matured, economic growth in this decade is expected to rise substantially in absolute terms given the higher starting base.
Our forecast of supply additions to meet anticipated demand varies by commodity. We have analysed whether existing supply capacity up to the end of CY2011 and asset inflation. Fiscal policylow-cost capacity additions through to CY2015 will be sufficient to meet anticipated demand growth through to 2020.
In the case of aluminium, we expect the forecast demand growth to be met by capacity additions through to CY2015. As such, we see the aluminium market changing at the variable cost of production for the foreseeable future. With iron ore, we expect approximately three-quarters of the demand growth to be met by low-cost supply by CY2015. As such, we expect going forward that iron ore supply will meet demand in due course and that the scarcity pricing seen in recent years is unlikely to be repeated. With copper, only about a quarter of demand growth through 2020 has currently been adjusted with renewed focus onmet by existing low-cost supply, and even by CY2015 40 per cent of this demand growth is not expected to be met by new low-cost supply. Resource depletion and resource degradation continue to constrain the economy’s inevitable transition away frompace of low-cost supply addition, and therefore prices are expected to be at a dependence on investment, towards more balanced, consumption led growth. With this recent policy tightening, property sales volumes and priceslevel high enough to induce additional supply through the development of greenfield mines.
3.4.4 Operating costs
Operating costs for the last three years are set out below.
2012 | 2011 | 2010 | ||||||||||
US$M | US$M | US$M | ||||||||||
Raw materials and consumables used | 8,483 | 8,148 | 6,371 | |||||||||
Employee benefits expense | 6,663 | 5,299 | 4,661 | |||||||||
External services (including transportation) | 14,716 | 11,705 | 9,538 | |||||||||
Third party commodity purchases | 3,381 | 3,758 | 4,478 | |||||||||
Net foreign exchange (gains)/losses | (355 | ) | 1,074 | 112 | ||||||||
Government royalties paid and payable | 3,051 | 2,887 | 1,653 | |||||||||
Depreciation and amortisation expense | 6,408 | 5,039 | 4,759 | |||||||||
Exploration and evaluation expenditure | 1,746 | 1,054 | 1,285 | |||||||||
Impairment of assets | 3,619 | 1 | (539 | ) | ||||||||
Other operating expenses | 1,668 | 1,489 | 977 | |||||||||
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Total expenses | 49,380 | 40,454 | 33,295 | |||||||||
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Less exceptional items | (3,786 | ) | (164 | ) | 312 | |||||||
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Total expenses excluding exceptional items | 45,594 | 40,290 | 33,607 | |||||||||
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Our operating costs excluding exceptional items have started to decline in tier one citiesincreased at a rate of 11.8 per cent per annum over the last quarter. While we see thesethree years. During FY2012, total costs excluding exceptional items, the impacts of inflation, exchange rate volatility and non-cash items, have increased by US$2.7 billion due to industry-wide cost pressure. Labour and contractor cost increases accounted for over one-third of this increase in FY2012, while industrial action at Queensland Coal, Australia, created additional pressure.
The increase in costs in FY2012 was affected by major outages and disruptions. The highest rate of cost escalation was in those businesses with a lower rate of capacity utilisation. We are implementing broad measures asacross the normal continuation of China’s economic management, we do expect Chinese Gross Domestic Product (GDP) growthGroup that seek to slow towardssubstantially reduce operating costs and non-essential expenditure in FY2013.
We have been quick to respond to the more sustainable level of circa eight per centchange in the first half of FY2011.
Uncertainty continues to surround the developed world as governments adjust fiscal policiesoperating environment during FY2012 and acted decisively by closing energy intensive silicomanganese alloy production capacity in South Africa and by temporarily closing capacity at TEMCO, Australia. In addition, metallurgical coal production at Norwich Park, Australia, was suspended following a period of significant stimulus and subsequent increase in sovereign debt levels. Significant public spending cuts and higher taxes have been announced in Europe; however, they are yet to be fully implemented, implying the inevitable negative impact on growth from fiscal consolidation remains ahead. Industrial output, a core measure of economic activity, remains well below previous peaks despite the positive impact attributable to re-stocking that now appears largely complete. In the absence of any additional inventory adjustment, improvement in end demand is essential to drive overall economic growth. Some positive signs have emerged, with strong private investment in equipment and software seen in some partsreview of the US economy, although ongoing de-leveragingmine’s profitability and, weak confidencesince 30 June 2012, we have also announced that mining at BMA’s Gregory open-cut mine will cease production from 10 October 2012. The viability of other high-cost operations is being assessed and additional measures are hampering effortsbeing implemented that are expected to revive demand.
Despite our short-term caution, we remain positive on the longer-term prospects for the global economy, driven by the continuing urbanisation and industrialisation of emerging economies. This path, however, will not be without volatility, reflecting normal business cycles.
3.4.6 Operatingsubstantially reduce operating costs and capitalnon-essential expenditure
During FY2010, raw materials across the business. In conjunction with safety and logistics costs reduced significantly, with the lagged impact of falling inputs providing non-structural reductions to thevolumes, cost base. However, a number of non-recurring costs have had an opposing impact in the period. Our relentless focus on our cost basecontrol continues to be a high priority,key area of focus for each area of operation.
3.4.5 Capital expenditure
Capital and exploration expenditure are both important in pursuing our strategy. Capital and exploration expenditure is disclosed for each CSG in the table below (presented on an accruals basis). The most significant increase over the three years has been in Petroleum, with a drive to achieve further cost efficienciesother significant increases in controllable cash costs.Iron Ore, Metallurgical Coal and Base Metals.
Our commitment to long-term growth and shareholder value remains unchanged, and we continued to invest strongly in capital expenditure and growth projects. Details of our growth projects can be found in section 3.7.2.
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||
US$M | US$M | US$M | ||||||||||
Capital and exploration expenditure(1) | ||||||||||||
Petroleum | 7,185 | 2,541 | 2,768 | |||||||||
Aluminium | 854 | 1,335 | 1,024 | |||||||||
Base Metals | 2,980 | 1,670 | 936 | |||||||||
Diamonds and Specialty Products | 825 | 400 | 222 | |||||||||
Stainless Steel Materials | 581 | 718 | 320 | |||||||||
Iron Ore | 5,921 | 3,777 | 3,944 | |||||||||
Manganese | 427 | 289 | 210 | |||||||||
Metallurgical Coal | 2,956 | 1,242 | 683 | |||||||||
Energy Coal | 919 | 784 | 905 | |||||||||
Group and unallocated items | 27 | 94 | 87 | |||||||||
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BHP Billiton Group | 22,675 | 12,850 | 11,099 | |||||||||
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(1) | ||
Capital and exploration expenditure includes accrued capital expenditure and excludes capitalised interest. Exploration expenditure is capitalised in accordance with our accounting policies, as set out in note 1 ‘Accounting policies’ in the financial statements. All other exploration expenditure is expensed in the period. |
3. OperatingCapital expenditure encompasses expenditure on major projects, as set out in section 3.7.2, and financial reviewcapital expenditure on sustaining and prospectscontinuedother items.
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||
US$M | US$M | US$M | ||||||||||
Capital expenditure | ||||||||||||
Growth | 17,735 | 9,366 | 8,063 | |||||||||
Sustaining and other | 2,488 | 2,244 | 1,703 | |||||||||
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Total | 20,223 | 11,610 | 9,766 | |||||||||
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Exploration expenditure | ||||||||||||
Petroleum | 1,355 | 557 | 817 | |||||||||
Minerals | 1,097 | 683 | 516 | |||||||||
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Total | 2,452 | 1,240 | 1,333 | |||||||||
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Total capital and exploration expenditure | 22,675 | 12,850 | 11,099 | |||||||||
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The forecast capital and exploration expenditure for FY2013 is US$22.0 billion.
The Group has a portfolio of development options beyond those projects in execution and a significant number of these are embedded within our existing footprint. As our current capital expenditure commitments decline, future capital will be allocated to those options that maximise shareholder value, while also considering the balance between short- and long-term returns.
In reviewing our rate of forward capital deployment, we have made the following decisions regarding our major projects:
We will investigate an alternative, less capital-intensive design of the Olympic Dam, Australia, open-pit expansion, involving new technologies, to substantially improve the economics of the project.
We will delay indefinitely the 2.5 million tonnes per annum (mtpa) (100 per cent basis) expansion of Peak Downs associated with the Caval Ridge mine development, Australia.
We have slowed down work on the Western Australia Iron Ore (WAIO) Outer Harbour project at Port Hedland, Australia, and shifted our focus to maximising the potential capacity of the Inner Harbour.
We will seek to adjust our rate of forward capital deployment in line with our forward estimate of cash flow generation. No major project approvals are expected during FY2013.
3.4.73.4.6 Exploration and development of resources
Because mostMost of our revenues and profits are related to our oil and gas and minerals operations, therefore our results and financial condition are directly related to the success of our exploration efforts and our ability to replace existing reserves. However, there are no guarantees that our exploration program will be successful. When we identify an economic deposit, there are often significant challenges and hurdles entailed in its development, such as negotiating rights to extract ore with governments and landowners, design and construction of required infrastructure, utilisation of new technologies in processing and building customer support.
Exploration expense represents that portion of exploration expenditure that is not capitalised in accordance with our accounting policies, as set out in note 1 ‘Accounting policies’ to the financial statements.
Over the past three years, exploration expense has increased, with a total expense of US$3.8 billion. Exploration expense for each CSG over the three-year period is set out below.
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||
US$M | US$M | US$M | ||||||||||
Exploration expense | ||||||||||||
Petroleum(1) | 818 | 477 | 562 | |||||||||
Aluminium | 2 | 6 | 5 | |||||||||
Base Metals | 324 | 266 | 173 | |||||||||
Diamonds and Specialty Products | 227 | 81 | 95 | |||||||||
Stainless Steel Materials | 57 | 60 | 52 | |||||||||
Iron Ore | 135 | 60 | 62 | |||||||||
Manganese | 9 | 11 | 26 | |||||||||
Metallurgical Coal | 148 | 70 | 30 | |||||||||
Energy Coal | 26 | 23 | 24 | |||||||||
Group and unallocated items | – | – | – | |||||||||
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BHP Billiton Group | 1,746 | 1,054 | 1,029 | |||||||||
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(1) | Includes US$144 million (2011: US$73 million, 2010: reversal of US$1 million) exploration expense previously capitalised, written off as impaired. |
During FY2012, Minerals greenfield exploration has focused on copper targets in South America, nickel and copper targets in Australia and iron ore and potash targets globally. Petroleum exploration activities focused on offshore Western Australia, the Gulf of Mexico, South East Asia and our recently acquired Onshore US business.
Exploration expenditure for FY2013 is expected to be approximately US$1.5 billion, of which approximately half is for offshore oil and gas and the other half is for Minerals.
3.4.7 Interest rates
We are exposed to interest rate risk on our outstanding borrowings and investments. Our policy on interest rate exposure is for interest on our borrowings to be on a US dollar floating interest rate basis. Deviation from our policy requires the prior approval of our Financial Risk Management Committee and is managed within our Cash Flow at Risk (CFaR) framework, which is described in note 28 ‘Financial risk management’ to the financial statements. When required under this strategy, we use interest rate swaps, including cross currency interest rate swaps, to convert a fixed rate exposure to a floating rate exposure, as well as using swaptions to manage the fixed interest rate exposure. As at 30 June 2012, the Group holds US$4.3 billion (2011: US$827 million) of centrally managed fixed interest rate borrowings, as well as US$4.0 billion (2011: US$650 million) of other fixed interest rate borrowings, that have not been swapped to floating interest rates, arising from debt raised during FY2012, debt assumed as part of the acquisition of Petrohawk and debt raised prior to the DLC merger.
Our earnings are sensitive to changes in interest rates on the floating interest rate component of the Group’s net borrowings. Based on the net debt position as at 30 June 2012, taking into account interest rate swaps and cross currency interest rate swaps, it is estimated that a one percentage point increase in the US LIBOR interest rate will decrease the Group’s profit after taxation by US$103 million (2011: decrease of US$25 million). This assumes that the change in interest rates is effective from the beginning of the financial year and the fixed/floating mix and balances are constant over the year. However, interest rates and the net debt profile of the Group may not remain constant in the coming financial year and therefore such sensitivity analysis should be used with care.
3.4.8 Freight markets
The bulk freight market is typically categorised by the size of the vessel. Capesize vessels are typically classified as having deadweight above 150 thousand deadweight tonnes (kdwt) compared with Panamax and Supramax vessels, which are 60 to 100 kdwt and 50 to 60 kdwt, respectively. Freight rates have dropped considerably over the three-year period as set out below.
Year ended 30 June | 2012 Closing | 2011 Closing | 2010 Closing | |||||||||
Rate (US$ per day) | ||||||||||||
Capesize average 4 Time Charter rate | 3,988 | 12,732 | 24,239 | |||||||||
Panamax average 4 Time Charter rate | 7,835 | 12,823 | 22,113 | |||||||||
Supramax average 6 Time Charter rate | 13,145 | 13,682 | 21,607 |
Although the demand for bulk commodities was strong, the freight market experienced oversupply due to the many newly built vessels entering the market. The total dry bulk fleet grew by 14 per cent year-on-year in CY2011, thereby outpacing seaborne trade growth.
3.4.9 Health, safety, environment and community
As the world’s largest diversified natural resources company, our operations touch every corner of the globe. We embrace our responsibility to work towards making a contribution to the long-term sustainability of the communities in which we operate. We remain committed to ensuring the safety of our people and respecting the environment and communities where we work.
We are subject to extensive regulation surrounding the health and safety of our people and the environment. We make every effort to comply with the regulations and, where less stringent than our standards, exceed applicable legal and other requirements. However, regulatory standards and community expectations are constantly evolving, and asevolving. As a result, we may be exposed to increased litigation, compliance costs and unforeseen environmental rehabilitation expenses, despite our best efforts to work with governments, community groups and scientists to keep pace with regulations, law and public expectations.
Further information about our compliance with HSEC regulations can be found in section 2.8 ‘Sustainability’.
3.4.93.4.10 Insurance
During FY2010,FY2012, we maintained an insurance program with policies encompassing property damage, business interruption, sabotage and terrorism, marine cargo, construction, public and certain other liabilities and directors and officers’ exposures. The program includes a combination of self-insurance via subsidiary captive insurance companies, industry mutuals and external market re-insurance.reinsurance above our reinsurance level. Mandates are established as to risk retention levels, policy cover and, where applicable, re-insurancereinsurance counter parties. As part of our portfolio risk management policy,approach, we regularly conduct an assessment of maximum foreseeable loss potential, cash flow at risk, loss experience, claims received and insurance premiums paid, and will make adjustments to the balance of self-insurance and reinsurance as required.
The Group continues to be largely self-insured for losses arising from property damage and business interruption, sabotage and terrorism, marine cargo and construction. For these risks, we internally insure our operations (for wholly owned assets and for our share of joint venture assets) via our captive insurance companies. Any losses incurred will consequently impact the financial statements as they arise.
During FY2012, insurance claims relating to extreme weather across central Queensland in 2008 were settled. Proceeds of US$300 million have been treated as an exceptional item – refer to section 3.6.5 ‘Exceptional items’.
3.5 Application of critical accounting policies
The preparation of our consolidated financial statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported revenue and costsexpenses during the periods presented therein. On an ongoing
basis, management evaluates its estimates and judgements in relation to assets, liabilities, contingent liabilities, revenue and costs.expenses. Management bases its estimates and judgements on historical experience and on various other factors it believes to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.
We have identified the following critical accounting policies under which significant judgements, estimates and assumptions are made and where actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods:
reserve estimates;
exploration and evaluation expenditure;
development expenditure;
property, plant and equipment and intangible assets – recoverable amount;
defined benefit pension schemes;
3. Operating and financial review and prospectscontinued
provision for closure and rehabilitation;
taxation.
In accordance with IFRS, we are required to include information regarding the nature of the estimates and judgements and potential impacts on our financial results or financial position in the financial statements. This information can be found in note 1 ‘Accounting policies’ into the financial statements.
The following tables provide a summary of the CSG Revenue and Underlying EBIT for FY2012 and the two prior corresponding periods. Our use of Underlying EBIT is explained in section 3.6.2.
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||
US$M | US$M | US$M | ||||||||||
Revenue(1) | ||||||||||||
Petroleum | 12,937 | 10,737 | 8,782 | |||||||||
Aluminium | 4,766 | 5,221 | 4,353 | |||||||||
Base Metals | 11,596 | 14,152 | 10,409 | |||||||||
Diamonds and Specialty Products | 1,326 | 1,517 | 1,272 | |||||||||
Stainless Steel Materials | 2,993 | 3,861 | 3,617 | |||||||||
Iron Ore | 22,601 | 20,412 | 11,139 | |||||||||
Manganese | 2,152 | 2,423 | 2,150 | |||||||||
Metallurgical Coal | 7,576 | 7,573 | 6,059 | |||||||||
Energy Coal | 6,022 | 5,507 | 4,265 | |||||||||
Group and unallocated items(2)(3) | 257 | 336 | 752 | |||||||||
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BHP Billiton Group | 72,226 | 71,739 | 52,798 | |||||||||
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Year ended 30 June Underlying EBIT(1) Petroleum Aluminium Base Metals Diamonds and Specialty Products Stainless Steel Materials Iron Ore Manganese Metallurgical Coal Energy Coal Group and unallocated items(2)(3) BHP Billiton Group 2012 2011 2010 US$M US$M US$M 6,348 6,330 4,573 (291 ) 266 406 3,965 6,790 4,632 199 587 485 32 588 668 14,201 13,328 6,001 235 697 712 1,570 2,670 2,053 1,227 1,129 730 (248 ) (405 ) (541 ) 27,238 31,980 19,719
(1) | Includes the sale of third party product. |
(2) | Revenue that is not reported in business segments principally includes sales of freight and fuel to third parties. |
(3) | Includes consolidation adjustments, unallocated items and external sales for the Group’s freight, transport and logistics operations and certain closed operations. |
3.6.1 Consolidated results
Year ended 30 June 20102012 compared with year ended 30 June 20092011
We delivered another strong setOur strategy to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market remained a major point of results in FY2010 despite significant volatilitydifferentiation, particularly in the macroeconomic environment with growthcurrent, more challenging economic environment.
Revenue was US$72.2 billion, an increase of US$487 million, or 0.7 per cent, from US$71.7 billion in the corresponding period. The revenue increases of US$2.2 billion in both our Petroleum and Iron Ore businesses were partially offset by decreases in other businesses, in particular our Base Metals and Stainless Steel Materials businesses of US$2.6 billion and US$868 million, respectively.
The increase in revenue in Iron Ore related primarily to higher sales volumes of US$3.4 billion, offset by lower realised prices of US$1.2 billion. Revenue increases in Petroleum related primarily to US$2.2 billion of revenue in Onshore US for FY2012, an increase of US$2.1 billion from FY2011. The impact of higher realised prices in Petroleum’s conventional (primarily offshore) business was largely offset by lower sales volumes.
The revenue decrease in Base Metals reflected lower sales volumes of US$861 million and lower realised prices of US$1.5 billion. The decrease in revenue in Stainless Steel Materials was primarily due to lower realised prices.
Further description on the changes in revenue is included in the analysis of Underlying EBIT for the Group in section 3.6.2 and for the CSGs in section 3.6.6.
Our Attributable profit of US$15.4 billion represented a decrease of 34.8 per cent from US$23.6 billion in the corresponding period.
Attributable profit in FY2012 included a number of exceptional items: an impairment of the Fayetteville, US, dry gas assets acquired from Chesapeake Energy in March 2011 of US$1.8 billion (US$2.8 billion before tax); an
impairment of the Nickel West, Australia, assets of US$355 million (US$449 million before tax) and a US$342 million (US$452 million before tax) charge for the suspension or early closure of operations and the change in status of specific projects, which included an impairment of the Olympic Dam Project of US$242 million (US$346 million before tax).
Other exceptional items included the settlement of insurance claims at Queensland Coal, Australia, which resulted in other income of US$199 million (US$284 million before tax), while a US$637 million non-cash income tax credit was recognised following the passage of Australia’s Minerals Resource Rent Tax (MRRT) and Petroleum Resource Rent Tax (PRRT) extension into legislation in March 2012.
Attributable profit excluding exceptional items (comprising Profit after taxation attributable to members of BHP Billiton Group less Exceptional items as described in section 3.6.5) of US$17.1 billion represented a decrease of 21.1 per cent from US$21.7 billion in FY2011. The US$4.6 billion decrease in Attributable profit excluding exceptional items primarily reflects the decrease in Underlying EBIT of eight per cent. Record sales volumes were achievedUS$4.8 billion.
The decrease in threeUnderlying EBIT from the prior year is a result of our major commodities as our focus on efficiency and productivity at all pointsweaknesses in the cycle ensured we were well positionedprice of, and demand for, commodities and industry-wide cost pressure. The rate of cost escalation was most severe in those CSGs that experienced disruptions, outages or grade-related issues. The increased revenue for Onshore US, from US$107 million in FY2011 to capitalise onUS$2.2 billion in FY2012, did not result in additional EBIT due to the recovery in demand and prices. Local currency costs were well controlled across the Group; however, the weaker US dollar had a negative exchange rate impact of US$2,150 million.
The combinationlower realised gas prices in the United States. An analysis of these factors underpinned strong margins and returns. For the sixth consecutive year, we recorded anchange in Underlying EBIT marginfor the Group is set out in section 3.6.2 and for the CSGs in section 3.6.6.
Net operating cash flow of around 40US$24.4 billion declined by 18.9 per cent, while Underlying return on capital was 2623.0 per cent. Excluding capital investment associated with projects not yetThe value of the Group’s diversified strategy was reflected in production,the Group’s Underlying return on capital was 30EBIT margin, which remained at a robust 39.4 per cent.
Operating cash flow for theYear ended 30 June 2011 compared with year remained strong atended 30 June 2010
Revenue was US$17,920 million and resulted in net debt declining further to US$3,308 million, with net gearing falling to six per cent. These results continue to demonstrate the strength of our uniquely diversified business model and world-class, low-cost asset portfolio.
We invested heavily in our business and successfully delivered another five growth projects including those in petroleum and iron ore. We approved two major growth projects (with a combined budget of US$695 million) and made pre-commitments totalling US$2,237 million (our share) to accelerate early works for another four. To underline the depth of our project pipeline, we have 20 projects in various stages of execution and definition with an estimated budget in excess of US$25 billion.
In the Pilbara (Australia), we continued to progress the proposed iron ore production joint venture with Rio Tinto, with a key focus on gaining regulatory approval. We also bolstered our upstream resource base with the acquisition of Athabasca Potash Inc. (Canada) and United Minerals Corporation NL (Australia, Iron Ore). On 20 August 2010, we launched an all-cash offer to acquire all of the issued and outstanding common shares of Potash Corporation of Saskatchewan Inc. (PotashCorp) at a price of US$130 in cash per PotashCorp common share.
Our profit attributable to members of BHP Billiton of US$12.771.7 billion, represents an increase of 116.5US$19.9 billion, representing 35.9 per cent from US$52.8 billion in the corresponding period. Increases were experienced across all our CSGs, with US$9.3 billion for Iron Ore being the most significant. Other significant increases were in Base Metals (US$3.7 billion), Petroleum (US$2.0 billion) and Metallurgical Coal (US$1.5 billion).
Our Attributable profit of US$23.6 billion represented an increase of 85.9 per cent from the corresponding period. Attributable profit excluding exceptional items of US$12.521.7 billion representsrepresented an increase of 16.373.9 per cent from the corresponding period.
Revenue was US$52.8 billion, anperiod, while Underlying return on capital, excluding investment associated with projects not yet in production, increased to 50 per cent. The strong increase of 5.2in the Group’s Underlying EBIT margin to 47 per cent from US$50.2 billion inemphasised the corresponding period.
On 25 August 2010, the Board declared a final dividend of 45 US cents per share, thus bringing the total dividends declared for FY2010 to 87 US cents per share, an increase of 6.1 per cent over the corresponding period. Capital management initiatives are discussed in section 3.7.6 of this Report.
Year ended 30 June 2009 compared with year ended 30 June 2008
Our profit attributable to membersquality of BHP Billiton’s diversified portfolio.
An ongoing commitment to invest through all points of the economic cycle delivered record annual production across four commodities and 10 operations. Our decision to invest in our WAIO business during the depths of the global financial crisis facilitated an eleventh consecutive annual increase in iron ore production, as prices continued to test new highs. Three major projects delivered first production in FY2011, including the New South Wales Energy Coal MAC20 Project, Australia, which was completed ahead of schedule.
Robust demand, industry-wide cost pressures and persistent supply side constraints continued to support the fundamentals for the majority of BHP Billiton’s core commodities. In that context, another strong year of growth in Chinese crude steel production ensured steelmaking material prices were the major contributing factor to the US$17.2 billion price-related increase in Underlying EBIT.
However, we regularly highlighted our belief that costs tend to lag the commodity price cycle as consumable, labour and contractor costs are broadly correlated with the mining industry’s level of activity. In the environment
at that time, tight labour and raw material markets were presenting a challenge for all operators, and BHP Billiton was not immune from that trend. The devaluation of the US dollar and inflation reduced Underlying EBIT by a further US$3.2 billion.
Record operating cash flow of US$5.930.1 billion represented a decrease of 61.8 per cent from FY2008. Attributable profit excluding exceptional items of US$10.7 billion represented a decrease of 30.2 per cent from FY2008.
Revenue was US$50.2 billion, a decrease of 15.6 per cent from US$59.5 billion in FY2008.
3. Operating and financial review and prospectscontinued
On 12 August 2009, to create substantial flexibility for the Board declared a final dividend of 41 US cents per share, thus bringing the total dividends declared for FY2009 to 82 US cents per share. Capital management initiatives are discussed in section 3.7.6 of this Report.Group.
3.6.2 Consolidated results – Underlying EBIT
In discussing the operating results of our business, we focus on a financial measure we refer to as ‘Underlying EBIT’.Underlying EBIT. Underlying EBIT is the key measure that management uses internally to assess the performance of our business, make decisions on the allocation of resources and assess operational management. Management uses this measure because financing structures and tax regimes differ across our assets and substantial components of our tax and interest charges are levied at a Group rather than an operational level. Underlying EBIT is calculated as earnings before interest and taxation (EBIT), which is referred to as ‘profit from operations’ in the income statement, excluding the effects of exceptional items.
We exclude exceptional items from Underlying EBIT in order to enhance the comparability of the measure from period to period and provide clarity into the underlying performance of our operations. Our management monitors exceptional items separately.
The following table reconciles Underlying EBIT to profitProfit from operations for the years ended 30 June 2010, 2009 and 2008. Further details of exceptional items for each year can be found in section 3.6.2.operations.
Year ended 30 June | 2010 US$M | 2009 US$M | 2008 US$M | 2012 | 2011 | 2010 | ||||||||||||||
US$M | US$M | US$M | ||||||||||||||||||
Underlying EBIT | 19,719 | 18,214 | 24,282 | 27,238 | 31,980 | 19,719 | ||||||||||||||
Exceptional items (before taxation) | 312 | (6,054 | ) | (137 | ) | |||||||||||||||
Exceptional items (before taxation) – refer section 3.6.5 | (3,486 | ) | (164 | ) | 312 | |||||||||||||||
Profit from operations (EBIT) | 20,031 | 12,160 | 24,145 | 23,752 | 31,816 | 20,031 | ||||||||||||||
The following tables and commentary describetable describes the approximate impact of the principal factors that affected Underlying EBIT for FY2010FY2012 and FY2009.FY2011.
Year ended 30 June | 2010 US$M | 2009 US$M | 2012 | 2011 | ||||||||||||||||
US$M | US$M | |||||||||||||||||||
Underlying EBIT as reported in the prior year | 18,214 | 24,282 | 31,980 | 19,719 | ||||||||||||||||
Change in volumes: | ||||||||||||||||||||
Increase in volumes | 2,142 | 158 | 2,529 | 841 | ||||||||||||||||
Decrease in volumes | (206 | ) | (2,523 | ) | (2,221 | ) | (1,422 | ) | ||||||||||||
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1,936 | (2,365 | ) | 308 | (581 | ) | |||||||||||||||
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Net price impact: | ||||||||||||||||||||
Change in sales prices | 778 | (3,994 | ) | (2,213 | ) | 18,648 | ||||||||||||||
Price-linked costs | 241 | 12 | 253 | (1,420 | ) | |||||||||||||||
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(1,960 | ) | 17,228 | ||||||||||||||||||
1,019 | (3,982 | ) |
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Change in costs: | ||||||||||||||||||||
Costs (rate and usage) | (2 | ) | (2,528 | ) | (3,138 | ) | (1,412 | ) | ||||||||||||
Exchange rates | (2,150 | ) | 2,456 | 820 | (2,526 | ) | ||||||||||||||
Inflation on costs | (400 | ) | (601 | ) | (764 | ) | (635 | ) | ||||||||||||
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(2,552 | ) | (673 | ) | (3,082 | ) | (4,573 | ) | |||||||||||||
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Asset sales | 82 | (81 | ) | 78 | (85 | ) | ||||||||||||||
Ceased and sold operations | 526 | 15 | 347 | (140 | ) | |||||||||||||||
New and acquired operations | 966 | (158 | ) | |||||||||||||||||
New and acquired operations(1) | (86 | ) | 1,153 | |||||||||||||||||
Exploration and business development | 239 | (104 | ) | (819 | ) | (328 | ) | |||||||||||||
Other | (711 | ) | 1,280 | 472 | (413 | ) | ||||||||||||||
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Underlying EBIT | 19,719 | 18,214 | 27,238 | 31,980 | ||||||||||||||||
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(1) | Assets are reported as New and acquired operations until there is a full-year period for comparison. Accordingly, Petrohawk and Fayetteville (for FY2012 and FY2011) are in New and acquired operations. |
The method of calculation of the factors that affected Underlying EBIT and the financial statement line items of Revenue, Other income and Expenses (excluding net finance costs) that are affected by the factors are as follows.
Factor affecting Underlying EBIT | Method of calculation | Financial statement line item affected | ||
Volumes | Change in volumes for each operation from the corresponding period to the current period multiplied by prior year Underlying EBIT margin. | Revenue and Expenses | ||
Change in sales prices | Change in average realised price for each operation from the corresponding period to the current period multiplied by current period volumes. | Revenue | ||
Price-linked costs | As for change in sales prices. | Expenses | ||
Costs (rate and usage) | Change in total costs, other than those included in other categories below, for each operation from the corresponding period to the current period. | Expenses | ||
Exchange rates | Change in exchange rate multiplied by current period local currency revenue and expenses – the majority of the Group’s selling prices are denominated in US dollars and so there is little impact of exchange rate changes on Revenue. | Revenue and Expenses | ||
Inflation on costs | Change in inflation rate applied to expenses, other than depreciation and amortisation, price-linked costs, exploration and business development expenses, expenses in ceased and sold and expenses in new and acquired operations. | Expenses | ||
Asset sales | Profit/loss on the sale of assets or operations in the current period minus profit/loss on sale in the corresponding period. | Other income | ||
Ceased and sold operations | Underlying EBIT for operations that are ceased or sold operations in the current period minus Underlying EBIT for operations that are ceased or sold in the corresponding period. | Revenue, Other income and Expenses | ||
New and acquired operations | Underlying EBIT for operations that are new or acquired in the current period minus Underlying EBIT for operations that are new or acquired in the corresponding period. | Revenue, Other income and Expenses | ||
Exploration and business development | Exploration and business development expense in the current period minus exploration and business development expense in the corresponding period. | Expenses | ||
Other | Variances not explained by the above factors. | Expenses |
3. OperatingThe following commentary provides description of the principal factors outlined in the table above for FY2012 and financial review and prospectscontinued
FY2011.
Year ended 30 June 20102012 compared with year ended 30 June 20092011
Underlying EBIT for FY2010FY2012 was US$19.727.2 billion, compared with US$18.232.0 billion in the corresponding period, a decrease of 14.8 per cent.
Volumes
Disciplined investment throughout the economic cycle has established strong momentum in our major businesses, demonstrated by a twelfth consecutive annual production record at WAIO and record annual production at another nine operations. In aggregate, volumes increased Underlying EBIT by US$308 million in the period.
WAIO shipments rose to a record annualised rate of 179 million tonnes (Mt) in the June 2012 quarter (100 per cent basis). The resultant 23 Mt (BHP Billiton share) uplift in WAIO shipments increased Underlying EBIT by US$2.4 billion in FY2012.
Downtime at our non-operated facilities in the Gulf of Mexico, US, and the North West Shelf, Australia, and natural field decline, particularly at Pyrenees, Australia, were the major contributors to the volume related US$1.1 billion reduction in Underlying EBIT for the Petroleum business. The Atlantis and Mad Dog, both US, facilities resumed production in August 2012. In Base Metals, annual copper production records were set at Antamina and Spence, Chile, although lower grades and industrial action constrained performance at Escondida. An overall decline in Base Metals volumes reduced Underlying EBIT by US$509 million in the period.
The impact on EBIT arising from the increase in volume relating to the acquisition of our US Onshore business is included under the heading ‘New and acquired operations’.
Prices
Prices for many of BHP Billiton’s products declined during FY2012 as global economic growth slowed and concerns surrounding the economic outlook increased. In total, lower average realised prices reduced Underlying EBIT by US$2.0 billion in FY2012, net of price-linked costs. The impact was most apparent in our Base Metals and Iron Ore businesses where weaker prices reduced Underlying EBIT by US$1.6 billion and US$1.3 billion, respectively. No respite was provided for our Aluminium, Manganese and Stainless Steel Materials businesses, where lower realised prices reduced Underlying EBIT by a combined US$1.2 billion.
In Petroleum, a 19 per cent increase in the average realised price of oil and a 29 per cent rise in the average realised price of liquefied natural gas contributed to a US$1.5 billion increase in Underlying EBIT in FY2012. In addition, stronger thermal and metallurgical coal realised prices increased Underlying EBIT by a combined US$434 million, net of price-linked costs.
Costs
Industry-wide cost pressure resulted in a decline in Underlying EBIT of US$3.1 billion, particularly in Base Metals and in Metallurgical Coal, where industrial action at Queensland Coal and Escondida created additional pressure on costs.
Higher costs, excluding the impacts of inflation, exchange rate volatility and non-cash items, reduced Underlying EBIT by US$2.7 billion in FY2012. Labour and contractor cost increases and higher raw material costs accounted for more than half of this increase.
The Group has been quick to respond to the change in the operating environment and has acted decisively by closing energy intensive silicomanganese alloy production capacity in South Africa and by temporarily closing capacity at TEMCO. In addition, metallurgical coal production at Norwich Park was suspended following a review of the mine’s profitability.
Non-cash items, which included foreign exchange rate related adjustments to the carrying value of inventory and higher depreciation associated with the completion of major projects, reduced Underlying EBIT by a further US$435 million in FY2012.
Exchange rates
The cost related impact of the stronger Australian dollar reduced Underlying EBIT by US$565 million in FY2012. However, the positive restatement of monetary items in the balance sheet that followed the general strengthening of the US dollar against a basket of currencies at the end of the period resulted in a US$1.1 billion increase in Underlying EBIT. In total, exchange rate volatility increased Underlying EBIT by US$820 million.
Average and closing exchange rates for FY2012 and FY2011 are detailed in note 1 ‘Accounting policies’ to the financial statements.
Inflation on costs
Inflationary pressure had an unfavourable impact on all CSGs and reduced Underlying EBIT by US$764 million during FY2012. The pressure was most notable in Australia and South Africa, which accounted for 75 per cent of the total impact.
Asset sales
The contribution of asset sales to Underlying EBIT increased by US$78 million from the corresponding period and primarily reflected the receipt of a post-closing payment that followed the 2006 divestment of our interests in Cascade and Chinook, US.
Ceased and sold operations
A favourable foreign exchange related restatement and partial release of the Newcastle steelworks, Australia, rehabilitation provision accounted for the majority of the US$347 million increase in Underlying EBIT.
New and acquired operations
Assets are reported as new and acquired operations until there is a full-year period for comparison. New and acquired operations reduced Underlying EBIT by US$86 million in FY2012. Iron Ore’s acquisition of the HWE business in Western Australia increased Underlying EBIT by US$97 million, which was more than offset by a decrease in Underlying EBIT for the Onshore US business of US$183 million – being a loss of US$140 million in FY2012 compared with a profit of US$43 million in FY2011.
The additional revenue of US$2.1 billion for Onshore US in FY2012 did not result in additional EBIT due to the impact of lower realised gas prices in the United States.
Exploration and business development
Exploration expense increased by US$662 million to US$1.7 billion in FY2012. Within Minerals (US$928 million expense), greenfield exploration continued on copper targets in South America, nickel and copper targets in Australia, and iron ore and potash targets globally.
Petroleum exploration expense was US$818 million and included a US$144 million impairment of exploration previously capitalised. Our activities focused on offshore Western Australia, the Gulf of Mexico, South East Asia and our recently acquired Onshore US business.
A general increase in the level of business development expenditure reduced Underlying EBIT by a further US$157 million in FY2012.
Other
The absence of specific provisions and non-cash charges that were reported in the Aluminium and Base Metals businesses in FY2011 largely accounted for a US$472 million increase in Underlying EBIT in the period.
Year ended 30 June 2011 compared with year ended 30 June 2010
Underlying EBIT for FY2011 was US$32.0 billion, compared with US$19.7 billion in the corresponding period, an increase of 8.362.2 per cent.
Volumes
StrongBHP Billiton achieved production records across four commodities and 10 operations during FY2011. WAIO shipments rose to a record annualised rate of 155 mtpa in the June 2011 quarter and, when combined with strong operating performance from steelmaking raw materials wasat Samarco, Brazil, enabled iron ore volumes to contribute an additional US$572 million to Underlying EBIT.
The completion and successful ramp-up of the major contributor toMAC20 Project ahead of schedule underpinned record production at New South Wales Energy Coal in the volume relatedperiod. When considered in conjunction with a 13 per cent increase in South Africa Coal production, Energy Coal volumes increased Underlying EBIT by US$177 million in FY2011.
However, broader challenges continued to delay the supply response of US$1,936 million. In that context, our strategy to maximise production from our low cost assets at all pointsthe industry over the 12-month period. For example, metallurgical coal supply was significantly affected by persistent wet weather in the cycle ideally positioned our Metallurgical Coal and Manganese businessesBowen Basin, Australia, while ongoing permitting delays in the Gulf of Mexico continued to capitalise on the improvement in market demand.impact drilling activity. In Western Australia’s Pilbara region, ongoing commitment to growth delivered the tenth consecutive record in iron ore sales while a recovery in pellet demand enabled Samarco (Brazil) to return to full capacity.
Solid operating performance was recorded across the remaining Customer Sector Groups (CSGs). In Base Metals, Escondida (Chile) and Cannington (Australia) both benefited from higher throughput and grade whilst Olympic Dam (Australia) and Spence (Chile) were impactedaggregate, volumes reduced BHP Billiton Underlying EBIT by unplanned interruptions.
Escondida production is expected to decline by five to 10 per centUS$581 million in FY2011 mainly due to lower grade.despite generally strong operating performance.
Prices
Prices (includingRobust demand driven by the impactemerging economies, a general elevation and steepening of linked costs)global (commodity) cost curves and the persistent theme of supply side constraint, were all catalysts for higher commodity prices that increased Underlying EBIT by US$1,019 million with iron ore and18.6 billion in the base and precious metals complex contributing US$5,265 millionperiod. Another strong year of the benefit. Lowergrowth in Chinese crude steel production ensured steelmaking material prices for coal (both forms) and manganese were the offsetting factors andmajor contributing factor, as they alone increased Underlying EBIT by US$11.1 billion. Price-linked costs (including royalties) reduced Underlying EBIT by US$4,401 million.
Price-linked costs were US$241 million lower than the corresponding period.
During the second half of the financial year, the old benchmark pricing system for iron ore and metallurgical coal was substantially replaced by shorter-term market based pricing. The transformation ensures the majority of BHP Billiton’s bulk commodities (iron ore, manganese, metallurgical coal and energy coal) are now linked to market based prices.
Additional detail on the effect of price changes appears in section 3.4.1.1.4 billion.
Costs
Excluding the significant impact of a weaker US dollar, inflation and an increase in non-cash items, (US$219 million),costs decreased Underlying EBIT by US$1.2 billion.
BHP Billiton has regularly highlighted its belief that costs tend to lag the commodity price cycle as consumable, labour and contractor costs were well controlled acrossbroadly correlated with the Group, adding US$217 million to Underlying EBIT inmining industry’s level of activity. In the period.FY2011 environment of elevated commodity prices, tight labour and raw material markets were presenting a challenge for all operators.
Raw materials, including
Higher fuel and energy generated the greatest benefitprices (of which BHP Billiton was a net beneficiary), together with increased maintenance, labour and increased Underlying EBIT by US$576 million althoughcontractor costs, accounted for the majority of the benefit was non-structural in nature.
In contrast, higher labourimpact and contractor rates continued to negatively impact the cost base, particularly in South America and Australia. At Spence, Escondida and Cerro Colorado (Chile) one-off wage negotiations, bonuses and contractor payments reduced Underlying EBIT by US$145 million. Similarly, Western Australia’s higher labour costs associated with the tight labour market reduced Western Australia Iron Ore Underlying EBIT by US$45878 million.
Cost performance in the large bulk commodity businesses was heavily influenced by the ability to leverage infrastructure and maximise volumes. In this regard, the weather related disruption at our Queensland Coal, Australia, business had a negative impact on unit costs in the period. The major cost offset was related to the recovery in operating performance that followed last year’s Clark Shaft outage at Olympic Dam.
Non-cash and other items, predominantly depreciation, reduced Underlying EBIT by a combinedfurther US$537 million. The major negative factors were higher depreciation in Western Australia Iron Ore255 million and a provision for a payment toreflected the Western Australian Government that is expected to follow the recently announced amendments to the State Agreements.ongoing delivery of our organic growth program.
Exchange rates
A weaker US dollar against all producer currencies reduced Underlying EBIT by US$2,150 million.2.5 billion, which included a US$735 million variance related to the restatement of monetary items in the balance sheet. The Australian operations were the most impacted with theheavily impacted. The strong Australian dollar decreasingreduced Underlying EBIT by US$1,779 million.
3. Operating and financial review and prospectscontinued
2.1 billion, which included a US$640 million variance related to the restatement of monetary items in the balance sheet. The absolute impact on costs as a result of the restatement of monetary items in the balance sheet was a loss of US$807 million in FY2011.
Average and closing exchange rates for FY2010FY2011 and FY2009FY2010 are detailed in note 1 ‘Accounting policies’ to the financial statements.
Inflation on costs
Inflationary pressure on input costs across all businesses had an unfavourable impact on Underlying EBIT of US$400635 million. The effectpressure was most evident in Australia and South Africa.Africa, which accounted for over two-thirds of the total impact.
Asset sales
The profit on the sale of assets increased Underlying EBIT bywas US$82 million. This was mainly85 million lower than the corresponding period largely due to the profit that followed dissolution of the Douglas Tavistock Joint Venture, arrangement (South Africa).South Africa, which increased Underlying EBIT in the prior period.
Ceased and sold operations
Lower operational lossesThe currency revaluation of rehabilitation and closure provisions for Yabulu and Ravensthorpe (both Australia) andceased operations was the Suriname alumina refinery, which were sold during FY2010, resultedmajor driver of the US$140 million reduction in a favourable impact on Underlying EBIT of US$526 million.EBIT.
New and acquired operations
New greenfield assetsAssets are reported inas new and acquired operations variance until there is a full yearfull-year comparison. New operations increased Underlying EBIT by US$1.2 billion primarily due to strong performance at the BHP Billiton operated Pyrenees oil facility and gas facilities, Shenzi (US) and Pyrenees (Australia), contributed an additional US$966 million to Underlying EBIT in the period.inaugural contribution from the recently acquired Fayetteville shale assets.
Exploration and business development
ExplorationGroup exploration expense was broadly flat for the year atincreased marginally in FY2011 to US$1,030 million.1.1 billion. Within mineralsMinerals (US$467577 million expense), the focus centred upon copper targets in ChileSouth America, Mongolia and Zambia,Zambia; nickel and copper targets in Australia, manganese in Gabon,Australia; and diamondsdiamond targets in Canada. Exploration for iron ore, coal, bauxite, potash, uranium and manganese was also undertaken in a number of regions, including Australia, Canada, South America, RussiaAsia, Africa and Africa.the Americas.
The
Petroleum CSG’s exploration expense increasedwas US$477 million and included a US$73 million impairment of exploration previously capitalised. Exploration drilling activity was delayed in the Gulf of Mexico due to US$563 million asnew regulatory permitting processes, but was partially offset by an increase in the business commenced a multi-year drilling campaign.acquisition and processing of geophysical data.
Expenditure on business development wasreduced Underlying EBIT by an additional US$195303 million lower thancompared with the corresponding period. This was mainly dueprior period as Base Metals progressed a number of its development options, including Olympic Dam Project (ODP1) and the Spence Hypogene project, Chile. Increased activity on the Scarborough and Browse liquefied natural gas projects, both Australia, in FY2011 also contributed to reduced activitythe rise in the Base Metals and Stainless Steel Materials CSGs.business development expense.
Other
Other items decreased Underlying EBIT by US$711413 million predominantly dueand included provisions totalling US$189 million related to indirect taxes in the influence of third party product salesAluminium and the fair value adjustment of derivative contracts.Iron Ore businesses and Colombian net worth tax in Stainless Steel Materials and Energy Coal.
3.6.3 Net finance costs
Year ended 30 June 20092012 compared with year ended 30 June 2008
Underlying EBIT for FY2009 was US$18.2 billion, compared with US$24.3 billion, a decrease of 25.0 per cent.
Volumes2011
Lower sales volumes, predominantly in Base Metals and Manganese, reduced Underlying EBIT by US$2,523 million. Copper sales volumes were impacted by lower ore grade and reduced output from milling operations at Escondida (Chile). Manganese sales volumes decreased significantly due to weaker demand.
This was partially offset by stronger volumes, predominantly in Iron Ore, which increased Underlying EBIT by US$158 million.
3. Operating and financial review and prospectscontinued
Prices
Underlying EBIT decreased by US$3,994 million (excluding the impact of newly commissioned projects) due to changes in commodity prices. Lower average realised prices for commodities such as crude oil, copper, nickel, aluminium, alumina and diamonds reduced Underlying EBIT by US$10,193 million. Despite the prices rallying in the second half of the financial year, spot commodity prices as at 30 June 2009 were generally 20 to 60 per cent lower than at the start of the financial year. This was partially offset by higher average realised prices for metallurgical coal, iron ore, manganese and thermal coal, which increased Underlying EBIT by US$6,199 million.
Price-linked costs were largely in line with the corresponding period. Decreased charges for third party nickel ore and more favourable rates for copper treatment and refining charges (TCRCs) were offset by higher royalty costs.
Costs
Costs increased by US$2,528 million compared with FY2008. This included the impact of higher non-cash costs of US$153 million. Approximately US$601 million of the increase was due to higher costs for fuel and energy, and raw materials such as coke, sulphuric acid, pitch and explosives. In addition, labour and contractor costs have increased by US$578 million. Costs associated with the FY2008 severe weather interruptions in Queensland and the furnace rebuild at the Kalgoorlie Nickel Smelter (Australia) had an adverse impact of US$561 million.
The bulk of the cost increases took place in the first half of the financial year. Discretionary costs previously incurred to maximise production to realise high prices in the first half of the financial year were successfully reduced. We also successfully negotiated lower contract prices for some of our key supply contracts.
While we continue to focus on cost containment, the benefits of falling input prices will have a lagged effect on reducing costs.
Exchange rates
Despite the recent strength in the Australian dollar and South African rand versus the US dollar, exchange rate movements positively impacted Underlying EBIT by US$2,456 million. The Australian operations’ Underlying EBIT increased by US$2,085 million due to a generally weaker Australian dollar. The depreciation of the South African rand also positively impacted Underlying EBIT by US$225 million.
Average and closing exchange rates for FY2009 and FY2008 are detailed in note 1 to the financial statements.
Inflation on costs
Inflationary pressures on input costs across all our businesses had an unfavourable impact on Underlying EBIT of US$601 million. The inflationary pressures were most evident in Australia, South Africa and South America.
Asset sales
The sale of assets reduced Underlying EBIT by US$81 million. This was mainly due to the sale of the Elouera mine (Illawarra Coal, Australia) and other Queensland Coal mining leases in FY2008. However, this was in part offset by the profit on sale of petroleum leases located offshore of Western Australia.
Ceased and sold operations
The favourable impact of US$15 million was mainly due to higher insurance recoveries for closed operations.
New and acquired operations
New and acquired operations represented the effect on Underlying EBIT of acquisitions and new greenfield operations during FY2009 between acquisition or commissioning and the end of the fiscal year at which a full year of comparative financial information is available. Atlantis (US) and Stybarrow (Australia) operations, which were commissioned in FY2008, contributed to a negative variance of US$258 million. This was due to lower realised prices, partially offset by higher sales volumes. The Shenzi and Neptune (both US) operations, which were commissioned during FY2009, generated US$100 million Underlying EBIT during FY2009.
3. Operating and financial review and prospectscontinued
Exploration and business development
Exploration expense for the year was US$1,074 million, an increase of US$168 million. The main expenditure for Petroleum was on targets in the Gulf of Mexico (US), Malaysia and Australia. We also progressed with minerals exploration activities in Western Australia Iron Ore and potash in Saskatchewan, Canada. During FY2009, we incurred US$94 million of exploration expense for potash.
Expenditure on business development was US$64 million lower than FY2008. This was mainly due to lower spending on the pre-feasibility study for the Olympic Dam expansion project and business development activities for diamonds projects. The draft Environmental Impact Statement (EIS) for the Olympic Dam expansion was submitted to the federal, South Australian and Northern Territory governments for review. Project activities were modified to that necessary to support the approvals process and the study of a number of mining and processing technology options.
Other
Other items increased Underlying EBIT by US$1,280 million, US$887 million of which was due to the contribution of third party product sales and the reversal of unrealised losses on derivative contracts.
Net finance costs
Year ended 30 June 2010 compared with year ended 30 June 2009
Net finance costs decreasedincreased to US$459730 million from US$543561 million in the corresponding period. This was primarily driven by increased net interest expense on higher levelsnet debt, partially offset by exchange rate variations on net debt. At 30 June 2012 net debt, comprising interest bearing liabilities less cash and cash equivalents, was US$23.6 billion, which represented an increase of capitalised interest.US$17.8 billion compared with the net debt position at 30 June 2011.
Year ended 30 June 20092011 compared with year ended 30 June 20082010
Net finance costs decreasedincreased to US$543561 million from US$662459 million in FY2008.the corresponding period. This was primarily driven predominantly by exchange rate variations on net debt and lower amounts of interest rates and foreign exchange impacts, partly offset by lower capitalised interest.capitalised.
3.6.4 Taxation expense
Taxation expense
Year ended 30 June 20102012 compared with year ended 30 June 20092011
TheTotal taxation expense, including royalty-related taxation, and tax on exceptional items and exchange rate movements, was US$6,563 million. This represented7.5 billion, representing an effective rate of 3432.5 per cent on profit before tax of US$19,572. Excluding the impacts of exceptional items, the taxation expense was US$6,504 million.(2011: 23.4 per cent).
Exchange rate movements increased the taxation expense by US$106250 million (2011: decrease of US$1.5 billion). The reduced impact compared with FY2011 was predominantly due to eligible Australian entities electing to adopt a US dollar tax functional currency from 1 July 2011.
Exceptional items decreased taxation expense by US$1.7 billion (2011: decrease of US$2.1 billion), predominantly due to the revaluationrecognition of local currency tax liabilitiesbenefits of US$1.2 billion arising from the impairments of goodwill and other monetary items, which amountedassets in relation to US$502 million. This was offset by the increase inFayetteville shale gas assets, Nickel West and the US dollar valueOlympic Dam expansion project and the recognition of futurea net income tax depreciationbenefit of US$396 million.
Royalty-related taxation represents an effective rate637 million on enactment of two per cent for the current period. Excluding the impacts of royalty-related taxation, the impact of exchange rate movements includedMRRT and PRRT extension legislation in taxation expense and tax on exceptional items, the underlying effective rate was 31 per cent.Australia.
Government imposed royalty arrangements which are calculated by reference to profits (revenue net of allowable deductions) after the adjustment for items comprising temporary differences isare reported as royalty-related taxation. Royalty-related taxation (excluding exceptional items) contributed US$889 million to taxation expense, representing an effective tax rate of 3.9 per cent (2011: US$828 million and 2.6 per cent).
Other royalty and excise arrangements that dodid not have these characteristics, are recognised as operating costs (US$1,653 million)within Profit before taxation. These amounted to US$3.1 billion during the period (2011: US$2.9 billion).
Year ended 30 June 20092011 compared with year ended 30 June 20082010
TheTotal taxation expense, including royalty-related taxation and tax onthe predominantly non-cash exceptional items and exchange rate movements, was US$5,279 million. This represented7.3 billion, representing an effective tax rate of 45.423.4 per cent on profit before tax of US$11,617 million. Excluding the impacts of exceptional items the taxation expense was US$6,488 million.
3. Operating and financial review and prospectscontinued
(2010: 33.5 per cent).
Exchange rate movements increased thedecreased taxation expense by US$444 million. The weaker Australian dollar against1.5 billion (2010: increase of US$106 million), predominantly due to the US dollar has significantly reduced the Australianrevaluation of local currency deferred tax assets forarising from future tax depreciation since FY2008. This wasof US$2.5 billion, partly offset by the devaluationrevaluation of local currency tax liabilities and deferred tax balances arising from other monetary items and temporary differences, which amounted to US$1.0 billion.
Exceptional items decreased taxation expense by US$2.1 billion (2010: increase of US$59 million), predominantly due to the strongerreversal of deferred tax liabilities of US$1.5 billion following the election of eligible Australian entities to adopt a US dollar. dollar tax functional currency, as well as the release of tax provisions of US$718 million following the Group’s position being confirmed with respect to Australian Taxation Office (ATO) amended assessments.
Royalty-related taxation representedcontributed US$828 million to taxation expense, representing an effective rate of 4.32.6 per cent for FY2009. Excluding(2010: US$451 million and 2.3 per cent).
Other royalty and excise arrangements amounted to US$2.9 billion during the impacts of royalty-related taxation, the impact of exchange rate movements included in taxation expense and tax on exceptionalperiod (2010: US$1.7 billion).
3.6.5 Exceptional items the underlying effective rate was 31.4 per cent.
3.6.2 Exceptional itemsYear ended 30 June 2012
Year ended 30 June 2012 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Impairment of Fayetteville goodwill and other assets | (2,835 | ) | 996 | (1,839 | ) | |||||||
Impairment of Nickel West goodwill and other assets | (449 | ) | 94 | (355 | ) | |||||||
Suspension or early closure of operations and the change in status of specific projects (1) | (502 | ) | 108 | (394 | ) | |||||||
Settlement of insurance claims(1) | 300 | (90 | ) | 210 | ||||||||
Recognition of deferred tax assets on enactment of MRRT and PRRT extension legislation in Australia | – | 637 | 637 | |||||||||
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(3,486 | ) | 1,745 | (1,741 | ) | ||||||||
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(1) | Includes amounts attributable to non-controlling interests of US$(34) million (US$7 million tax expense). |
As a result of the fall in United States domestic gas prices and the Company’s decision to adjust its development plans, the Group has recognised impairments of goodwill and other assets in relation to its Fayetteville shale gas assets. A total impairment charge of US$2.8 billion (US$996 million tax benefit) was recognised in FY2012.
The Group has recognised impairments of goodwill and other assets at Nickel West as a result of the continued downturn in the nickel price and margin deterioration. A total impairment charge of US$449 million (US$94 million tax benefit) was recognised in FY2012.
As part of our regular portfolio review, various operations and projects around the Group have either been suspended, closed early or changed in status. These include: the change in status of the Olympic Dam expansion project; the temporary suspension of production at TEMCO and the permanent closure of the Metalloys South Plant in South Africa; the indefinite cessation of production at Norwich Park; and the suspension of other minor capital projects. As a result, impairment charges of US$422 million (US$84 million tax benefit), idle capacity
costs and inventory write-down of US$40 million (US$12 million tax benefit) and other restructuring costs of US$40 million (US$12 million tax benefit) were recognised in FY2012 of which US$346 million (US$104 million tax benefit) related to Olympic Dam.
During 2008, the extreme weather across the central Queensland coalfields in Australia affected production from the BHP Billiton Mitsubishi Alliance (BMA) and BHP Billiton Mitsui Coal (BMC) operations. The Group settled insurance claims in respect of the lost production, and insurance claim income of US$300 million (US$90 million tax expense) was recognised in FY2012.
The Australian MRRT and PRRT extension legislation was enacted in March 2012. Under the legislation, the Group is entitled to a deduction against future MRRT and PRRT liabilities based on the market value of its coal, iron ore and petroleum assets. A deferred tax asset, and an associated net income tax benefit of US$637 million, was recognised in FY2012 to reflect the future deductibility of these market values for MRRT and PRRT purposes, to the extent they are considered recoverable.
Refer to note 3 ‘Exceptional items’ to the financial statements for more information.
Year ended 30 June 2011
Year ended 30 June 2011 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Withdrawn offer for PotashCorp | (314 | ) | – | (314 | ) | |||||||
Newcastle steelworks rehabilitation | 150 | (45 | ) | 105 | ||||||||
Release of income tax provisions | – | 718 | 718 | |||||||||
Reversal of deferred tax liabilities | – | 1,455 | 1,455 | |||||||||
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(164 | ) | 2,128 | 1,964 | |||||||||
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The Group withdrew its offer for Potash Corporation of Saskatchewan (PotashCorp) on 15 November 2010 following the Board’s conclusion that the condition of the offer relating to receipt of a net benefit as determined by the Minister of Industry under the Investment Canada Act could not be satisfied. The Group incurred fees associated with the US$45 billion debt facility (US$240 million), investment bankers’, lawyers’ and accountants’ fees, printing expenses and other charges (US$74 million) in progressing this matter during the period up to the withdrawal of the offer, which were expensed as operating costs in FY2011.
The Group recognised a decrease of US$150 million (US$45 million tax charge) to rehabilitation obligations in respect of former operations at the Newcastle steelworks, Australia, following a full review of the progress of the Hunter River Remediation project, Australia, and estimated costs to completion.
The ATO issued amended assessments in prior years denying bad debt deductions arising from the investments in Beenup and Boodarie Iron, both Australia, and the denial of capital allowance claims made on the Boodarie Iron project. The Group challenged the assessments and was successful on all counts before the Full Federal Court. The ATO obtained special leave in September 2010 to appeal to the High Court in respect of the denial of capital allowance claims made on the Boodarie Iron project. The Group’s position in respect of the capital allowance claims on the Boodarie Iron project was confirmed by the High Court in June 2011. As a result of these appeals, US$138 million was released from the Group’s income tax provision in September 2010 and US$580 million in June 2011.
Consistent with the functional currency of the Group’s operations, eligible Australian entities elected to adopt a US dollar tax functional currency from 1 July 2011. As a result, a deferred tax liability relating to certain US dollar denominated financial arrangements was derecognised, resulting in a credit to income tax expense of US$1.5 billion.
Year ended 30 June 2010
On 22 February 2010,
Year ended 30 June 2010 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Pinal Creek rehabilitation | 186 | (53 | ) | 133 | ||||||||
Disposal of the Ravensthorpe nickel operation | 653 | (196 | ) | 457 | ||||||||
Restructuring of operations and deferral of projects | (298 | ) | 12 | (286 | ) | |||||||
Renegotiation of power supply agreements | (229 | ) | 50 | (179 | ) | |||||||
Release of income tax provisions | – | 128 | 128 | |||||||||
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312 | (59 | ) | 253 | |||||||||
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During FY2010, a settlement was reached in relation to the Pinal Creek, (US)US, groundwater contamination, which resulted in other parties taking on full responsibility for groundwater rehabilitation and partly funding the Group for past and future rehabilitation costs incurred. As a result, a gain of US$186 million (US$53 million tax expense) has beenwas recognised reflecting the release of rehabilitation provisions and cash received.
On 9 December 2009, theThe Group announced it had signed an agreement to sellsold the Ravensthorpe nickel operations, (Australia). The sale was completed on 10 February 2010.Australia, during FY2010. As a result of the sale, impairment charges recognised as exceptional items in FY2009 have beenwere partially reversed totalling US$611 million (US$183 million tax expense). In addition, certain obligations that remained with the Group were mitigated and related provisions released;released, together with minor net operating costs this resulted in a gain of US$42 million (US$13 million tax expense).
Continuing power supply constraints impacting the Group’s three Aluminiumaluminium smelters in southern Africa, and temporary delays with the Guinea Aluminaalumina project, have givengave rise to charges for the impairment of property, plant and equipment and restructuring provisions. A total charge of US$298 million (US$12 million tax benefit) was recognised by the Group in the FY2010.
Renegotiation of long-term power supply arrangements in southern Africa have impacted the value of embedded derivatives contained within those arrangements. A total charge of US$229 million (US$50 million tax benefit) was recognised by the Group in FY2010.
The Australian Taxation Office (ATO)ATO issued amended assessments in prior years denying bad debt deductions arising from the investments in Hartley, (Zimbabwe),Zimbabwe, Beenup and Boodarie Iron (both Australia) and the denial of capital allowance claims made on the Boodarie Iron project. BHP Billiton lodged objections and has beenwas successful on all counts in the Federal Court and the Full Federal Court. The ATO hasdid not soughtseek to appeal the Boodarie Iron bad debt disallowance to the High Court, which resulted in a release of US$128 million from the Group’s income tax provisions. The ATO sought special leave to appeal to the High Court in relation to the Beenup bad debt disallowance and the denial of the capital allowance claims on the Boodarie Iron project and has beenwas granted special leave only in relation to the denial of the capital allowance claims on the Boodarie Iron project.
Refer to note 3 ‘Exceptional items’ in the financial statements for more information.
Year ended 30 June 2010 | Gross US$M | Tax US$M | Net US$M | ||||||
Exceptional items by category | |||||||||
Pinal Creek rehabilitation | 186 | (53 | ) | 133 | |||||
Disposal of the Ravensthorpe nickel operation | 653 | (196 | ) | 457 | |||||
Restructuring of operations and deferral of projects | (298 | ) | 12 | (286 | ) | ||||
Renegotiation of power supply agreements | (229 | ) | 50 | (179 | ) | ||||
Release of income tax provisions | — | 128 | 128 | ||||||
312 | (59 | ) | 253 |
Year ended 30 June 2009
On 21 January 2009, we announced the suspension of operations at the Ravensthorpe nickel operations (Australia) and as a consequence stopped the processing of the mixed nickel cobalt hydroxide product at Yabulu (Australia). As a result, charges relating to impairment, increased provisions for contract cancellation, redundancy and other closure costs of US$3,615 million (US$1,076 million tax benefit) were recognised. This exceptional item did not include the loss from operations of Ravensthorpe nickel operations of US$173 million.
3. Operating and financial review and prospectscontinued
On 3 July 2009, we announced the sale of the Yabulu nickel operations. As a result, impairment charges of US$510 million (US$ nil tax benefit) were recognised in addition to those recognised on suspension of the Ravensthorpe nickel operations. As a result of the sale, deferred tax assets of US$175 million that were no longer expected to be realised by the Group were recognised as a charge to income tax expense. The remaining assets and liabilities of the Yabulu operations were classified as held for sale as at 30 June 2009.
As part of our regular review of the long-term viability of operations, a total charge of US$665 million (US$23 million tax expense) was recognised primarily in relation to the decisions to cease development of the Maruwai Haju trial mine (Indonesia), sell the Suriname operations, suspend copper sulphide mining operations at Pinto Valley (US) and cease the pre-feasibility study at Corridor Sands (Mozambique). The remaining assets and liabilities of the Suriname operations were classified as held for sale as at 30 June 2009.
A further charge of US$306 million (US$86 million tax benefit) was recognised primarily in relation to the deferral of expansions at the Nickel West operations (Australia), deferral of the Guinea Alumina project (Guinea) and the restructuring of the Bayside Aluminium Casthouse operations (South Africa).
We recognised a charge of US$508 million (US$152 million tax benefit) for additional rehabilitation obligations in respect of former operations at the Newcastle steelworks (Australia). The increase in obligations related to changes in the estimated volume of sediment in the Hunter River requiring rehabilitation and treatment, and increases in estimated treatment costs.
Our offers for Rio Tinto lapsed on 27 November 2008 following the Board’s decision that it believed that completion of the offers was no longer in the best interests of BHP Billiton shareholders. We incurred fees associated with the US$55 billion debt facility (US$156 million cost, US$31 million tax benefit), investment bankers’, lawyers’ and accountants’ fees, printing expenses and other charges (US$294 million cost, US$62 million tax benefit) up to the lapsing of the offers, which were expensed in FY2009.
Refer to note 3 ‘Exceptional items’ in the financial statements for more information.
Year ended 30 June 2009 | Gross US$M | Tax US$M | Net US$M | ||||||
Exceptional items by category | |||||||||
Suspension of Ravensthorpe nickel operations | (3,615 | ) | 1,076 | (2,539 | ) | ||||
Announced sale of Yabulu refinery | (510 | ) | (175 | ) | (685 | ) | |||
Withdrawal or sale of other operations | (665 | ) | (23 | ) | (688 | ) | |||
Deferral of projects and restructuring of operations | (306 | ) | 86 | (220 | ) | ||||
Newcastle steelworks rehabilitation | (508 | ) | 152 | (356 | ) | ||||
Lapsed offers for Rio Tinto | (450 | ) | 93 | (357 | ) | ||||
(6,054 | ) | 1,209 | (4,845 | ) | |||||
Year ended 30 June 2008
Tax losses incurred by WMC Resources Ltd (WMC), acquired by BHP Billiton in June 2005, were not recognised as a deferred tax asset at acquisition pending a ruling application to the ATO. A ruling was issued during FY2008 confirming the availability of those losses. This resulted in the recognition of a deferred tax asset (US$197 million) and a consequential adjustment to deferred tax liabilities (US$38 million) through income tax expense at current Australian dollar/US dollar exchange rates. As a further consequence, the Group recognised an expense of US$137 million for a corresponding reduction in goodwill measured at the Australian dollar/US dollar exchange rate at the date of acquisition.
3. Operating and financial review and prospectscontinued
3.6.33.6.6 Customer Sector Group summary
The following table provides a summarydiscussion of the Customer Sector Group revenues and results for FY2010our CSGs is set out below and the two prior corresponding periods.
Year ended 30 June US$M | 2010 | 2009 | 2008 | |||
Revenues:(1) | ||||||
Petroleum | 8,782 | 7,211 | 8,382 | |||
Aluminium | 4,353 | 4,151 | 5,746 | |||
Base Metals | 10,409 | 7,105 | 14,774 | |||
Diamonds and Specialty Products | 1,272 | 896 | 969 | |||
Stainless Steel Materials | 3,617 | 2,355 | 5,088 | |||
Iron Ore | 11,139 | 10,048 | 9,455 | |||
Manganese | 2,150 | 2,536 | 2,912 | |||
Metallurgical Coal | 6,059 | 8,087 | 3,941 | |||
Energy Coal | 4,265 | 6,524 | 6,560 | |||
Group and unallocated items(2)(3) | 752 | 1,298 | 1,646 | |||
BHP Billiton Group | 52,798 | 50,211 | 59,473 | |||
Year ended 30 June US$M | 2010 | 2009 | 2008 | ||||||
Underlying EBIT:(1) | |||||||||
Petroleum | 4,573 | 4,085 | 5,485 | ||||||
Aluminium | 406 | 192 | 1,465 | ||||||
Base Metals | 4,632 | 1,292 | 7,989 | ||||||
Diamonds and Specialty Products | 485 | 145 | 189 | ||||||
Stainless Steel Materials | 668 | (854 | ) | 1,275 | |||||
Iron Ore | 6,001 | 6,229 | 4,631 | ||||||
Manganese | 712 | 1,349 | 1,644 | ||||||
Metallurgical Coal | 2,053 | 4,711 | 937 | ||||||
Energy Coal | 730 | 1,460 | 1,057 | ||||||
Group and unallocated items(2)(3) | (541 | ) | (395 | ) | (390 | ) | |||
BHP Billiton Group | 19,719 | 18,214 | 24,282 | ||||||
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focuses on Underlying EBIT. The changes in revenue andfactors affecting Underlying EBIT for eachhave also affected revenue, except where stated. For further information on our CSG are discussed below. We adopted IFRS 8/AASB 8 ‘Operating Segments’ in FY2010,results, including depreciation, refer note 2 ‘Segment reporting’ to the impact of which is that CSG financial information now excludes exceptional items.statements.
Petroleum
Year ended 30 June 20102012 compared with year ended 30 June 20092011
Revenue was US$8,782 million for FY2010, an increaseIn combination with our worldwide conventional oil and gas operations, the integration of US$1,571 million, or 21.8the Eagle Ford, Haynesville and Permian assets from the Petrohawk acquisition strengthened our operating position in the
Onshore US and combined with the Fayetteville field contributed to a 40 per cent over the corresponding period. This was primarily dueincrease in Petroleum production to increased production of high margin liquids from new project developments.
Total production for the year of 159222.3 million barrels of oil equivalent was a full year(MMboe) for FY2012. Our total production record and an increase of 21 millionaveraged 608,000 barrels of oil equivalent. The 15equivalent per day. This achievement was realised despite extended downtime at our non-operated facilities in the Gulf of Mexico.
Underlying EBIT for FY2012 was unchanged from the prior period at US$6.3 billion. This financial performance was achieved despite natural field decline at Pyrenees and the substantial deferral of high margin production due to extended downtime in the Gulf of Mexico and the North West Shelf. Higher prices for our offshore production increased Underlying EBIT by US$1.5 billion largely as a result of a 19 per cent increase in production reflected strong performance from BHP Billiton operated Shenzi (US)the average realised price of oil to US$110.66 per barrel and Pyrenees (Australia), the latter being delivered on schedule during the period. In addition, improved reservoir performance from Atlantis (US) and an absence of weather related interruptions supported such strong production. In addition, for the fourth consecutive year, Petroleum achieved greater than 100a 29 per cent reserve replacement.
3. Operating and financial review and prospectscontinued
Underlying EBIT was US$4,573 million, an increase of US$488 million, or 11.9 per cent, compared withrise in the prior year. The increase was primarily due to higher production as noted and higher realised oil prices, which averaged US$73.05 per barrel for the year (compared with US$66.18 per barrel). The major offsets were a lower average realised price of liquefied natural gas price ofto US$3.4314.23 per thousand standard cubic feet (compared with(scf). For US natural gas, our average realised price in FY2012 was US$3.572.82 per thousand standard cubic feet)scf(1).
Capital expenditure across our offshore and a lower average realised liquefied natural gas price ofonshore businesses totalled US$9.07 per thousand standard cubic feet (compared with $12.07 per thousand standard cubic feet).
Gross exploration expenditure5.8 billion in FY2012. Spending in major capital projects across our conventional portfolio was US$817 million, an increase of US$269 million compared with last year (US$548 million),2.5 billion and primarily from increased drilling activityincluded projects in Western Australia and the Gulf of Mexico, (US), Canada, Malaysia,US.
Exploration and development expenditure specifically within our Onshore US business totalled US$3.7 billion in FY2012 and is expected to rise to US$4.0 billion in FY2013. At the Falklandsend of FY2012, over 80 per cent of the activity of our approximately 40 drilling rigs in the Onshore US business was focused on the liquids-rich Eagle Ford and the Philippines. SeveralPermian fields.
We achieved success in our conventional exploration program in FY2012 as seven of 12 wells were not commercial andencountered hydrocarbons. The associated rise in our level of activity resulted in thea US$798 million increase in gross exploration expense ofspend for the period to US$163 million (US$563 million compared with1,355 million. Capitalised exploration costs increased from US$400153 million in the prior year).
Drilling activities at Atlantis and Shenzi ceased during the June 2010 quarter basedFY2011 to US$681 million in FY2012. A US$775 million high-impact exploration program, in our conventional business, largely focused on the drilling moratorium currently in place in the deepwater Gulf of Mexico. We continue to monitor and assess the impact of the suspension of certain permitting and drilling activities. All other drilling operations outside of the Gulf of Mexico progressed as planned. Underlying EBITand Western Australia, will target large prospective resources in FY2013. During FY2013, our Onshore US business will focus on development wells rather than exploration.
Petroleum production is forecast to increase to approximately 240 MMboe in FY2013, despite the deferral of Onshore US natural gas drilling at Haynesville and Fayetteville. The forecast increase in production is expected to include a 15 per cent rise in valuable liquids production, which will be underpinned by the recommencement of operations at Mad Dog and Atlantis and an increase in activity in our liquids rich Onshore US acreage. The strong liquids growth potential of our Onshore US business was impacteddemonstrated by a $59 million charge relatedthe 60 per cent increase in liquids production, to idle rig time inmore than 40 thousand barrels per day over the Gulf10-month period since the acquisition of Mexico for BHP Billiton controlled rigs. This is part of BHP Billiton’s ongoing management of rig contracts which included negotiating revised terms for the rigs during the moratorium and will provide BHP Billiton with continued access to the rigs and experienced crews when the moratorium ceases.Petrohawk.
Year ended 30 June 20092011 compared with year ended 30 June 20082010
RevenueThe successful integration of the Fayetteville Shale gas assets, the start-up of the Angostura Gas Phase II project on schedule and strong underlying performance from existing assets, delivered 159.4 MMboe for FY2011, the fourth consecutive increase in annual petroleum production. BHP Billiton brought the first new deepwater well into production since the Gulf of Mexico moratorium was US$7,211 millionenacted in May 2010 and this important milestone, achieved at the BHP Billiton operated Shenzi field, US, followed previous regulatory approvals for FY2009, a decreasewater injection and production well drilling.
Underlying EBIT of US$1,171 million,6.3 billion represented an increase of US$1.8 billion or 14.038.4 per cent from FY2008. This was mainly due to lowerwhen compared with the prior period. Higher average realised prices for petroleum products.
Total production for FY2009 was 137.2 million barrels of oil equivalent (boe) compared with total production in FY2008 of 129.5 million boe. The strong annual production growth was duewere a major contributor to the delivery of new projects and an ongoing focus on driving base performance. First production was achieved for five projects – Neptune, Shenzi and Atlantis North (all US), North West Shelf Train 5 and Angel (both Australia). This strong growth was achieved despite the impact of hurricanes and natural field declines.
increase in Underlying EBIT was US$4,085 million,(US$1.5 billion, net of price-linked costs) and reflected a decrease of US$1,400 million, or 25.528 per cent from FY2008. The decrease was due mainly to lower average realised prices for petroleum products, with lower average realisedincrease in oil prices to US$93.29 per barrel, of US$66.18 (compared with US$96.27), lower averagea 22 per cent increase in realised liquefied natural gas prices ofto US$3.5711.03 per thousand standard cubic feet (compared with US$3.75), partially offset by higher average realised prices for liquefiedscf, and a 17 per cent increase in natural gas ofprices to US$12.074.00 per thousand standard cubic feet (compared with US$8.95) and increased production.
Gross expenditure on explorationscf. BHP Billiton’s operating capability was US$548 million, US$144 million lower than FY2008. Exploration expenditure charged to profitfurther underscored by the success of Pyrenees although natural field decline worldwide was US$400 million. We continued to replenish our exploration inventory and acquired exploration rights to seven deepwater blocks offshore Western India and were awarded an additional 28 leasesfurther impacted by the deferral of high volume wells in the Gulf of Mexico lease sale process. Evaluation work commenced, or continued, onMexico.
(1) | See New and acquired operations in section 3.6.2 for further information |
Gross exploration spend of US$557 million was similarly impacted, although an increase in seismic acquisition and processing partially offset the significant acreage position we have acquired over recent years.
In addition, for the third consecutive year we achieved greater than 100 per cent reserve replacement.decrease in drilling activity. Recommencement of development drilling at Atlantis, US, was still pending although a step out exploration well at Mad Dog, US, was underway.
Aluminium
Year ended 30 June 20102012 compared with year ended 30 June 20092011
Revenue was US$4,353 million for FY2010, an increase of US$202 million, or 4.9Record annual production at the Alumar refinery, Brazil, contributed to a four per cent over the corresponding period.
Totalincrease in total alumina production in FY2012. Metal production was lower as potline capacity at Hillside, South Africa, was temporarily curtailed following a major unplanned outage in the March 2012 quarter.
Underlying EBIT for FY2012 decreased by US$557 million to a loss of 3,841,000 tonnesUS$291 million as weaker prices and cost escalation drove significant margin compression. An eight per cent reduction in FY2010 decreased from 4,396,000 tonnesthe average realised price of aluminium (to US$2,314 per tonne) and a three per cent decline in FY2009 mainly attributablethe average realised price of alumina (to US$333 per tonne) reduced Underlying EBIT by US$245 million, net of price-linked costs. Higher raw material costs for inputs such as coke and caustic soda led to lowera further US$223 million decline in Underlying EBIT. Costs associated with the Hillside outage added to the decline.
The Worsley Efficiency and Growth project delivered first production as a resultduring FY2012.
Year ended 30 June 2011 compared with year ended 30 June 2010
The ongoing ramp-up of the sale of Suriname on 31 July 2009. Aluminium smelterAlumar refinery, Brazil, contributed to a seven per cent increase in total alumina production increased from 1,233,000 tonnes in FY2009for FY2011. Metal production remained largely unchanged with all operations running at or close to 1,241,000 tonnes in FY2010 as a result of the amperage increases at the Aluminium operations in southern Africa.technical capacity.
Underlying EBIT was US$406266 million, an increasea decrease of US$214140 million, or 111.534.5 per cent, overwhen compared with the corresponding period. Higher prices and premiumspremia for aluminium had a favourable impact of US$253559 million that was partially(net of price-linked costs), but were largely offset by a US$19519 million unfavourable impactincrease in costs largely associated with the devaluation of price-linkedthe US dollar, inflation and rising raw material and energy costs. The average LMErealised aluminium price increased by 19 per cent to US$2,0182,515 per tonne, compared with last year’s price of US$1,862 per tonne. Thewhile the average realised alumina price wasrose 21 per cent to US$291342 per tonne.
3. Operating and financial review and prospectscontinued
Underlying EBIT excludes exceptional charges of US$527 million relating to impairments (US$298 million) and the renegotiation of long-term power contracts (US$229 million). Refer section 3.6.2 for details.
Overall, operating costs were lower mainly due to reduced raw materials and energy costs. This was partially offset by a weaker US dollar against the Australian dollar and South African rand, and inflationary pressures in Australia, South Africa and Brazil.
Underlying EBIT was favourablyunfavourably impacted by US$68 million as a result of the divestment of Suriname on 31 July 2009.provision related to indirect taxes in FY2011.
Year ended 30 June 2009 compared with year ended 30 June 2008
Revenue was US$4,151 million for FY2009, a decrease of US$1,595 million, or 27.8 per cent, from FY2008.
Total alumina production of 4,396,000 tonnes in FY2009 decreased from 4,554,000 tonnes in FY2008 mainly due to lower production at Worsley as a result of gas curtailments impacting calcination. Aluminium smelter production decreased from 1,298,000 tonnes in FY2008 to 1,233,000 tonnes in FY2009 mainly due to the closure of potlines B and C at Bayside.
Underlying EBIT was US$192 million, a decrease of US$1,273 million, or 86.9 per cent, from FY2008. Lower LME prices and premiums for aluminium had an unfavourable impact of US$1,293 million. This was partially offset by a US$131 million positive impact of price-linked costs. The average LME aluminium price decreased to US$1,862 per tonne compared with FY2008’s price of US$2,668 per tonne. The average realised alumina prices were US$281 per tonne.
Underlying EBIT excluded exceptional charges of US$313 million relating to the sale and restructuring of operations, recognised as part of the total charge of US$665 million. Refer section 3.6.2 for details.
Higher operating costs also had an adverse impact. This was due to higher charges for raw materials, mainly as a result of increased coke and caustic prices and higher energy costs. Underlying EBIT was also adversely impacted by the closure of the B and C potlines at Bayside in FY2008. However, the benefit of a stronger US dollar and a strong focus on business improvement initiatives reduced the full impact of cost increases.
Favourable embedded derivatives revaluation increased Underlying EBIT by US$170 million. This related primarily to electricity contracts where the price is linked to the LME aluminium price.
Base Metals
Year ended 30 June 20102012 compared with year ended 30 June 20092011
Revenue was US$10,409 million for FY2010, an increase of US$3,304 million, or 46.5BHP Billiton established strong momentum in its Base Metals business in the June 2012 quarter. Escondida copper production increased by 22 per cent overfrom the corresponding period. This revenue increase was mainly attributable toMarch 2012 quarter as mining activities progressed towards higher LME prices for copper, zinc, leadgrade ore, while quarterly material mined, mill throughput and silver.
Payable copper production decreased by 10.9 per cent to 1.075 million tonnes compared with 1.207 million tonnes in the corresponding period. Zinc production was 198.3 kilotonnes, an increase of 21.5 per cent compared with the corresponding period due to higher plant throughput and utilisation and higher gradesrecords at Antamina (Peru) and Cannington (Australia). Attributable uranium production at Olympic Dam (Australia) was 2,279 tonnes for the period compared with 4,007 tonnes for the corresponding period dueadded to the Clark Shaft outage. Silver production was 45.4 million ounces compared with 41.3 million ounces instrong finish to the corresponding period. Lead production was 248.4 kilotonnes for the period compared with 230.1 kilotonnes in the corresponding period.
Payableyear. Annual copper production, was primarily impacted by the Olympic Dam Clark shaft outagehowever, declined marginally in FY2012 as lower grades and industrial action constrained performance at Spence (Chile). DuringEscondida for the second quarterfirst nine months of FY2010, the haulage system in the Clark Shaft atyear. Production from Pampa Norte, Olympic Dam and Cannington during FY2012 was damaged. Ore hoisting operated at approximately 25 per cent of capacity until the fourth quarter of FY2010. The incident impacted earnings by US$455 million, but was partially offset by insurance recoveries of US$297 million. The recommissioning of Olympic Dam’s Clark Shaft occurred during the final quarter of the year and has returned to full production. Payable copperin line with production was also impacted by the cessation of sulphide mining at Pinto Valley (US), following the decision to place the Pinto Valley operation in a state of care and maintenance in FY2009. This was partly offset by higher grade and recovery at Escondida and the earlier than planned completion of the SAG mill repairs in the Laguna Seca Concentrator plant.
3. Operating and financial review and prospectscontinued
FY2011.
Underlying EBIT wasfor FY2012 decreased by US$4,632 million, an increase of2.8 billion to US$3,340 million, or 258.54.0 billion. A 14 per cent over the corresponding period. This increase was predominantly attributable to higher prices for all key commodities in Base Metals, except uranium. The LME price for copper averaged US$3.04/lb compared with US$2.23/lbfall in the corresponding period, or an increaseaverage realised price of 36.3copper to US$3.58 per cent. The impact of higher prices for copper, zinc, lead and silver in FY2010 contributed $3,977 millionpound was the major contributor to the Underlying EBIT increase. Lower sales volumesdecline and reduced Underlying EBIT by US$117 million.
1.4 billion. General cost pressure across the Base Metals portfolio, together with unit cost escalation specifically associated with industrial activity and lower ore grades at Escondida, reduced Underlying EBIT excludes exceptional gains ofby US$186 million in relation to Pinal Creek. Refer section 3.6.2 for details.841 million.
Higher costs were incurred during the period, mostly due to the Clark Shaft incident at Olympic Dam (Australia) and higher labour costs, including one-off bonus payments from collective labour negotiations completed during the year in the South American operations. The effect of inflation and the weaker US dollar against the Australian dollar and the Chilean peso also impacted negatively. Higher costs were partially mitigated by lower business development costs resulting from the decision to scale back Olympic Dam Expansion project activity in line with completion of feasibility studies and required approvals.
At 30 June 2010 we2012, the Group had 236,584278,547 tonnes of outstanding copper sales that were revalued at a weighted average price of US$2.96/lb.3.49 per pound. The final price of these sales will be determined in FY2011.FY2013. In addition, 234,871239,156 tonnes of copper sales from FY2009FY2011 were subject to a finalisation adjustment in 2010. The2012. This finalisation adjustment and the provisional pricing impact as at 30 June 2010 increased earnings2012 decreased Underlying EBIT by US$303265 million for the year (compared with a lossperiod (2011: US$650 million gain).
Escondida copper production is forecast to increase by approximately 20 per cent in FY2013. Successful completion of US$936 million).both the Escondida Ore Access and Laguna Seca Debottlenecking projects is expected to drive Escondida copper production to over 1.3 Mt (100 per cent basis) in FY2015.
Year ended 30 June 20092011 compared with year ended 30 June 20082010
RevenueCopper production increased during FY2011 as Olympic Dam, Australia, reported annual material mined and milling records. Strong operating performance was US$7,105 millionsimilarly reported at Pampa Norte, Chile, and Antamina, Peru, where record annual milling rates mitigated the impact of lower grades. Total copper cathode production represented another record for FY2009, a decrease ofthe period.
Underlying EBIT for FY2011 increased by US$7,669 million,2.2 billion, or 51.9 per cent, from FY2008. This revenue decrease was mainly attributable to lower LME prices for copper, zinc, lead and silver, and lower sales volumes.
Payable copper production decreased by 12.246.6 per cent, to 1.207 million tonnes comparedUS$6.8 billion. Higher average realised prices for all of our core products favourably impacted Underlying EBIT by US$3.3 billion (net of price-linked costs). The supportive pricing environment was similarly reflected in a number of our key input costs with 1.375 million tonnes in FY2008. Zinc production was 163.2 kilotonnes, an increase of 12.9 per cent compared with FY2008 due to better gradeshigher energy, fuel and an increased proportion of ore containing zinc at Antamina (Peru). Attributable uranium production at Olympic Dam (Australia) was 4,007 tonnes for FY2009 compared with 4,144 tonnes for FY2008 due to a drop in grade. Silver production was 41.3 million ounces compared with 43.5 million ounces in FY2008. Lead production was 230.1 kilotonnes forcontractor costs, the period compared with 253.1 kilotonnes in FY2008.
While payable copper production was lower, record copper cathode production was achieved as a resultmajor offset. The devaluation of the continued ramp-up of Escondida Sulphide LeachUS dollar and Spence (Chile). Payable copper production was also impacted by the decision to place the Pinto Valley sulphide mining and milling operations (US) in a state of care and maintenance. This occurred in response to the global economic slowdown. Volume was further impacted by declining head grades at Escondida (Chile) and an electrical motor failure at the Laguna Seca SAG Mill. A correction to the SAG Mill problem was completed in the first quarter of FY2010.
Underlying EBIT was US$1,292 million, a decrease of US$6,697 million, or 83.8 per cent, from FY2008. This decrease was predominantly attributable to the decline of prices across commodities, especially copper. The LME price for copper averaged US$2.23/lb compared with US$3.53/lb in FY2008, or a decline of 36.8 per cent. The impact of lower prices for copper, zinc, lead and silver in FY2009inflation reduced Underlying EBIT by US$5,532418 million. Lower sales volumes further reducedIn addition, BHP Billiton refined the basis on which the metal content of its leach pads is estimated at Escondida and Pampa Norte, both Chile, which resulted in a non-cash reduction in Underlying EBIT byof US$1,211168 million.
Underlying EBIT excluded exceptional charges of US$295 million in relation to Pinto Valley and Olympic Dam, recognised as part of the total charge of US$665 million. Refer to section 3.6.2 for details.
Higher costs were incurred during the period, mostly due to higher energy, acid and labour. The effect of inflation also impacted negatively. However, the rate of cost increase declined in the second half of FY2009 as the Company initiated cost saving initiatives in all operations. In addition, costs were partly offset by the exchange rate change and the strengthening of the US dollar against the Australian dollar and Chilean peso. Underlying EBIT was favourably impacted by lower purchases of third party uranium from the spot market.
Provisional pricing of copper shipments, including the impact of finalisations and revaluations of the outstanding shipments, resulted in the calculated average realised price being US$1.92/lb versus an average LME price of US$2.23/lb. The average realised price was US$3.62/lb in FY2008. The negative impact of provisional pricing for the period was US$936 million. Outstanding copper volumes subject to the fair value measurement amounted to 234,871 tonnes atAt 30 June 2009. These2011, the Group had 239,156 tonnes of outstanding copper sales that were revalued at a weighted average price of US$4,9464.25 per tonne, orpound. The final price of these sales was determined in FY2012. In addition, 236,584 tonnes of copper sales from FY2010 were subject to a finalisation adjustment in FY2011. The finalisation adjustment and provisional pricing impact increased Underlying EBIT by US$2.24/lb.650 million for the period.
3. OperatingBHP Billiton’s Base Metals business is characterised by its large, tier one resource position and financial reviewits numerous options for growth. In that context, a combined investment of US$492 million (BHP Billiton share) was approved during the period for the Escondida Ore Access and prospectscontinued
Laguna Seca Debottlenecking projects, Chile.
Diamonds and Specialty Products
Year ended 30 June 20102012 compared with year ended 30 June 20092011
Revenue was US$1,272 million for FY2010, an increase of US$376 million, or 42.0 per cent, over the corresponding period, predominantly due to higher realised diamond prices and higher volumes.
EKATIAs anticipated, diamond production in FY2012 was 3,050,000 carats, a decrease of 5.3 per cent comparedsubstantially lower than the prior period. EKATI, Canada, production is forecast to remain constrained in the medium term as the operations extract lower grade material, consistent with the corresponding period, mainly reflecting a higher proportion of ore sourced from Fox pit as mining of the higher grade Panda underground was completed during the year.mine plan.
Underlying EBIT for FY2012 declined by US$388 million to US$199 million, despite stronger diamond and titanium prices that increased Underlying EBIT by US$246 million. The decline in production at EKATI, which reduced Underlying EBIT by US$357 million, was the major contributing factor to the compression of operating margins. Higher potash exploration and business development costs decreased Underlying EBIT by a further US$485 million, an increase171 million.
The sale of our 37.8 per cent non-operated interest in Richards Bay Minerals to Rio Tinto was completed on 7 September 2012, at a price of US$340 million over the corresponding period. Strong operating earnings at EKATI (Canada) resulted from higher volumes and realised diamond prices and lower unit costs due to the continued emphasis on cost control. There was also a decrease in exploration expense1.9 billion before adjustments. The review of US$43 million, mainly due to reducedour diamonds exploration activity. Potash exploration expenditure of US$73 million in Saskatchewan, Canada, was US$21 million lower for the year as the exploration work program for Jansen was completed in the corresponding period. Higher diamond earnings were partially offset by a reduction in operating earnings in Titanium Minerals due to lower realised prices and higher energy costs.business is ongoing.
Year ended 30 June 20092011 compared with year ended 30 June 20082010
RevenueEKATI, Canada, diamond production for FY2011 was US$8962.5 million carats, an 18 per cent decrease from the prior period. BHP Billiton expected lower average ore grades to impact EKATI production in the medium term, consistent with the mine plan.
Underlying EBIT for FY2009,the Diamonds and Specialty Products business increased by 21.0 per cent to US$587 million. Strong demand and a shortage of rough diamonds resulted in higher prices, which increased Underlying EBIT by US$254 million. A 28 per cent increase in titanium prices added a further US$112 million to Underlying EBIT. Gross exploration expenditure was US$81 million, a decrease of US$7314 million or 7.5 per cent, from FY2008, predominantly due to lower realised diamond prices.the prior period.
EKATI diamond production was 3,221,000 carats,BHP Billiton’s goal of becoming a decreasesignificant producer in the potash market took another important step forward in FY2011.
The approval of 3.8 per cent compared with FY2008 mainly reflectinga further US$488 million of pre-commitment funding during the increasing undergroundJansen Potash Project feasibility study phase provided funding for site preparation, the procurement of long lead time items and the initial sinking of the production and variations in the mix of ore processed.
Underlying EBIT was US$145 million, a decrease of $44 million, or 23.3 per cent, from FY2008. Underlying EBIT at EKATI (Canada) was impacted by lower diamonds sales volumes and a reduction in average realised prices. This was partially offset by a stronger US dollar, higher value per carat of production and improved plant recoveries. There was also an increase in exploration costs due to increased spend on potash in Canada, which was partially offset by lower diamonds exploration in Angola.
Underlying EBIT excluded exceptional charges of US$70 million in relation to Corridor Sands. Refer section 3.6.2 for details.service shafts.
Stainless Steel Materials
Year ended 30 June 20102012 compared with year ended 30 June 20092011
Revenue was US$3,617 millionThe successful replacement of the Line 1 furnace at Cerro Matoso, Colombia, in FY2010,September 2011 quarter led to an increase of US$1,262 million, or 53.6 per cent, from the corresponding period.
Nickel production was 176,200 tonnes in FY2010, a 1.8 per cent increase above 173,100 tonnes in the corresponding period. Production for FY2010 was a record performance at Nickel West (Australia) and attributable to the completion of the furnace rebuild at the Kalgoorlie Nickel Smelter (Australia) in FY2009 and the drawdown in FY2010 of the concentrate stocks that were built up during that period. Totalannual nickel production includes one month’s operation of Yabulu (Australia) prior to its divestment at the end of July 2009. Production from Cerro Matoso (Colombia) was in line with the corresponding period.production.
Underlying EBIT wasfor FY2012 decreased by US$668556 million an increase ofto US$1,522 million compared with the corresponding period. This was mainly due to higher average LME prices for nickel of US$8.81/lb compared with US$6.03/lb32 million. A 22 per cent decline in the prior year. Higher prices (net of price-linked costs) increasedaverage realised nickel price reduced Underlying EBIT by US$866 million.
Underlying EBIT excludes exceptional gains584 million, net of US$653 million relating toprice-linked costs. At Nickel West, Mt Keith, a reduction in mining activity and the disposalcommissioning of the Ravensthorpe nickel operations. Refer section 3.6.2 for details.
Proactive portfolio restructuring and ongoing improvement atTalc Redesign project delivered tangible cost benefits during the operating levelperiod. Construction of the new Kwinana hydrogen plant, Australia, was also contributed to the strong result. Lower operational losses from Yabulu and Ravensthorpecompleted in FY2010 increased Underlying EBIT by US$458 million.
3. Operating and financial review and prospectscontinued
The Kalgoorlie nickel smelter furnace rebuild and concurrent maintenance at the Kwinana nickel refinery (both Australia) in the prior year set the platform for record total production at Nickel West in FY2010. Ongoing cost saving initiatives and lower labour costs were offset by the devaluation in the US dollar and inflation. Underlying EBIT also benefited from lower exploration and business development expenditure.FY2012.
Year ended 30 June 20092011 compared with year ended 30 June 20082010
Revenue was US$2,355 million in FY2009, a decrease of US$2,733 million, or 53.7 per cent, from FY2008.
The Nickel West Kalgoorlie smelter, Australia, achieved record matte production was 173,100 tonnes in FY2009, a 3.1 per cent increase above 167,900 tonnes in FY2008. Production for FY2009 was adversely impacted by the rebuild of the furnace at the Kalgoorlie nickel smelter and wet weather interruptions at Yabulu (Australia). Production was higher atduring FY2011, while Cerro Matoso, (Colombia) following an industrial stoppage in FY2008. In January 2009, operations atColombia, successfully progressed its planned furnace replacement into the Ravensthorpe nickel operation (Australia) were indefinitely suspended with the consequential effect of suspending the production of nickel from mixed hydroxide precipitate at Yabulu.commissioning phase.
Underlying EBIT was a loss ofdecreased by US$854 million, a decrease of US$2,12980 million, or 167.012.0 per cent, compared with FY2008. This was mainly due to US$588 million for FY2011 as a weaker US dollar impacted both operating costs and year-end balance sheet revaluations. In total, the lower average LME price for nickel of US$6.03/lb compared with US$12.93/lb in the prior year. Lower prices (net of price-linked costs)weaker US dollar and inflation reduced Underlying EBIT by US$1,995227 million.
Underlying EBIT excluded exceptional charges totalling US$4,332 million relating to impairment The planned loss of the Ravensthorpe (US$3,615 million) and Yabulu (US$510 million) operations, and the deferral of Nickel West operations (US$207 million, reported as part of the total charge of US$306 million). Refer section 3.6.2 for details.
The furnace rebuild at the Kalgoorlie nickel smelter and concurrent maintenance at the Kwinana nickel refinery (both Australia) adversely impacted Underlying EBIT by US$338 million. Operational costs in total were broadly unchanged compared with FY2008, as increased mining costs and inflationary pressures in Australia were largely offset by a favourable impact of the weaker Australian dollar against the US dollar and cost saving initiatives. Underlying EBIT for FY2009 was also higher due to increased production at Cerro Matoso (Colombia) as aforementioned.and the absence of stockpiled concentrate sales at Nickel West that benefited FY2010 decreased Underlying EBIT by a combined US$122 million. Underlying EBIT at Cerro Matoso was also positively impacted by a further US$4653 million followingdue to a provision related to the indefinite suspension of operations at RavensthorpeColombian net worth tax and additional royalty charges. In contrast, a 24 per cent rise in the Yabulu Extension Project in January 2009, with the total operating lossLME nickel price for the year from these operations beingperiod increased Underlying EBIT by approximately US$267 million.435 million (net of price-linked costs).
Iron Ore
Year ended 30 June 20102012 compared with year ended 30 June 20092011
RevenueBHP Billiton’s commitment to invest throughout the economic cycle helped to deliver a twelfth consecutive annual production record in iron ore. WAIO shipments rose to a record annualised rate of 179 Mt in the June 2012 quarter (100 per cent basis). Consistently strong operating performance, the ramp-up of Ore Handling Plant 3 at Yandi, dual tracking of the Company’s rail infrastructure and additional ship loading capacity at Port Hedland contributed to the record result. Samarco’s, Brazil, three pellet plants continued to operate at capacity in the period.
Underlying EBIT for FY2012 increased by US$873 million to a record US$14.2 billion. Outstanding financial performance was underpinned by record production at WAIO, which increased Underlying EBIT by US$11,139 million for FY2010,2.4 billion. This was partially offset by a seven per cent and five per cent decline in fines and lump prices, respectively, which reduced Underlying EBIT by US$1.3 billion, net of price-linked costs. While the acquisition of the HWE Mining subsidiaries in September 2012 eliminated third party contractor margin, one-off integration costs and an increase of US$1,091 million overin exploration expense more than offset the correspondingcost savings achieved during the period.
For FY2010, 39WAIO production is forecast to increase by approximately five per cent in FY2013. Commissioning of Western Australia Iron Ore shipmentsthe WAIO Port Hedland Inner Harbour Expansion project remains on a wet metric tonne basis were priced on annually agreed terms, with the remainder sold on a shorter-term basis.
Duringschedule for the second half of the financial year, the annual benchmark pricing system was substantially replaced by shorter-term market based, landed pricing. Our expectationCY2012 and is that future Western Australia Iron Ore shipments will be priced on this basis.
Underlying EBIT was US$6,001 million, a decrease of US$228 million, or 3.6expected to increase our inner harbour capacity to 220 mtpa (100 per cent compared withbasis). Subsequent debottlenecking opportunities that are expected to enable us to maximise our capacity in the corresponding period. Record sales volumes was the major positive contributor with Western Australia Iron Ore increasing by six per centinner harbour continue to 113.4 wet million tonnes and Samarco increasing 42 per cent to 11.1 million tonnes, adding US$546 million to Underlying EBIT.
Costs were unfavourably impacted by a weaker US dollar, general inflationary pressure and the ongoing ramp-up of Western Australia RGP4, reducing Underlying EBIT by US$759 million. In addition, a provision that relates to proposed amendments to the Western Australian State Agreements reduced Underlying EBIT by US$126 million.be assessed.
Year ended 30 June 20092011 compared with year ended 30 June 20082010
RevenueBHP Billiton’s commitment to invest through all phases of the economic cycle delivered an eleventh consecutive annual production record in iron ore. WAIO benefited from the dual tracking of the Company’s rail infrastructure, which substantially increased overall system capability. WAIO shipments rose to a record annualised rate of 155 mtpa (100 per cent basis) in the June quarter of FY2011, confirming the successful ramp-up of recently expanded capacity.
Underlying EBIT increased by 122.1 per cent to US$13.3 billion for FY2011 driven by record production and a significant improvement in iron ore prices. For the period, average realised iron ore prices increased Underlying EBIT by US$8.5 billion following the important transition to shorter-term, landed, market-based pricing. The significant appreciation in product prices and the adjustment of WAIO royalty rates contributed to a significant increase in price-linked costs, which reduced Underlying EBIT by US$648 million. Broader inflationary pressures and the devaluation of the US dollar reduced Underlying EBIT by a further US$813 million, while non-cash depreciation also increased with the ramp-up of expanded iron ore capacity.
The investment approval for major projects totalling US$8.4 billion (BHP Billiton share) in FY2011 highlighted the Company’s commitment to accelerate the development of its tier one, low-cost and expandable iron ore operations. BHP Billiton also continued to lay the foundations for longer-term growth in the WAIO business with the release of its Public Environmental Review/Draft Environmental Impact Statement that sought Commonwealth and Western Australian Government approvals for the proposed development of an Outer Harbour facility in Port Hedland, Australia.
Manganese
Year ended 30 June 2012 compared with year ended 30 June 2011
Consistently strong operating performance and improved plant availability at both GEMCO, Australia, and Hotazel, South Africa, underpinned annual ore production and sales records in FY2012. Alloy production was substantially lower than the corresponding period following the termination of energy intensive silicomanganese production at Metalloys and the temporary suspension of production at TEMCO.
Underlying EBIT for FY2012 decreased by US$10,048462 million to US$235 million. A 22 per cent decline in the average realised price of ore and a 10 per cent decline in the average realised price of alloy reduced Underlying EBIT by US$400 million, net of price-linked costs. In contrast, record manganese ore sales increased Underlying EBIT by US$64 million.
The US$167 million (BHP Billiton share) GEMCO Expansion Phase 2 (GEEP2) project is expected to further solidify GEMCO as one of the lowest cost and largest manganese mines in the industry. On completion, the GEEP2 project will increase processing capacity from 4.2 to 4.8 mtpa (100 per cent basis), with first production anticipated on schedule in the second half of CY2013.
Year ended 30 June 2011 compared with year ended 30 June 2010
Record annual ore production and sales reflected a full-year contribution from the GEEP1 project, Australia. Record annual sales were also achieved for FY2009,manganese alloy as the business intensified its volume maximising strategy.
Underlying EBIT remained largely unchanged at US$697 million as stronger volumes and prices were offset by higher costs. Notably, controllable costs remained largely unchanged during the period, although the combined impact of a weaker US dollar and inflation reduced Underlying EBIT by US$186 million. Average realised ore and alloy prices increased by nine per cent and seven per cent, respectively, during FY2011.
Metallurgical Coal
Year ended 30 June 2012 compared with year ended 30 June 2011
A modest increase in metallurgical coal production was achieved in FY2012 despite numerous operating challenges. Production at Queensland Coal remained constrained largely as a result of industrial action, weather related downtime and geotechnical issues at Gregory Crinum. Record annual production at Illawarra Coal, Australia, followed successful commissioning of the West Cliff Coal Preparation Plant upgrade project.
Underlying EBIT for FY2012 decreased by US$1.1 billion to US$1.6 billion. Lower production volumes and higher operating costs at Queensland Coal reduced Underlying EBIT by US$1.1 billion. The progression of our development pipeline also led to an increase in exploration and business development costs in the period. In contrast, a six per cent increase in the price of hard coking coal increased Underlying EBIT by US$339 million, net of price-linked costs.
In July 2012, force majeure was lifted across all BMA sites. In addition, BMA and the unions reached a framework agreement that should guide the finalisation of the BMA Enterprise Agreement. Further work is underway to finalise local mine site details.
In response to the challenging external environment, the Group has chosen to delay the 2.5 mtpa (100 per cent basis) expansion of Peak Downs that is associated with the Caval Ridge mine development. The 5.5 mtpa (100 per cent basis) Caval Ridge mine remains on schedule to deliver first production in CY2014. Following a review of the Norwich Park mine’s profitability, we also announced the indefinite closure of this operation during the June 2012 quarter and the cessation of mining at the Gregory open-cut mine. We continue to review the viability of other Metallurgical Coal operations.
Despite these actions, the capacity of our Queensland Coal business is expected to rise substantially by the end of CY2014 as all other projects remain on schedule and budget (refer section 3.7.2 ‘Major projects’). BHP Billiton announced approval of the US$845 million Appin Area 9 project, Australia, in the period. This underground development is expected to sustain Illawarra Coal’s production capacity at nine mtpa with first production anticipated in CY2016.
Year ended 30 June 2011 compared with year ended 30 June 2010
The remnant effects of wet weather that persisted for much of FY2011 continued to restrict our Queensland Coal business, despite an unrelenting focus on recovery efforts. Although Queensland Coal production did recover strongly in the June 2011 quarter, total metallurgical coal production declined by 13 per cent in FY2011.
Underlying EBIT was US$2.7 billion, an increase of US$593617 million, over FY2008.or 30.1 per cent, from the corresponding period. The increase was mainly attributable to the 48 per cent and 45 per cent improvement in average realised prices for hard coking coal and weak coking coal, respectively. In total, stronger prices increased Underlying EBIT by US$2.1 billion, net of price-linked costs. Uncontrollable factors were the major contributor to a
significant increase in operating costs. In that context, inflation and the weaker US dollar reduced Underlying EBIT by US$664 million, while the weather related disruption to production at Queensland Coal placed additional pressure on unit costs.
3. Operating and financial review and prospectscontinuedYear ended 30 June 2012 compared with year ended 30 June 2011
Annual production records were achieved at two of our export oriented operations, Cerrejón Coal, Colombia, and New South Wales Energy Coal. The RX1 Project at New South Wales Energy Coal delivered first production during the June 2012 quarter, significantly ahead of schedule. This project capitalises on strong demand for high ash coal in our key growth markets.
WesternUnderlying EBIT for FY2012 increased by US$98 million to US$1.2 billion. Stronger volumes and a higher proportion of export sales, largely associated with improved rail performance at BECSA, South Africa, and the accelerated expansion of New South Wales Energy Coal, Australia, Iron Ore achieved record productionincreased Underlying EBIT by US$152 million in the period. Higher average realised prices, most notably at Cerrejón Coal, contributed to a US$95 million increase in Underlying EBIT, net of 106.1 wetprice-linked costs. In contrast, higher labour and raw material costs contributed to a US$190 million tonnes, an increase of 2.3 million tonnes, or 2.2reduction in Underlying EBIT.
During FY2012, BHP Billiton approved a further eight mtpa (100 per cent over FY2008, and record sales duebasis) expansion of Cerrejón Coal mine. The US$437 million project (BHP Billiton share) will increase export capacity to the full ramp-up of Rapid Growth Project 3. However, our operations were interrupted by safety incidents, maintenance and tie-in activities associated with Rapid Growth Project 4. During the period, 68approximately 40 mtpa (100 per cent basis), with first production anticipated on schedule in CY2013. In addition, the partners approved the third phase of Western Australia Iron Ore shipments on a wet metric tonne basis were based on annually agreed pricing.expansion of the Newcastle Coal Infrastructure Group’s (NCIG) coal handling facility in Newcastle, Australia.
Samarco (Brazil)Year ended 30 June 2011 compared with year ended 30 June 2010
Annual production and sales were adversely impacted by weaker pellet demand.records for New South Wales Energy Coal followed the successful commissioning and ramp-up of the MAC20 Project, while strong performance at South Africa Coal delivered a 13 per cent increase in annual production.
Underlying EBIT of US$6,229 million increased by US$1,598 million, or 34.554.7 per cent. This was mainly driven by highercent to US$1.1 billion in FY2011. The 31 per cent rise in average realised prices, which increased Underlying EBIT by US$939 million.
Overall operating costs917 million for the period, reflected a higher proportion of export sales as we continued to optimise our product mix in response to evolving market demand. Broad cost pressures were lower than last yearaccentuated by an increase in cash and increased Underlying EBIT by US$73 million. The favourable impact of the stronger US dollar was offset by highernon-cash costs associated with the uncommissionedramp-up of growth projects in Australia and safety initiatives.
Manganese
Year ended 30 June 2010 compared with year ended 30 June 2009
Revenue was US$2,150 million for FY2010, a decrease of US$386 million, or 15.2 per cent, from the corresponding period. This decrease was mainly as a result of lower average realised prices attributable to manganese ore, which fell by 46.4 per centSouth Africa. The weaker US dollar and manganese alloy, which fell by 42.7 per cent compared with the corresponding period.
Production was increased in line with the higher demand. Manganese alloy production at 583,000 tonnes was 13.6 per cent higher and manganese ore production at 6.1 million tonnes was 36.8 per cent higher when compared with the corresponding period.
Underlying EBIT was US$712 million, a decrease of US$637 million, or 47.2 per cent, from the corresponding period. The decrease is directly attributable to lower realised prices whichinflation reduced Underlying EBIT by US$1,680 million. In comparison298 million, while a non-recurring charge related to the corresponding period, average realised prices for ore fell by 46 per cent and alloy prices fell by 43 per cent. Offsetting this was the positive impact of price-linked costs of US$261 million.
The decrease in realised prices was partially offset by a demand driven rise in sales volumes that increased Underlying EBIT by US$799 million. Local operating costs were well controlled throughout the year, although the impacts of inflation and a weaker US dollar mitigated any benefit.
All Manganese assets were running at full supply chain capacity at the endrecognition of the June 2010 quarter.
Year ended 30 June 2009 compared with year ended 30 June 2008
Revenue was US$2,536 million for FY2009, a decrease of US$376 million, or 12.9 per cent, from FY2008. This decrease was mainly as a result of lower sales volumes that were attributable to the global economic slowdown, with steel demand, the driver of manganese usage, reducing drastically.
Production was reduced in line with the lower demand. Manganese alloy production at 513,000 tonnes was 33.8 per cent lower and manganese ore production at 4.5 million tonnes was 31.8 per cent lower when compared with FY2008.
Underlying EBIT was US$1,349 million, a decrease of US$295 million, or 17.9 per cent, from FY2008. The decrease is directly attributable to lower turnover impacted by lower sales volumes achieved for both ore and alloy products. Production costs were well controlled despite the reduced volumes. The lower sales volumeColombian net worth tax reduced Underlying EBIT by US$1,266 million partly offset by gains of US$223 million as a result of higher prices.
Metallurgical Coal
Year ended 30 June 2010 compared with year ended 30 June 2009
Revenue wasfurther US$6,059 million for FY2010, a decrease of US$2,028 million, or 25.1 per cent, from the corresponding period.
3. Operating and financial review and prospectscontinued
Record annual sales volumes were delivered despite wet weather disruptions in Queensland in March 2010 quarter. Production was 37.4 million tonnes in FY2010, an increase of 2.6 per cent compared with 36.4 million tonnes in the corresponding period. This increase was due to improved operational and supply chain performance, supported by strong demand.
Underlying EBIT was US$2,053 million, a decrease of US$2,658 million, or 56.4 per cent, from the corresponding period.32 million. The decrease was mainly due to lower realised prices for hard coking coal (34 per cent lower), weak coking coal (33 per cent lower), and thermal coal (11 per cent lower), partly offset by a reduction in price-linked costs.
Operating costs were well controlled. However, a weaker US dollar and inflationary pressure had an unfavourable impact of US$632 million on Underlying EBIT.
As with iron ore, the old benchmark system was substantially replaced by shorter-term market based pricing. For FY2010, 34 per cent of metallurgical coal shipments were priced on a shorter-term basis. The majority of product sold in the June 2010 quarter was priced in this manner.
Year ended 30 June 2009 compared with year ended 30 June 2008
Revenue was US$8,087 million for FY2009, an increase of US$4,146 million, or 105.2 per cent, over FY2008.
Production was 36.4 million tonnes in FY2009, an increase of 3.5 per cent compared with 35.2 million tonnes in the previous corresponding period. The increase largely reflects the impact of the rainfall events in FY2008, partially offset by production cuts as a result of lower demand in the second half of FY2009.
Underlying EBIT was US$4,711 million, an increase of US$3,774 million, or 402.8 per cent, over FY2008. The increase was mainly due to the higher realised prices for hard coking coal (125 per cent higher), weak coking coal (121 per cent higher) and thermal coal (17 per cent higher), which together contributed US$4,213 million of the increase. This was partly offset by a negative impact on price-linked royalty costs associated with the higher realised prices and the introduction of a new royalty structure in Queensland and New South Wales of US$434 million and the impact of the recovery from the FY2008 rainfall events at Queensland Coal of US$122 million.
Underlying EBIT excluded exceptional charges totalling US$86 million relating to the decision to cease development of the Maruwai Haji trial mine (Indonesia). Refer section 3.6.2 for details.
Other operating costs were higher due to inflationary pressures, increased labour and contractor charges. This was offset by a favourable impact of the weaker Australian dollar against the US dollar.
In addition, profits on the sales of Elouera mine (Australia) and Queensland Coal mining leases were realised in FY2008.
Energy Coal
Year ended 30 June 2010 compared with year ended 30 June 2009
Revenue was US$4,265 million for FY2010, a decrease of US$2,259 million, or 34.6 per cent, from the corresponding period.
Production was 66.1 million tonnes in FY2010, in line with the corresponding period, with the continued ramp-up of the Klipspruit (South Africa) expansion and record production at Mt Arthur (Australia). Weaker production at New Mexico Coal (US) reflected a downturn in demand from the power generators.
Underlying EBIT was US$730 million, a decrease of US$730 million, or 50.0 per cent, from the corresponding period. This decrease was mainly attributed to lower average export prices (net price impact US$459 million) and reduced earnings from trading activities (US$309 million). Export sales from BECSA and Mt Arthur increased due to higher demand from China and India, offsetting the effects of reduced demand from the Atlantic market. Dissolutiondissolution of the Douglas Tavistock Joint Venture arrangement favourably impactedincreased Underlying EBIT in the period. Costs were well controlled other thancorresponding period by US$69 million.
The MAC20 Project was successfully completed during FY2011, ahead of schedule. The Company’s confidence in the adverse impactsoutlook for demand in the Asia Pacific Basin was subsequently illustrated by the approval of the weakening US dollar (US$133 million) and inflation (US$70 million).
3. Operating and financial review and prospectscontinued
Year ended 30 June 2009 compared with year ended 30 June 2008
Revenue was US$6,524400 million for FY2009, a decreaseRX1 Project, Australia, designed to get product to market rapidly, ahead of US$36 million, or 0.5further coal preparation plant expansions. Further expansion of our world-class Cerrejón Coal operation to 40 mtpa (100 per cent from FY2008.
Productionbasis) was 68.2 million tonnesapproved by the partners in FY2009, a decrease of 15.7 per cent compared with 80.9 million tonnes in FY2008, following completion of the Optimum sale in June 2008 and closure of the Douglas underground mine in November 2008 at our South African operations (BECSA).
Underlying EBIT was US$1,460 million, an increase of US$403 million, or 38.1 per cent, over FY2008. The increase was mainly attributable to higher prices (US$224 million), predominately in the first half of the financial year, and earnings from trading activities (US$357 million). Lower production at BECSA was offset by record production at Cerrejón Coal (Colombia) and record sales from Hunter Valley Coal (Australia) (combined decrease of US$152 million). Depreciation of the Australian dollar, South African rand and Colombian peso was offset in part by higher costs due to inflationary pressures, increase in raw materials and labour and contractor costs.August 2011.
Group and unallocated items
This category represents corporate activities, including Group Treasury, Freight, Transport and Logistics operations.
Year ended 30 June 20102012 compared with year ended 30 June 20092011
The Underlying EBIT wasexpense for Group and Unallocated in FY2012 decreased by US$157 million to US$248 million. Higher corporate and information technology costs were more than offset by a lossforeign exchange related restatement and partial release of US$541 millionthe Newcastle steelworks rehabilitation provision.
Year ended 30 June 2011 compared with year ended 30 June 2010
The Underlying EBIT expense for Group and Unallocated decreased by US$395136 million in the corresponding period,FY2011 to US$405 million. The weaker US dollar and inflation had an increaseunfavourable impact on Underlying EBIT of US$146105 million. Self insurance claims related to the Clark shaftShaft incident at Olympic Dam decreasedreduced Underlying EBIT in the prior period by US$297 million. A weaker US dollar had an unfavourable impact on Underlying EBIT of US$140 million.
Year ended 30 June 2009 compared with year ended 30 June 2008
Underlying EBIT was a loss of US$395 million in FY2009 compared with US$390 in FY2008, an increase of US$5 million. This was due to higher insurance costs, offset by favourable exchange rate movements.
3.6.7 Third party sales
We differentiate sales of our production from sales of third party products due to the significant difference in profit margin earned on these sales. The table below shows the breakdown between our production and third party products.
Year ended 30 June(1) | 2010 US$M | 2009 US$M | 2008 US$M | 2012 | 2011 | 2010 | |||||||||||||||
US$M | US$M | US$M | |||||||||||||||||||
Group production | |||||||||||||||||||||
Revenue | 48,193 | 44,113 | 51,918 | 68,747 | 67,903 | 48,193 | |||||||||||||||
Related operating costs | (28,585 | ) | (26,402 | ) | (27,252 | ) | (41,635 | ) | (36,021 | ) | (28,585 | ) | |||||||||
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|
| |||||||||||||||||||
Operating profit | 19,608 | 17,711 | 24,666 | ||||||||||||||||||
Margin(2) | 40.7 | % | 40.1 | % | 47.5 | % | |||||||||||||||
Operating profit (EBIT) | 27,112 | 31,882 | 19,608 | ||||||||||||||||||
Underlying EBIT Margin | 39.4 | % | 47.0 | % | 40.7 | % | |||||||||||||||
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|
| |||||||||||||||||||
Third party products | |||||||||||||||||||||
Revenue | 4,605 | 6,098 | 7,555 | 3,479 | 3,836 | 4,605 | |||||||||||||||
Related operating costs | (4,494 | ) | (5,595 | ) | (7,939 | ) | (3,353 | ) | (3,738 | ) | (4,494 | ) | |||||||||
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|
| |||||||||||||||||||
Operating profit/(loss) | 111 | 503 | (384 | ) | |||||||||||||||||
Operating profit (EBIT) | 126 | 98 | 111 | ||||||||||||||||||
Margin(2) | 2.4 | % | 8.2 | % | (5.1 | )% | 3.6 | % | 2.6 | % | 2.4 | % | |||||||||
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|
(1) | Excluding exceptional items. |
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(2) | ||
Operating profit divided by revenue. |
3. Operating and financial review and prospectscontinued
We engage in third party trading for threethe following reasons:
In providing solutions for our customers, sometimes we provide products that we do not produce, such as a particular grade of coal. To meet customer needs and contractual commitments, we may buy physical product from third parties and manage risk through both the physical and financial markets.
Production variability and occasional shortfalls from our own assets means that we sometimes source third party materials to ensure a steady supply of product to our customers.
The active presence in the commodity markets provides us withTo optimise our supply chain outcomes, we may buy physical market insight and commercial knowledge. From time to time, we actively engage in these markets inproduct from third parties.
In order to take commercial advantagesupport development of business opportunities. These trading activities provide not only amore liquid markets, we will sometimes source of revenue, but also a further insight into planning,third party physical product and can, in some cases, give rise to business development opportunities.manage risk through both the physical and financial markets.
3.7 Liquidity and capital resources
As a result of our record production volumes and record prices in many of our key commodities over the past several years, we have generated very strong cash flows throughout our operations. Despite the changing economic and market conditions, our net operating cash flow remainedin the year ended 30 June 2012 of US$24.4 billion reflected the strong and resulted in net debt declining to US$3,308 million. cash generating capacity of the business throughout the economic cycle.
These cash flows have been fundamental to our ability to internally fund our existing operations, maintain a pipeline of growth projects and return capital to shareholders through dividends.dividends and, in prior years, share
buy-backs. Our priority for cash is to reinvest in the business. In line with our strategy, we have grown our business rapidly and consistently through project developments and acquisitions. Through a combination of borrowings and payments to shareholders, we manage our balance sheet with the goal of maintaining levels of gearing that we believe optimise our costs of capital and return on capital employed.
Net operating cash flows are our principal source of cash. We also raise cashfunds from the debt financingmarkets to manage temporary fluctuations inour liquidity arrangementsposition and to refinance existing debt. Our liquidity position is supported by our strong and stable credit rating and committed debt facilities.
3.7.1 Cash flow analysis
A full consolidated cash flow statement is contained in the financial statements. The explanatory notes appear in note 23 ‘Notes to the consolidated cash flow statement’ into the financial statements. A summary table has been presented below to show the key sources and uses of cash.
Year ended 30 June | 2012 | 2011 | 2010 | ||||||||||||||||||
US$M | US$M | US$M | |||||||||||||||||||
Cash generated from operations | 33,274 | 37,081 | 22,246 | ||||||||||||||||||
Dividends received and net interest paid | (563 | ) | (443 | ) | (401 | ) | |||||||||||||||
Taxation paid | (8,327 | ) | (6,558 | ) | (4,955 | ) | |||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M |
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| ||||||||||||||||
Net operating cash flows | 17,920 | 18,863 | 17,817 | 24,384 | 30,080 | 16,890 | |||||||||||||||
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Cash outflows from investing activities | (11,557 | ) | (11,328 | ) | (9,244 | ) | |||||||||||||||
Purchases of property plant and equipment | (18,385 | ) | (11,147 | ) | (9,323 | ) | |||||||||||||||
Exploration expenditure | (2,452 | ) | (1,240 | ) | (1,333 | ) | |||||||||||||||
Exploration expenditure expensed and included in operating cash flows | 1,602 | 981 | 1,030 | ||||||||||||||||||
Purchases of intangibles | (220 | ) | (211 | ) | (85 | ) | |||||||||||||||
Investment in financial assets | (341 | ) | (238 | ) | (152 | ) | |||||||||||||||
Investment in subsidiaries, operations and jointly controlled entities | (12,556 | ) | (4,807 | ) | (508 | ) | |||||||||||||||
Net proceeds from investing activities | 542 | 277 | 180 | 316 | 198 | 386 | |||||||||||||||
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| |||||||||||||||||||
Net investing cash flows | (11,015 | ) | (11,051 | ) | (9,064 | ) | (32,036 | ) | (16,464 | ) | (9,985 | ) | |||||||||
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Net proceeds from/(repayment of) interest bearing liabilities | (485 | ) | 3,929 | (408 | ) | ||||||||||||||||
Net proceeds from / (repayment of) interest bearing liabilities | 8,827 | (577 | ) | (485 | ) | ||||||||||||||||
Share buy-back | – | – | (3,115 | ) | (83 | ) | (9,860 | ) | – | ||||||||||||
Dividends paid | (4,895 | ) | (4,969 | ) | (3,250 | ) | (5,933 | ) | (5,144 | ) | (4,895 | ) | |||||||||
Other financing activities | 73 | (140 | ) | (226 | ) | (302 | ) | (437 | ) | 73 | |||||||||||
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Net financing activities | (5,307 | ) | (1,180 | ) | (6,999 | ) | 2,509 | (16,018 | ) | (5,307 | ) | ||||||||||
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| |||||||||||||||||||
Net increase in cash and cash equivalents | 1,598 | 6,632 | 1,754 | ||||||||||||||||||
Net (decrease)/increase in cash and cash equivalents | (5,143 | ) | (2,402 | ) | 1,598 | ||||||||||||||||
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|
|
Year ended 30 June 20102012 compared with year ended 30 June 20092011
Net operating cash flowflows after interest and tax decreased by five18.9 per cent to US$17,92024.4 billion for FY2012. A US$3.8 billion reduction in cash generated from operations (after changes in working capital balances) was the major contributor to the decline. Higher net income tax paid and increased royalty-related taxation payments further reduced net operating cash flows after interest and tax by US$1.4 billion and US$408 million, respectively.
Investing cash flows increased by US$15.6 billion, primarily driven by investment in subsidiaries and operations of US$12.6 billion in FY2012, the majority of which related to the purchase of Petrohawk, with a resulting cash outflow of US$12.0 billion. Capital and exploration expenditure, including exploration expenditure expensed and included in operating cash flows, totalled US$20.8 billion in FY2012. Expenditure on major growth projects was US$16.3 billion, including US$5.1 billion on Petroleum projects and US$11.2 billion on Minerals projects. Capital expenditure on sustaining and other items was US$2.0 billion. The breakdown of capital and exploration expenditure by CSG is set out in section 3.4.5.
Net financing cash flows include proceeds from borrowings of US$13.3 billion partially offset by dividend payments of US$5.9 billion and debt repayments of US$4.3 billion. Proceeds from borrowings include the issuance of a three tranche Global Bond of US$3.0 billion, a five tranche Global Bond of US$5.25 billion, a two tranche Euro Bond of €2.0 billion and proceeds from Commercial Paper of US$995 million.
Net debt, comprising interest bearing liabilities less cash and cash equivalents, was US$23.6 billion, which is an increase of US$17.8 billion compared with the net debt position at 30 June 2011.
Year ended 30 June 2011 compared with year ended 30 June 2010
Net operating cash flows after interest and tax increased by 78.1 per cent to US$30.1 billion. This was primarily driven by changesan increase in working capital balances having a negative year-on-year impact on operating cash flow of US$4,780 million, offset by higher levels of cash generated from operations (before changes in working capital balances) of US$2,874 million12.3 billion and lower net tax and royalty-related tax paymentschanges in working capital balances having a positive year-on-year impact on operating cash flow of US$528 million and a tax refund of US$552 million.
3. Operating and financial review and prospectscontinued
2.6 billion.
Capital and exploration expenditure, including exploration expenditure expensed and included in operating cash flows, totalled US$10,656 million12.4 billion for the period.year. Expenditure on major growth projects was US$7,655 million,9.1 billion, including US$1,902 million1.8 billion on Petroleum projects and US$5,753 million7.3 billion on Minerals projects. Capital expenditure on sustaining and other items was US$1,668 million.2.0 billion. Exploration expenditure was US$1,3331.2 billion, including US$981 million including US$303 million, which has been capitalised.
Cash flows from investing activities included acquisitions of US$508 million relating to Athabasca Potash Inc. of US$323 million and United Minerals Corporation NL of US$185 million.classified within net operating cash flows.
Financing cash flows includeincluded payments related to the US$10 billion capital management program, dividend payments of US$5.1 billion and net debt repayments of US$485 million and dividend payments577 million.
3.7.2 Major projects
We approved eight major projects during FY2012 for a total investment commitment of US$4,618 million, excluding dividends paid7.5 billion (BHP Billiton share). Pre-commitment funding of US$2.7 billion (BHP Billiton share) was also approved to non-controlling interests.further progress a series of development options.
Year ended 30 June 2009 compared with year ended 30 June 2008
Net operating cash flow after interest and tax increased by 5.9In response to the challenging external environment, the Group has chosen to delay the 2.5 mtpa (100 per cent basis) expansion of Peak Downs that is associated with the Caval Ridge mine development, Australia. The 5.5 mtpa (100 per cent basis) Caval Ridge mine remains on schedule to US$18,863 million. This was primarily attributable todeliver first production in CY2014.
With 20 major projects currently in execution with a decrease in receivables, partly offset by increases in other working capital items.
Capital and exploration expenditure totalled US$10,735 million for FY2009. Expenditure on major growth projects was US$7,464 million, including US$1,851 million on Petroleum projects and US$5,613 million on Minerals projects. Capital expenditure on sustaining, minor capital and other items was US$2,028 million. Exploration expenditure was US$1,243 million, including US$234 million which was capitalised.
Financing cash flows included net debt proceedscombined budget of US$3,929 million22.8 billion, we are largely committed for FY2013. No major project approvals are expected over this timeframe. As our current expenditure commitments decline, we will seek to allocate future capital to those options that maximise shareholder value, while also considering the balance between short- and increased dividend payments oflong-term returns.
In addition, our Onshore US business invested US$4,563 million, excluding dividends paid3.7 billion in exploration and development expenditure in FY2012 and expects to non-controlling interests.spend a further US$4.0 billion in FY2013.
Six major projects delivered first production in FY2012, namely: WAIO Rapid Growth Project 5, Worsley Efficiency and Growth, North West Shelf CWLH Life Extension and the New South Wales Energy Coal RX1 Project, all Australia, the Antamina Expansion, Peru, and the Escondida Ore Access project, Chile.
3.7.2 Growth projects
During the period, we completed five major growth projects (oil and gas, iron ore, alumina and energy coal). Highlighting our commitment to reinvest through the cycle, we approved two major growth projects (base metals and energy coal) and made pre-commitments of US$2,237 million for another four (iron ore, metallurgical coal and potash).
Completed projects
Customer Sector Group | Project | Capacity (1) | Capital expenditure (US$M)(1) | Date of initial production(2) | |||||||||||
Budget | Actual | Target | Actual | ||||||||||||
Petroleum | Pyrenees (Australia) BHP Billiton – 71.43% | 96,000 barrels of oil and 60 million cubic feet gas per day | 1,200 | 1,247 | H1 2010 | H1 2010 | |||||||||
Aluminium | Alumar Refinery Expansion (Brazil) BHP Billiton – 36% | 2 million tonnes per annum of additional alumina capacity | 900 | (4) | 851 | Q2 2009 | (4) | Q3 2009 | |||||||
Iron Ore | WA Iron Ore Rapid Growth Project 4 (Australia) BHP Billiton – 86.2% | 26 million tonnes per annum of additional iron ore system capacity | 1,850 | 1,850 | (3) | H1 2010 | H2 2009 | ||||||||
Energy Coal | Klipspruit (South Africa) BHP Billiton – 100% | 1.8 million tonnes per annum export and 2.1 million tonnes per annum domestic thermal coal | 450 | 400 | (3) | H2 2009 | H2 2009 | ||||||||
Newcastle Third Port Project (Australia) BHP Billiton – 35.5% | 30 million tonnes per annum export coal loading facility | 390 | 390 | (3) | 2010 | H1 2010 | |||||||||
4,790 | 4,738 | ||||||||||||||
3. Operating and financial review and prospectscontinuedProjects that delivered first production during FY2012
Customer Sector Group | Project | Capacity(1) | Capital expenditure (US$M)(1) | Date for initial production (2) | ||||||||||||||||
Budget | Actual (3) | Target | Actual | |||||||||||||||||
Petroleum | North West Shelf CWLH Life Extension, Australia, BHP Billiton – 16.67% | Replacement vessel with capacity of 60,000 barrels per day of oil (bbl/d). | 245 | 211 | 2011 | Q3 2011 | ||||||||||||||
Aluminium | Worsley Efficiency and Growth, Australia, BHP Billiton – 86% | 1.1 mtpa of additional alumina capacity. | 2,995 | (5) | 2,995 | Q1 2012 | (5) | Q1 2012 | ||||||||||||
Base Metals | Antamina Expansion, Peru, BHP Billiton – 33.75% | Increases ore processing capacity to 130 ktpd. | 435 | 435 | Q1 2012 | (5) | Q1 2012 | |||||||||||||
Escondida Ore Access, Chile, BHP Billiton – 57.5% | The relocation of the in-pit crushing and conveyor infrastructure provides access to higher grade ore. | 319 | 319 | Q2 2012 | Q2 2012 | |||||||||||||||
Iron Ore | WAIO Rapid Growth Project 5, Australia, BHP Billiton – 85% | Project integrated into subsequent expansion approvals that will increase WAIO capacity to 220 mtpa (4). | 4,800 | 4,800 | H2 2011 | Q3 2011 | ||||||||||||||
Energy Coal | RX1 Project, Australia, BHP Billiton – 100% | Increases run-of-mine thermal coal production by approximately 4 mtpa. | 400 | 400 | H2 2012 | (5) | Q2 2012 | |||||||||||||
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9,194 | 9,160 | |||||||||||||||||||
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(1) | All references to capital expenditure are BHP Billiton’s share unless noted otherwise. All references to capacity are 100 per cent unless noted otherwise. |
(2) | References are based on calendar years. |
(3) | Number subject to finalisation. |
(4) | Consistent with the revised scope of the iron ore development sequence. |
(5) | As per revised budget |
Projects currently under development (approved in prior years)
Customer Sector Group | Project | Capacity (1) | Budgeted capital expenditure (US$M)(1) | Target date of initial production(2) | Project | Capacity(1) | Budgeted capital expenditure (US$M)(1) | Target date for initial production (2) | ||||||||||||
Petroleum | Angostura Gas Phase II (Trinidad and Tobago) BHP Billiton – 45% | 280 million cubic feet of gas per day | 180 | H1 2011 | Macedon, Australia, BHP Billiton – 71.43% | 200 million cubic feet per day (MMcf/d) of gas. | 1,050 | 2013 | ||||||||||||
Bass Strait Kipper(3) (Australia) BHP Billiton – 32.5 - 50% | 10,000 barrels of condensate per day and processing capacity of 80 million cubic feet gas per day | 500 | 2011 | Bass Strait Kipper, Australia, BHP Billiton – 32.5% – 50% | 10 Mbbl/d of condensate and processing capacity of 80 MMcf/d of gas. | 900 | (3) | 2012 | (3)(4) | |||||||||||
Bass Strait Turrum(3)(Australia) BHP Billiton – 50% | 11,000 barrels of condensate per day and processing capacity of 200 million cubic feet of gas per day | 625 | 2011 | Bass Strait Turrum, Australia, BHP Billiton – 50% | 11 Mbbl/d of condensate and processing capacity of 200 MMcf/d of gas. | 1,350 | (3) | 2013 | (3) | |||||||||||
North West Shelf CWLH Extension (Australia) BHP Billiton – 16.67% | Replacement vessel with capacity of 60,000 barrels of oil per day | 245 | 2011 | North West Shelf North Rankin B Gas Compression, Australia, BHP Billiton – 16.67% | 2,500 MMcf/d of gas. | 850 | 2013 | |||||||||||||
North West Shelf North Rankin B Gas Compression (Australia) BHP Billiton – 16.67% | 2,500 million cubic feet of gas per day | 850 | 2012 | |||||||||||||||||
Aluminium | Worsley Efficiency and Growth (Australia) BHP Billiton – 86% | 1.1 million tonnes per annum of additional alumina capacity | 1,900 | H1 2011 | ||||||||||||||||
Diamonds & Specialty Products | EKATI Misery Open Pit Project, Canada, BHP Billiton – 80% | Project consists of a pushback of the existing Misery open-pit, which was mined from 2001 to 2005. | 323 | 2015 | ||||||||||||||||
Iron Ore | WA Iron Ore Rapid Growth Project 5 (Australia) BHP Billiton – 85% | 50 million tonnes per annum additional iron ore system capacity | 4,800 | H2 2011 | WAIO Jimblebar mine Expansion (Australia) BHP Billiton – 96% | Increases mining and processing capacity to 35 mtpa. | 3,300 | (5) | Q1 2014 | |||||||||||
Energy Coal | Douglas-Middelburg Optimisation (South Africa) BHP Billiton – 100% | 10 million tonnes per annum export thermal coal and 8.5 million tonnes per annum domestic thermal coal (sustains current output) | 975 | Mid 2010 | ||||||||||||||||
WAIO Port Hedland Inner Harbour Expansion, Australia, BHP Billiton – 85% | Increases total inner harbour capacity to 220 mtpa with debottlenecking opportunities to 240 mtpa. | 1,900 | (5) | H2 2012 | ||||||||||||||||
10,075 | WAIO Port Blending and Rail Yard Facilities, Australia, BHP Billiton – 85% | Optimises resource and enhances efficiency across the WAIO supply chain. | 1,400 | (5) | H2 2014 | |||||||||||||||
Samarco Fourth Pellet Plant, Brazil, BHP Billiton – 50% | Increases iron ore pellet production capacity by 8.3 mtpa to 30.5 mtpa. | 1,750 | H1 2014 | |||||||||||||||||
Metallurgical Coal | Daunia, Australia, BHP Billiton – 50% | Greenfield mine development with capacity to produce 4.5 mtpa of export metallurgical coal. | 800 | 2013 | ||||||||||||||||
Broadmeadow Life Extension, Australia, BHP Billiton – 50% | Increases productive capacity by 0.4 mtpa and extends the life of the mine by 21 years. | 450 | 2013 | |||||||||||||||||
Hay Point Stage Three Expansion, Australia, BHP Billiton – 50% | Increases port capacity from 44 mtpa to 55 mtpa and reduces storm vulnerability. | 1,250 | (5) | 2014 | ||||||||||||||||
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15,323 | ||||||||||||||||||||
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(1) | All references to capital expenditure are BHP Billiton’s share unless noted otherwise. All references to capacity are 100 per cent unless noted otherwise. |
(2) | References are based on calendar years. |
(3) |
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(4) | ||
Facilities ready for first production pending resolution of mercury content. |
(5) | Excludes announced pre-commitment funding. |
3. Operating and financial review and prospectscontinuedProjects approved during FY2012
Customer Sector Group Project Capacity (1) Petroleum North West Shelf Greater Western Flank-A, Australia, BHP Billiton – 16.67% Base Metals Escondida Organic Growth project 1, Chile, BHP Billiton – 57.5% Escondida Oxide Leach Area project, Chile, BHP Billiton – 57.5% Iron Ore Metallurgical Coal Appin Area 9, Australia, BHP Billiton – 100% Energy Coal Projects approved during FY2010 Budgeted
capital
expenditure
(US$M)(1) Target date
for initial
production (2) To maintain LNG plant throughput from the North West Shelf operations. 400 2016 Replaces the Los Colorados concentrator with a new 152 ktpd plant. 2,207 H1 2015 New dynamic leaching pad and mineral handling system. Maintains oxide leaching capacity. 414 H1 2014 WAIO Orebody 24, Australia, BHP Billiton – 85% Maintains iron ore production output from the Mt Newman Joint Venture operations. 698 H2 2012 Caval Ridge, Australia, BHP Billiton – 50% The greenfield mine will add 5.5 mtpa of export metallurgical coal as planned. The associated 2.5 mtpa expansion of Peak Downs has been delayed indefinitely. 2,100 (3) 2014 Maintains Illawarra Coal’s production capacity with a replacement mining domain and capacity to produce 3.5 mtpa of metallurgical coal. 845 2016 Cerrejón P40 project, Colombia, BHP Billiton – 33.3% Increases saleable thermal coal production by 8 mtpa to approximately 40 mtpa. 437 2013 Newcastle Third Port project Stage 3, Australia, BHP Billiton – 35.5% Increases total coal terminal capacity from 53 mtpa to 66 mtpa. 367 2014 7,468
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(1) | All references to capital expenditure are BHP Billiton’s share unless noted otherwise. All references to capacity are 100 per cent unless noted otherwise. |
(2) | References are based on calendar years. |
(3) | Capital expenditure under review following the decision to delay the 2.5 mtpa expansion of Peak Downs. Excludes announced pre-commitment funding. |
Projects with pre-commitment funding
Customer Sector Group | Project | Pre-commitment funding (US$M)(1) | Development project approved (US$M)(1) | |||||||
Petroleum | Mad Dog Phase 2, US | 708 | – | |||||||
Base Metals | Olympic Dam Project, Australia(2) | 1,200 | – | |||||||
Iron Ore | WAIO Port, Rail and Jimblebar mine, Australia | 2,300 | 2,300 | |||||||
WAIO Outer Harbour, Australia(2) | 779 | – | ||||||||
Diamonds and Specialty Products | Jansen Potash, Canada | 728 | – | |||||||
Metallurgical Coal | Caval Ridge and Hay Point, Australia (2) | 267 | 267 | |||||||
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5,982 | 2,567 | |||||||||
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(1) | All references to capital expenditure are BHP Billiton’s share unless noted otherwise. |
(2) | Additional information on these projects can be found in section 3.4.5. |
3.7.3 Net debt and sources of liquidity
Our policies on debt and treasury management are as follows:
a commitment to a solid ‘A’ credit rating;
gearing to be cash flow positive before dividends, debt service and capital management;
to target a minimum interest cover ratiomaximum of eight times over the commodity cycle;
to maintain gearing (net debt/net debt + net assets) of 35 per cent to 40 per cent;
diversification of funding sources;
generally to maintain borrowings and excess cash in US dollars.
Solid ‘A’ credit ratings
The Group’s credit ratings are currently A1/P-1 (Moody’s) and A+/A-1 (Standard & Poor’s). The ratings outlook from both agencies has not changed during FY2010.
Interest rate risk
Interest rate risk on our outstanding borrowings and investments is managed as part of the Portfolio Risk Management Strategy. Refer to note 28 ‘Financial risk management’ in the financial statements for a detailed discussion on the strategy. When required under this strategy, we use interest rate swaps, including cross currency interest rate swaps, to convert a fixed rate exposure to a floating rate exposure. All interest swaps have been designated and are effective as hedging instruments under IFRS.
Gearing and net debt
30 June 20102012 compared with 30 June 20092011
Net debt, comprising Interest bearing liabilities less Cash and cash and interest-bearing liabilities,equivalents, was US$3,308 million, a decrease23.6 billion, which represented an increase of US$2,278 million, or 41 per cent,17.8 billion compared with 30 June 2009. Net gearing, which is the ratio of net debt to net debt plus net assets, was 6.3 per centposition at 30 June 2010, compared with 12.1 per cent at 30 June 2009.
Cash at bank and in hand less overdrafts at 30 June 2010 was US$12,455 million compared with US$10,831 million at 30 June 2009. Included within this are short-term deposits at 30 June 2010 of US$11,087 million compared with US$9,677 million at 30 June 2009.
3. Operating and financial review and prospectscontinued
30 June 2009 compared with 30 June 2008
Net debt, comprising cash and interest bearing liabilities, was US$5,586 million, a decrease of US$2,872 million, or 34.0 per cent, compared with 30 June 2008.2011. Gearing, which is the ratio of net debt to net debt plus net assets, was 12.126.0 per cent at 30 June 2009,2012, compared with 17.89.2 per cent at 30 June 2008.2011. The primary reason for the increase in gearing during FY2012 was the purchase of Petrohawk for US$12.0 billion and assumption of net debt of US$3.8 billion.
Cash at bank and in hand less overdrafts at 30 June 20092012 was US$10,831 million4.9 billion compared with US$4,173 million10.1 billion at 30 June 2008.2011. Included within this are short-term deposits at 30 June 20092012 of US$9,677 million3.3 billion compared with US$2,503 million8.7 billion at 30 June 2008.2011.
30 June 2011 compared with 30 June 2010
Net debt, comprising Interest bearing liabilities less Cash and cash equivalents, was US$5.8 billion, which was an increase of US$2.5 billion compared with the net debt position at 30 June 2010. Gearing, which is the ratio of net debt to net debt plus net assets, was 9.2 per cent at 30 June 2011, compared with 6.3 per cent at 30 June 2010.
Cash at bank and in hand less overdrafts at 30 June 2011 was US$10.1 billion compared with US$12.5 billion at 30 June 2010. Included within this were short-term deposits at 30 June 2011 of US$8.7 billion compared with US$11.1 billion at 30 June 2010.
Funding sources
During FY2012 we made the following debt issues:
In November 2011, we issued a three tranche Global Bond. The maturity profileGlobal Bond comprised US$1.0 billion 1.125 per cent Senior Notes due 2014, US$750 million 1.875 per cent Senior Notes due 2016 and US$1.25 billion 3.250 per cent Senior Notes due 2021.
In February 2012, we issued a five tranche Global Bond. This comprised US$1.0 billion, three month US dollar LIBOR plus 27 basis points Senior Floating Rate Notes due 2014, US$1.0 billion 1.000 per cent Senior Notes due 2015, US$1.25 billion 1.625 per cent Senior Notes due 2017, US$1.0 billion 2.875 per cent Senior Notes due 2022 and US$1.0 billion 4.125 per cent Senior Notes due 2042.
In May 2012, we issued a two tranche Euro Bond. This comprised €1.25 billion 2.125 per cent Euro Bonds due 2018 and €750 million 3.000 per cent Euro Bonds due 2024.
Following the acquisition of our debt obligations and detailsPetrohawk Energy Corporation during FY2012 we assumed an additional US$3.8 billion of our undrawn committed facilities are set forth inInterest bearing liabilities (refer note 28 ‘Financial risk management’ in24 ‘Business Combinations’ to the financial statements.
During FY2010, no debt was issued or matured.statements).
None of our generalGroup level borrowing facilities are subject to financial covenants. Certain specific financing facilities in relation to specific businesses are the subject of financial covenants that vary from facility to facility, but which would be considered normal for such facilities.
Our maturity profile for US dollar Global Bonds and Euro Bonds for the following five years is set out below.
Year ended 30 June | 2013 | 2014 | 2015 | 2016 | 2017 | |||||||||||||||
US$M | US$M | US$M | US$M | US$M | ||||||||||||||||
Global Bonds | 1,600 | 2,704 | 3,389 | 1,050 | 2,750 | |||||||||||||||
Euro Bonds | – | 788 | – | 1,353 | – | |||||||||||||||
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1,600 | 3,492 | 3,389 | 2,403 | 2,750 | ||||||||||||||||
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Additional information regarding the maturity profile of our debt obligations and details of our standby and support agreements is included in note 28 ‘Financial risk management’ to the financial statements.
The Group’s credit ratings are currently A1/P-1 (Moody’s) and A+/A-1 (Standard & Poor’s). The ratings outlook from both agencies has not changed during FY2012.
3.7.4 Quantitative and qualitative disclosures about market risk
We identified our primary market risks in section 3.4 ‘External factors and trends affecting our results‘.3.4. A description of how we manage our market risks, including both quantitative and qualitative information about our market risk sensitive instruments outstanding at 30 June 2010,2012, is contained in note 28 ‘Financial risk management’ to the financial statements.
3.7.5 Portfolio management
Our strategy is focused on long-life, low-cost, expandable, upstream assets and we continually review our portfolio to identify assets that do notno longer fit this strategy. These activities continued during the year, with proceeds amounting to US$542316 million being realised from divestments of property, plant and equipment and financial assets and operations, including Ravensthorpe nickel operations and Manganese Metal Company (Pty) Ltd.
assets. We will purchase interests in assets where they fit our strategy.
On 18 February 2010,20 August 2011, we completed the Group acquired all the issued sharesacquisition of United Minerals Corporation NLPetrohawk for a total cashnet consideration of US$185 million. Similarly, on 23 March 2010,12.0 billion, excluding the Group acquired allassumption of Petrohawk’s net debt of US3.8 billion. Petrohawk is an oil and natural gas company based in the issuedUnited States.
On 30 September 2011, we finalised the purchase of the HWE mining services business (HWE Mining), comprising three entities and outstanding common shares of Athabasca Potash Incother property, plant and equipment, which provided contract mining services to WAIO for a total cashnet consideration of US$323449 million.
On 27 August 2012, we announced an agreement to sell our wholly owned Yeelirrie uranium deposit in Western Australia to Cameco Corporation for US$430 million. The sale is subject to relevant approvals from the Australian Foreign Investment Review Board and Government of Western Australia.
The sale of our 37.8 per cent non-operated interest in Richards Bay Minerals, South Africa, to Rio Tinto was completed on 7 September 2012, at a price of US$1.9 billion before adjustments. The review of our diamonds business is ongoing. Other targeted divestments are being considered. These actions demonstrate the Group’s intention to further simplify the portfolio.
3.7.6 Dividend and capital management
The Group’s priorities for capital management remain unchanged: firstly, to invest in high-return growth opportunities throughout the economic cycle; secondly, to maintain our solid ‘A’ credit rating and to grow our progressive dividend; and finally, to return excess capital to shareholders.
The disciplined application of these priorities within the framework of our strategy has not only facilitated strong growth in the business, but has also enabled the Company to return US$53.8 billion to shareholders in the form of dividends and share buy-backs over the last 10 years.
On 2522 August 2010,2012, the Board declared a final dividend for the year of 4557 US cents per share. Together with the interim dividend of 4255 US cents per share paid to shareholders on 2322 March 2010,2012, this brings the total dividend declared for the year to 87112 US cents per share, a 6.110.9 per cent increase over lastthe previous year’s full yearfull-year dividend of 82101 US cents per share.
AtThe increase in the Annual General Meetings held during 2009,final dividend to 57 US cents per share took the compound annual growth rate of our progressive dividend to 26 per cent over that same 10-year period.
Year ended 30 June | 2012 | 2011 | 2010 | |||||||||
Dividends declared in respect of the period (US cents per share) | ||||||||||||
Interim dividend | 55.0 | 46.0 | 42.0 | |||||||||
Final dividend | 57.0 | 55.0 | 45.0 | |||||||||
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112.0 | 101.0 | 87.0 | ||||||||||
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The consistent and disciplined manner in which we return excess capital to shareholders authorised BHP Billitonwas further illustrated by the completion of our expanded US$10 billion capital management program on 29 June 2011, six months ahead of schedule. Completion of the substantial program in such a timely manner highlighted our commitment to maintain an appropriate capital structure, irrespective of the economic cycle. Since 2004, the Group has repurchased a cumulative US$22.6 billion of Limited and Plc to make on-market purchases of up to 223,112,120 of its ordinary shares, representing approximately 1015 per cent of BHP Billiton Plc’sthen issued share capital at that time. Shareholders will be asked at the 2010 Annual General Meetings to renew this authority.capital.
During FY2010, we did not make any on-market or off-market purchases of BHP Billiton Limited or BHP Billiton Plc shares under any share buy-back program of the Group.
3.8 Off-balance sheet arrangements and contractual commitments
Information in relation to our material off-balance sheet arrangements, principally contingent liabilities, commitments for capital expenditure and other expenditure and commitments under leases at 30 June 20102012 is provided in note 21 ‘Contingent liabilities’ and note 22 ‘Commitments’ to the financial statements.
3. Operating and financial review and prospectscontinued
We expect that these contractual commitments for expenditure, together with other expenditure and liquidity requirements will be met from internal cash flow and, to the extent necessary, from the existing facilities described in section 3.7.3 ‘Net debt and sources of liquidity’.
3.9 Subsidiaries and related party transactions
Subsidiary information
Information about our significant subsidiaries is included in note 25 ‘Subsidiaries’ to the financial statements.
Related party transactions
Related party transactions are outlined in note 31 ‘Related party transactions’ into the financial statements.
Other than the matters disclosedoutlined above or elsewhere in this Report, no matters or circumstances have arisen since the end of the year that have significantly affected, or may significantly affect, the operations, results of operations or state of affairs of the BHP Billiton Group in subsequent accounting periods.
4 Board of Directors and Group Management Committee
JacquesJac Nasser AO, BBus, Hon DT, 6264
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since 6 June 2006. AppointedJac Nasser was appointed Chairman of BHP Billiton Limited and BHP Billiton Plc fromon 31 March 2010. Mr Nasser is retiring and standing for re-election in 2010.
Independent: Yes
Skills and experience: Following a 33-year career with Ford Motor Company in various leadership positions in Europe, Australia, Asia, South America and the USA, JacquesUnited States, Mr Nasser served as a member of the Board of Directors and as President and Chief Executive Officer of Ford Motor Company from 1998 to 2001. HeMr Nasser has more than 30 years’ experience in large-scale global businesses.businesses and a decade of private equity investment and operating expertise.
Other directorships and offices (current and recent):
Director of British Sky Broadcasting Group plc (since November 2002).
Non-executive advisory partner (since March 2010) of One Equity Partners ‘JPMorgan Chase & Co’s Private Equity Business’ (Partner from November 2002 until March 2010).
Member of the International Advisory Council of Allianz Aktiengesellschaft (since February 2001).
Former Director of Brambles Limited (from March 2004 to January 2008).
Board Committee membership:
Chairman of the Nomination Committee.
Marius Kloppers BE (Chem), MBA, PhD (Materials Science), 4850
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since January 2006. MrMarius Kloppers was appointed Chief Executive Officer on 1 October 2007. He was appointed Group President Non-Ferrous Materials and executive Director in January 2006 and was previously Chief Commercial Officer. Mr Kloppers was elected in 2006 and last re-elected in 2009.
Independent: No
Skills and experience: MariusMr Kloppers has extensive knowledge of the mining industry and of BHP Billiton’s operations. Active in the mining and resources industry since 1993, he was appointed Chief Commercial Officer in December 2003. He2003 and Group President Non-Ferrous Materials and Executive Director in January 2006. Mr Kloppers was previously Chief Marketing Officer, Group Executive of Billiton Plc, Chief Executive of Samancor Manganese and held various positions at Billiton Aluminium, including Chief Operating Officer and General Manager of Hillside Aluminium.
Other directorships and offices (current and recent):
None.
Board Committee membership:
None.
Alan Boeckmann BE (Electrical Eng), 62
Term of office: Appointed a Director of BHP Billiton Limited and BHP Billiton Plc in September 2008. Mr Boeckmann was elected at the 2008 Annual General Meetings.
Independent: Yes
Skills and experience: Alan Boeckmann is currently Chairman and Chief Executive Officer of Fluor Corporation, USA, having originally joined Fluor in 1974. Mr Boeckmann has extensive experience in running large-scale international industrial companies and experience in the oil and gas industry. He has global experience in engineering, procurement, construction, maintenance and project management across a range of industries, including resources and petroleum.
Other directorships and offices (current and recent):
Chairman of the International Council on Mining and Chief Executive Officer of Fluor CorporationMetals (since February 2002).
Former Director of Burlington Northern Santa Fe CorporationOctober 2011) and former Deputy Chairman (from September 2001 until February 2010).
Former Director of Archer Daniels Midland Company (from November 2007October 2008 to November 2008)October 2011).
Board Committee membership:
Member of the Remuneration Committee.None.
Malcolm Broomhead MBA, BE, FIE(Aus), FAusIMM, FAIM, MICE (UK), FAICD, 5860
Term of office: Appointed a Director of BHP Billiton Limited and BHP Billiton Plc with effect from 31since March 2010 and will stand for election at the 2010 Annual General Meetings.2010.
Independent:Yes
Skills and experience:Malcolm Broomhead has extensive experience in running industrial and mining companies with a global footprint and broad global experience in project development in many of the countries in which BHP Billiton operates. Mr Broomhead was Managing Director and Chief Executive Officer of Orica Limited from 2001 until September 2005, where he oversaw a strongly performing global business that controlled interests in more than 45 countries.2005. Prior to joining Orica, Mr Broomhead held a number of senior positions at North Limited, including Managing Director and Chief Executive Officer and, prior to that, held senior management positions with Halcrow (UK), MIM Holdings, Peko Wallsend and Industrial Equity. Mr Broomhead has extensive experience in running industrial and mining companies with a global footprint and broad global experience in project development in many of the countries in which BHP Billiton operates. Mr Broomhead is currently non-executive Chairman of Asciano Limited and a non-executive Director of Coates Group Holdings Pty Ltd.
Other directorships and offices (current and recent):
Chairman of Asciano Limited (since October 2009).
Director of Coates Group Holdings Pty Ltd (since January 2008).
Board Committee membership:
Member of the Sustainability Committee.
Member of the Finance Committee.
Sir John Buchanan BSc, MSc (Hons 1), PhD, 6769
Term of office:office: Director of BHP Billiton Limited and BHP Billiton Plc since February 2003. DrSir John Buchanan has been designated as the Senior Independent Director of BHP Billiton Plc since his appointment. He was last re-elected in 2008 and is retiring and standing for re-election in 2010.
Independent:Independent: Yes
Skills and experience:experience: Educated at Auckland, Oxford and Harvard, Sir John Buchanan has broad international business experience gained in large and complex international businesses. He has substantial experience in the petroleum industry and knowledge of the international investor community. He has held various leadership roles in strategic, financial, operational and marketing positions, including executive experience in different countries. He is a former executiveExecutive Director and Group Chief Financial Officer of BP, serving on theTreasurer and Chief Executive of BP Board for six years.Finance and Chief Operating Officer of BP Chemicals.
Other directorships and offices (current and recent):
Chairman of ARM Holdings Plc (UK) (since May 2012).
Chairman of Smith & Nephew Plc (since April 2006) and former Deputy Chairman (from February 2005 to April 2006).
Chairman of the International Chamber of Commerce (UK) (since May 2008).
Member of Advisory Board of Ondra Bank (since June 2009).
Chairman of the UK Trustees for the Christchurch Earthquake appeal.
Former Senior Independent Director and Deputy Chairman of Vodafone Group Plc (since(from July 2006)2006 to July 2012) and Director (since(from April 2003).
Member of Advisory Board of Ondra Bank (since June 2009)2003 to July 2012).
Former Director of AstraZeneca Plc (from April 2002 to April 2010).
Board Committee membership:
Chairman of the Remuneration Committee.
Member of the Nomination Committee.
Carlos Cordeiro AB, MBA, 5456
Term of office:office: Director of BHP Billiton Limited and BHP Billiton Plc since February 2005. Mr Cordeiro was last re-elected in 2009.
Independent:Independent: Yes
Skills and experience:experience: Carlos Cordeiro brings to the Board more than 30 years’ experience in providing strategic and financial advice to corporations, financial institutions and governments around the world. HeMr Cordeiro was previously Partner and Managing Director of Goldman Sachs Group Inc.Inc and Executive Vice Chairman of Goldman Sachs (Asia) LLC.
Other directorships and offices (current and recent):
Non-executive Advisory Director of The Goldman Sachs Group Inc (since December 2001).
Non-executive Vice Chairman of Goldman Sachs (Asia) LLC (since December 2001).
Board Committee membership:
Member of the Remuneration Committee.
David Crawford AO, BComm, LLB, FCA, FCPA, FAICD, 6668
Term of office:office: Director of BHP Limited since May 1994. Director of BHP Billiton Limited and BHP Billiton Plc since June 2001. Mr Crawford was last re-elected in 2009 and, in accordance with the Group’s policy described under ‘Tenure’ in section 5.3.5 of this Annual Report, is retiring and standing for re-election in 2010.
Independent:Independent: Yes
Skills and experience:experience: David Crawford has extensive experience in risk management and business reorganisation. HeMr Crawford has acted as a consultant, scheme manager, receiver and manager and liquidator to very large and complex groups of companies. HeMr Crawford was previously Australian National Chairman of KPMG, Chartered Accountants. The
Other directorships and offices (current and recent):
Chairman of Australia Pacific Airports Corporation Limited (since May 2012).
Chairman of Lend Lease Corporation Limited (since May 2003) and Director (since July 2001).
Former Chairman of Foster’s Group Limited (from November 2007 to December 2011) and former Director of Foster’s Group Limited (from August 2001 to December 2011).
Former Director of Westpac Banking Corporation (from May 2002 to December 2007).
Former Chairman of National Foods Limited (Director from November 2001 to June 2005).
Board Committee membership:
Chairman of the Finance Committee.
Pat Davies BSc (Mechanical Engineering), 61
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since June 2012.
Independent: Yes
Skills and experience: Pat Davies has nominatedbroad experience in the natural resources sector across a number of geographies, commodities and markets. From July 2005 until June 2011, Mr CrawfordDavies was Chief Executive of Sasol Limited, an international energy, chemical and mining company with operations in 38 countries and listings on the Johannesburg and New York stock exchanges. He began his career at Sasol in 1975 and held a number of diverse roles, including managing the group’s oil and gas businesses, before becoming Chief Executive in July 2005. Mr Davies is a former Director of various Sasol Group companies and joint ventures.
Other directorships and offices (current and recent):
Former Director (from August 1997 to June 2011) and Chief Executive (from July 2005 to June 2011) of Sasol Limited.
Board Committee membership:
Member of the Remuneration Committee.
Carolyn Hewson AO, BEc (Hons), MA (Econ), 57
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since March 2010.
Independent: Yes
Skills and experience: Carolyn Hewson is a former investment banker and has over 30 years’ experience in the finance sector. Ms Hewson was previously an Executive Director of Schroders Australia Limited and has extensive financial markets, risk management and investment management expertise. Ms Hewson is a Non-executive Director of Stockland Group and BT Investment Management Limited. Ms Hewson previously served as a Director on the boards of Westpac Banking Corporation, AMP Limited, CSR Limited, AGL Energy Limited, the Australian Gas Light Company, South Australia Water and the Economic Development Board of South Australia. Ms Hewson is currently a member of the Advisory Board of Nanosonics Limited, a Director of the Australian Charities Fund Pty Limited, Patron and a Director of the Neurosurgical Research Foundation and Chair of the Westpac Foundation.
Other directorships and offices (current and recent):
Director of Stockland Group (since March 2009).
Director of BT Investment Management Limited (since December 2007).
Member of the Advisory Board of Nanosonics Limited (since June 2007).
Director of Australian Charities Fund Pty Limited (since June 2000).
Director and Patron of the Neurosurgical Research Foundation (since April 1993).
Former Director of Westpac Banking Corporation (from February 2003 to June 2012).
Former Director of AGL Energy Limited (from February 2006 to February 2009).
Chair of the Westpac Foundation (since January 2011).
Board Committee membership:
Member of the Risk and Audit Committee.
Lindsay Maxsted DipBus (Gordon), FCA, 58
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since March 2011.
Independent: Yes
Skills and experience: Lindsay Maxsted is a corporate recovery specialist who has managed a number of Australia’s largest corporate insolvency and restructuring engagements and, until recently, continued to undertake consultancy work in the restructuring advisory field. Mr Maxsted was the Chief Executive Officer of KPMG Australia between 2001 and 2007. Mr Maxsted is currently Chairman of Westpac Banking Corporation and of Transurban Group. Mr Maxsted was on the Board of the Public Transport Corporation from 1995 to 2001 and in his capacity as Chairman from 1997 to 2001 had the responsibility of guiding the Public Transport Corporation through the final stages of a significant reform process. Mr Maxsted is the Board’s nominated ‘audit committee financial expert’ for the purposes of the US Securities and Exchange Commission Rules, and the Board is satisfied that he has recent and relevant financial experience for the purposes of the UK Financial Services Authority’s Disclosure and Transparency Rules and the UK Corporate Governance Code.
Other directorships and offices (current and recent):
Chairman of Lend LeaseWestpac Banking Corporation Limited (since May 2003)December 2011) and a Director (since July 2001)March 2008).
Chairman of Foster’sTransurban Group Limited (since November 2007) and Director of Foster’s Group Limited (since August 2001)2010) and a Director (since March 2008).
Director and Honorary Treasurer of Baker IDI Heart and Diabetes Institute (since June 2005).
Former Director of Westpac Banking CorporationKPMG Australia Chief Executive Officer (from May 2002January 2001 to December 2007).
Former Chairman of National Foods Limited (Director from November 2001 to June 2005).
Board Committee membership:
Chairman of the Risk and Audit Committee.
Carolyn Hewson AO, BEc (Hons), MA (Econ), FAICD, 55
Term of office: Appointed a Director of BHP Billiton Limited and BHP Billiton Plc with effect from 31 March 2010 and will stand for election at the 2010 Annual General Meetings.
Independent: Yes
Skills and experience: Carolyn Hewson is a former investment banker and has over 25 years’ experience in the finance sector. Ms Hewson was previously an Executive Director of Schroders Australia Limited and has extensive financial markets, risk management and investment management expertise. Ms Hewson is a non-executive director of Stockland Corporation Limited, Westpac Banking Corporation, BT Investment Management Limited and previously served as a director on the boards of AMP Limited, CSR Limited, AGL Energy Limited, the Australian Gas Light Company, South Australia Water and the Economic Development Board of South Australia. She has current board or advisory roles with Nanosonics Limited, the Australian Charities Fund and the Neurosurgical Research Foundation.
Other directorships and offices (current and recent):
Director of Stockland Corporation Limited (since March 2009).
Director of BT Investment Management Limited (since December 2007).
Director of Westpac Banking Corporation (since February 2003).
Member of the Advisory Board of Nanosonics Limited (since June 2007).
Director of Australian Charities Fund (since March 2001).
Member and Patron of the Neurosurgical Research Foundation Council (since April 1993).
Former Director of AGL Energy Limited (from February 2006 to February 2009).
Board Committee membership:
Member of the Risk and AuditFinance Committee.
Wayne Murdy BSc (Business Administration), CPA, 6668
Term of office:office: Director of BHP Billiton Limited and BHP Billiton Plc since 18 June 2009. Mr Murdy was elected in 2009.
Independent:Independent: Yes
Skills and experience:experience: Wayne Murdy served as the Chief Executive Officer of Newmont Mining Corporation from January 2001 to June 2007 and Chairman of Newmont from January 2002 to December 2007. Hishas a background is in finance and accounting, where he gained comprehensive experience in the financial management of mining, oil and gas companies during his career with Getty Oil, Apache Corporation and Newmont.Newmont Mining Corporation. Mr Murdy served as the Chief Executive Officer of Newmont Mining Corporation from 2001 to 2007 and Chairman of Newmont from 2002 to 2007. Mr Murdy is also a former Chairman of the International Council on Mining and Metals, a former directorDirector of the US National Mining Association and a former member of the Manufacturing Council of the US Department of Commerce.
Other directorships and offices (current and recent):
Director of Weyerhaeuser Company (since January 2009).
Former Director of Qwest Communications International Inc (since(from September 2005)2005 to April 2011).
Former Chief Executive Officer (from January 2001 to June 2007) and Chairman (from January 2002 to December 2007) of Newmont Mining Corporation.
Former Chairman of the International Council ofon Mining and Metals (from January 2004 to December 2006).
Former Director of the US National Mining Association (from January 2002 to December 2007).
Board Committee membership:
Member of the Risk and Audit Committee.
Member of the Finance Committee.
Keith Rumble BSc, MSc (Geology), 5658
Term of office:office Appointed a: Director of BHP Billiton Limited and BHP Billiton Plc insince September 2008. Mr Rumble was elected at the 2008 Annual General Meetings and will retire and stand for re-election in 2010.
Independent:Independent: Yes
Skills and experience:experience: Keith Rumble was previously Chief Executive Officer of SUN Mining, a wholly owned entity of the SUN Group, a principal investor and private equity fund manager in Russia, India and other emerging and transforming markets. HeMr Rumble has over 30 years’ experience in the resources industry, specifically in titanium and platinum mining, and is a former Chief Executive Officer of Impala Platinum (Pty) Ltd and former Chief Executive Officer of Rio Tinto Iron and Titanium Inc.Inc in Canada. He began his career at Richards Bay Minerals in 1980 and held various management positions before becoming Chief Executive Officer in 1996.
Other directorships and offices (current and recent):
Director of The Aveng Group (since September 2009).
Board of Governors of Rhodes University (since April 2005).
Trustee of the World Wildlife Fund, South Africa (since October 2006).
Former Director of Aveng Group Limited (from September 2009 to December 2011).
Board Committee membership:
Member of the Sustainability Committee.
John Schubert AO, BCh Eng, PhD (Chem Eng), FIEAust, FTSE, 6769
Term of office:office: Director of BHP Limited since June 2000 and a Director of BHP Billiton Limited and BHP Billiton Plc since June 2001. Dr Schubert was last re-elected in 2008 and in accordance with the Group’s policy described under ‘Tenure’ in section 5.3.5 of this Annual Report, is retiring and standing for re-election in 2010.
Independent:Independent: Yes
Skills and experience:experience: John Schubert has considerable experience in the international oil industry, including at Chief Executive Officer level. HeDr Schubert has had executive mining and financial responsibilities and was Chief Executive Officer of Pioneer International Limited for six years, where he operated in the building materials industry in 16 countries. HeDr Schubert has experience in mergers, acquisitions and divestments, project analysis and management. HeDr Schubert was previously Chairman and Managing Director of Esso Australia Limited and President of the Business Council of Australia.
Other directorships and offices (current and recent):
Director of Qantas Airways Limited (since October 2000).
Chairman of G2 Therapies Pty Limited (since November 2000).
Former Chairman (from November 2004 to February 2010) and Director (from October 1991 to February 2010) of Commonwealth Bank of Australia.
Former Chairman and Director of Worley Parsons Limited (from November 2002 until February 2005).
Board Committee membership:
Chairman of the Sustainability Committee.
Member of the Remuneration Committee.
Member of the Nomination Committee.
Baroness Shriti Vadera MA, 50
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since January 2011.
Independent: Yes
Skills and experience: Shriti Vadera brings wide-ranging experience in finance, economics and public policy, as well as extensive experience of emerging markets and international institutions. In recent years, Ms Vadera has undertaken a number of international assignments, including advising the G20 chair under the Republic of Korea, Temasek Holdings, Singapore on strategy and the Government of Dubai on the restructuring of Dubai World. Ms Vadera was a Minister in the British Government from 2007 to 2009 in the Department for International Development, the Business Department and the Cabinet Office, where she was responsible for the response to the global financial crisis. Ms Vadera was on the Council of Economic Advisers, H M Treasury from 1999 to 2007 focusing on business and international economic issues. Prior to her time in the British Government, Ms Vadera spent 14 years in investment banking at UBS Warburg where she specialised in advisory work in emerging markets.
Other directorships and offices (current and recent):
Director of AstraZeneca Plc (since January 2011).
Former Trustee of Oxfam (from 2000 to 2005).
Board Committee membership:
Member of the Risk and Audit Committee.
Group Company Secretary
Jane McAloon BEc (Hons), LLB, GDipGov, FCIS, 4648
Term of office: Jane McAloon was appointed Group Company Secretary in July 2007 and joined the BHP Billiton Group in September 2006 as Company Secretary for BHP Billiton Limited.Limited and was appointed Group Company Secretary in July 2007.
Skills and experience: Prior to joining BHP Billiton, JaneMs McAloon held the position of Company Secretary and Group Manager External and Regulatory Services in the Australian Gas Light Company. SheMs McAloon previously held various Australian State and Commonwealth government positions, including Director General of the NSW Ministry of Energy and Utilities and Deputy Director General for the NSW Cabinet Office, as well as working in private legal practice. SheMs McAloon is a Fellow of the Institute of Chartered Secretaries.Secretaries and a Member of the Corporations and Markets Advisory Committee.
4.2 Group Management Committee
Marius Kloppers BE (Chem), MBA, PhD (Materials Science), 4850
Chief Executive Officer and executiveExecutive Director
Chairman of the Group Management Committee
Marius Kloppers has been active in the mining and resources industry since 1993 and was appointed Chief Executive Officer in October 2007. HeMr Kloppers was previously Chief Commercial Officer, Chief Marketing Officer, Group Executive of Billiton Plc, Chief Executive of Samancor Manganese and held various positions at Billiton Aluminium, among them Chief Operating Officer and General Manager of Hillside Aluminium.
Alberto Calderon PhD Econ, M Phil Econ, JD Law, BA Econ, 5052
Group Executive and Chief Commercial OfficerExecutive Aluminium, Nickel & Corporate Development
Member of the Group Management Committee
Alberto Calderon joined the GroupBHP Billiton as President Diamonds and Specialty Products in February 2006 and was appointed to his current position asGroup Executive and Chief Commercial Officer in July 2007. In December 2011, he was appointed to his current position, Group Executive and Chief Executive Aluminium, Nickel & Corporate Development. Prior to this, hejoining BHP Billiton, Mr Calderon was Chief Executive Officer of Cerrejón Coal Company and PresidentChief Executive Officer of theColombian oil company, Ecopetrol. In the early 1990s he was President of the Power Company of Bogotá andHe has held various senior roles in investment banking, and in the Colombian Government.Government and the International Monetary Fund.
Andrew MackenzieMike Henry BSc (Geology)(Chem), PhD (Chemistry), 5346
Group Executive and Chief Executive Non-FerrousMarketing Officer
Member of the Group Management Committee
Andrew MackenzieMike Henry joined the Group in 2003 and was appointed Chief Marketing Officer in November 2011. Prior to this, he was President Marketing. Mr Henry’s earlier career with BHP Billiton in November 2008 in his current position as Chief Executive Non-Ferrous. His prior career included time with Rio Tinto, where he was Chief Executive of Diamondsvarious business development and Minerals,marketing roles, including Marketing Director for Petroleum, Marketing Director for Energy Coal & Freight and with BP,Vice President Business Development for the Energy Coal Customer Sector Group. Prior to joining BHP Billiton, Mr Henry worked for Mitsubishi Corporation, where he held a number of senior roles, including Group Vice President for Technology and Engineering and Group Vice President for Chemicals. He is a non-executive Director of Centrica plc.commercial roles.
Marcus RandolphGraham Kerr BSc, MBA, 54BBus, FCPA, 41
Group Executive and Chief Executive Ferrous and Coal
Member of the Group Management Committee
Marcus Randolph was previously Chief Organisation Development Officer, President Diamonds and Specialty Products, Chief Development Officer Minerals and Chief Strategic Officer Minerals for BHP Billiton. His prior career includes Chief Executive Officer, First Dynasty Mines, Mining and Minerals Executive, Rio Tinto Plc, Director of Acquisitions and Strategy, Kennecott Inc, General Manager Corporación Minera Nor Peru, Asarco Inc, and various mine operating positions in the US with Asarco Inc. He has been in his current position as Chief Executive Ferrous and Coal since July 2007.
Alex Vanselow BComm, Wharton AMP, 48
Group Executive and Chief Financial Officer
Member of the Group Management Committee and Chairman of the Investment Committee and Financial Risk Management Committee
Alex VanselowGraham Kerr joined the Group in 19891994 and was appointed Chief Financial Officer in March 2006. HeNovember 2011. Prior to this, he was previously President Aluminium,of Diamonds and Specialty Products. Mr Kerr has worked in a wide range of finance, treasury and operational roles across the Group, and has held the positions of Chief Financial Officer of Aluminium,Stainless Steel Materials, Vice President Finance – BHP Billiton Diamonds and Finance Director for EKATI. In 2004, Mr Kerr left BHP Billiton for a two-year period when he was General Manager Commercial for Iluka Resources Ltd.
Andrew Mackenzie BSc (Geology), PhD (Chemistry), 55
Group Executive and Chief Financial OfficerExecutive – Non-Ferrous
Member of Orinoco Iron CA, and Manager Accounting and Controlthe Group Management Committee
Andrew Mackenzie joined BHP Iron Ore. HisBilliton in November 2008 in his current position as Chief Executive – Non-Ferrous. Mr Mackenzie’s prior career included time with Rio Tinto, where he was Chief Executive of Diamonds and Minerals, and with Arthur Andersen.
Marcus Randolph BSc, MBA, 56
Group Executive and Chief Executive – Ferrous & Coal
Member of the Group Management Committee
Marcus Randolph was previously Chief Organisation Development Officer, President Diamonds and Specialty Products, Chief Development Officer Minerals and Chief Strategic Officer Minerals for BHP Billiton. Mr Randolph’s prior career includes Chief Executive Officer, First Dynasty Mines, Mining and Minerals Executive, Rio Tinto Plc, Director of Acquisitions and Strategy, Kennecott Inc, and various mine operating positions in the United States and Peru with Asarco Inc. Mr Randolph has been in his current position as Chief Executive – Ferrous & Coal since July 2007.
Karen Wood BEd, LLB (Hons), 5456
Group Executive and Chief People & Public Affairs Officer
Member of the Group Management Committee and Chairman of the Global Ethics Advisory Panel
Karen Wood joined BHP Billiton in 2001. Ms Wood’s previous positions with BHP Billiton were Chief Governance Officer, Group Company Secretary and Special Adviser and Head of Group Secretariat. She is a member of the Takeovers Panel (Australia), a Fellow of the Institute of Chartered SecretariesSecretariat and a member of the Law Council of AustraliaGroup Company Secretary. Ms Wood was appointed Chief People Officer in 2007 and the Law Institute of Victoria.in 2010 assumed responsibility for Public Affairs. Before joining BHP Billiton, she was General Counsel and Company Secretary for Bonlac Foods Limited. She has been in her current position as Chief People Officer since July 2007.Ms Wood is a Fellow of the Institute of Chartered Secretaries.
J Michael Yeager BSc, MSc, 5759
Group Executive and Chief Executive – Petroleum
Member of the Group Management Committee
Mike Yeager joined the Group in April 2006 as Chief Executive Petroleum after 25 years with Mobil and later ExxonMobil. HeMr Yeager was previously Vice President, ExxonMobil Development Company, and held the roles of Senior Vice President, Imperial Oil Ltd and Chief Executive Officer, Imperial Oil Resources, Vice President Africa, ExxonMobil Production Company, Vice President Europe, ExxonMobil Production Company and President, Mobil Exploration and Production in the US.United States.
5 Corporate Governance Statement
5.1 Governance at BHP Billiton
‘Dear Shareholder,
Welcome to BHP Billiton’s corporate objectiveCorporate Governance Statement. At BHP Billiton, our purpose is to create long-term shareholder value for shareholders through the discovery, acquisition, development and conversionmarketing of natural resourcesresources. Your Board oversees the consistent execution of BHP Billiton’s long-stated business strategy and commitment to transparent and high-quality governance.
Our approach
We believe that long-term value creation is supported by high-quality governance. Our governance framework reflects the regulatory requirements of Australia, the United Kingdom and the provision of innovative customer and market-focused solutions. We have unique assets that are criticalUnited States, given our listings in those three countries. Beyond regulatory requirements, we adopt what we consider to the growth of the world’s developing economies, and a geographic and commodity spread that reduces risk and optimises opportunity.
In pursuing the corporate objective, we have committed tobe the highest level of governance andstandards in those jurisdictions. Underpinning this is our overall approach to governance:
We believe governance is not just a matter for the Board. Good governance must be fostered throughout the organisation.
We strive to foster a culture that values and rewards exemplary ethical standards, personal and corporate integrity and respect for others. The Board governs
• | We set out in the BHP BillitonCode of Business Conduct our expectations of our employees and those to whom we contract business. |
Our statement of full compliance with the Group consistent with our long-stated business strategy and commitmentgovernance codes that apply to a transparent and high-quality governance system.
Our approach to governanceus is firmly based on the belief that there is a link between high-quality governance and the creation of long-term shareholder value. Our expectations of our employees and those to whom we contract business are set out in theBHP BillitonCodesection 5.22, and an outline of Business Conduct.our governance structure is set out below.
This statement outlines our system of governance. BHP Billiton operatesgovernance structure
Ongoing renewal
We are continuously focused on enhancing the diversity of perspective on the Board. We do this in a structured manner, looking out over a five-year period at the skills, backgrounds, knowledge, experience and diversity on the Board. The right blend of skills, experience and perspective is critical to ensuring the Board oversees BHP Billiton effectively for shareholders.
Our immediate business imperative in FY2012 was to appoint an additional Director with skills and experience in the oil and gas sector. Pat Davies, former Chief Executive of Sasol Limited, commenced as a single economic entity under a Dual Listed Company (DLC) structure with a unified BoardDirector in June 2012 and management. We have a primary listing in Australia and a premium listing in the UK and are registered with the US Securities and Exchange Commission and listed on the New York Stock Exchange (NYSE),he brings this specific experience as well as maintaining a secondary listingbroad range of international commercial and business skills.
The Board has set an aspirational goal of increasing the number of women on the Johannesburg Stock Exchange. In formulating our governance framework,Board to at least three over the regulatory requirements in Australia,next two years. If achieved, this would see the UK and the US have been taken into account, together with prevailing standardsproportion of best practice. Where governance principles vary across these jurisdictions,women on the Board increase from 15 per cent currently to 23 per cent, based on a Board size of 13.
Continuous improvement
The Board has resolveda commitment to adopt what we consider to beongoing improvement in the higherway it carries out its work. The continued evolution of the prevailing standards.
Our view remains that governance is not just a matter for the Board and a good governance culture must be fostered throughoutits committees resulted in the organisation.
The past year saw significant commentary on governance practices, through the United Kingdom’s Financial Reporting Council’s reviewformation of the Combined Code on Corporate Governance (which has now been renamed the UK Corporate Governance Code), the Australian Productivity Commission’s Inquiry into Executive Remuneration, as well as proposals for change to the Australian Securities Exchange’s Corporate Governance Council’s Corporate Governance Principles and Recommendations. Key recommendations emerged, such as the effective compositionFinance Committee during FY2012. The Board is of the Board (including ensuring an appropriate blendview that our governance structure is enhanced by a committee that focuses on capital structure, funding, capital management planning and due diligence. As part of skills and experience),our commitment to continuous improvement, the role and function of the Chairman and the non-executive Directors, the time commitment expected of non-executive Directors, the alignment of executive remuneration with shareholder interests and the role of the Board in reviewing risk management governance. We have the benefit of robust governance practices that already address many of the key recommendations; for example, the Board has, for many years, focused on ensuring it has the right mix of skills and experience to effectively carry outFinance Committee will be evaluated not later than 12 months after its duties. Significant Board renewal activities were undertaken during theestablishment.
This year, with the appointmentassistance of two Directors, Malcolm Broomheadindependent advisers, we completed an assessment of each Director individually and Carolyn Hewsonimplemented recommendations from Committee reviews. As a consequence, we initiated a number of changes to our Committee and with five Directors retiring, includingBoard processes. Further information is set out in section 5.10. We believe the former Chairman Don Argus. Governanceevaluation process is an ongoing processimportant part of continuous improvement. You will also see some changes to our Corporate Governance Statement this year, as we strive to continually improve our transparency and we aimour dialogue with shareholders. I hope you find this report useful and look forward to maintain our focus on continuous improvement by building a multi-skilled and diversified Board supported by a first-class management team.feedback fellow shareholders may have.’
We have, over the years, adopted leading corporate governance practices, including implementing an active approach to institutional and retail shareholder engagement. The Board represents shareholders and is ultimately accountable to them for the Group’s performance in creating and delivering shareholder value through the effective governance of BHP Billiton.
BHP Billiton Governance StructureJac Nasser AO
Chairman
The Board representsPart of the Group’s shareholders andBoard’s commitment to high-quality governance is accountable to them for creating and delivering valueexpressed through the effective governance of the business.
The Board has developed a strategy forapproach we take to engaging and communicating with shareholders. We encourage shareholders key aspectsto make their views known to us.
Our shareholders are based across the globe. Outside of whichthe Annual General Meeting (AGM), the Board uses a range of formal and informal communication channels to understand shareholder views to ensure it can represent shareholders in governing the business. Regular proactive engagement with institutional shareholders and investor representative organisations takes place in Australia, South Africa, the United Kingdom and the United States. This is led by:
The Chairman, supported by the Company Secretariat team – strategy, governance and remuneration.
The Remuneration Committee Chairman and Senior Independent Director – governance and remuneration.
The Chief Executive Officer (CEO), Chief Financial Officer (CFO), management and Investor Relations team – strategy, financial and operating performance. Important briefings are outlined below.webcast live from our website.
In addition, shareholders can contact us at any time through our Investor Relations team, with contact details available on our website.
Feedback from shareholders is regularly reported to the Board. Shareholder and analyst feedback is shared with the Board through the Chairman, the Chairman of the Remuneration Committee (also the Senior Independent Director), other Directors, the CEO and the CFO. In addition, the Investor Relations team provides regular reports to the Board on shareholder feedback and analysis. This approach provides a robust mechanism to ensure Directors are aware of issues raised and have a good understanding of current shareholder views.
Annual General Meeting
The AGM is an opportunity for shareholders to ask questions of the Board.
Our Dual Listed Company (DLC) structure means that we hold two AGMs each year. The AGMs are important dates in the BHP Billiton calendar. In October each year, the BHP Billiton Plc meeting is held in the United Kingdom, and in November, the BHP Billiton Limited meeting is held in Australia. These meetings provide an update for shareholders on the Group’s performance and offer an opportunity for shareholders to ask questions and vote. Shareholders vote on important matters affecting the business, including the election of Directors, any changes to our constitutional documents, the receipt of annual financial statements and incentive arrangements for executive Directors.
the Executive Director. Shareholders may appoint proxies electronically through our website, and the Notice of Meeting describes how this can be done. As described above, a key part of our approach to governance is that shareholders’ views are encouragedheard and understood. The AGM provides an important forum to make their views known to us and to raise directly any matters of concern. The Board uses a range of formal and informal measures to ensure that it understands and effectively responds to shareholder questions and concerns relating to the management and governance of the Group:
TheChairman, with support from the company secretariat team, has regular meetings with institutional shareholders and investor representatives to discuss governance matters.
TheRemuneration Committee Chairman and Senior Independent Director also meets with institutional shareholders and investor representatives to discuss executive remuneration and other governance issues.
TheChief Executive Officer (CEO),Chief Financial Officer (CFO) and investor relations team meet regularly with major shareholders to discuss our strategy, financial and operating performance.
Theinvestor relations team provides quarterly reports in relation to shareholder feedback generally, which the Board uses to assess how the Group is responding to shareholder views and issues.
Finally, shareholders are encouraged to attend BHP Billiton’sAnnual General Meetings and to use these opportunities to ask questions (discussed further below).
In each case, the views and concerns that have been raised are reported to the Board, which ensures Directors are aware of the issues raised and assists Directors in developing an understanding of the views of shareholders, in particular in relation to strategic, financial and operating issues.
enable this.
The Dual Listed Company structure means that Annual General Meetings of BHP Billiton Plc and BHP Billiton Limited are held in the United Kingdom and Australia in October and November, respectively, each year. Questions can be registered prior to the meeting by completing the relevant form accompanying the Notice of Meeting or by emailingMeeting. Shareholders can also email the Group atinvestor.relations@bhpbilliton.com. Questions that have beencan be lodged ahead of the meeting and the answers to them,the most frequently asked questions are posted to our website.
Key members of management, including the CEO and CFO, are present and available to answer questions. The External Auditor attends the Annual General MeetingsAGMs and is also available to answer questions. Shareholders may appoint proxies electronically through our website. The Notice of Meeting describes how this can be done.
Proceedings at shareholder meetings and important briefings are broadcastwebcast live from our website. Copies of the speeches delivered by the Chairman and CEO to the Annual General MeetingsAGMs are released to the stock exchanges and posted to our website. A summary of proceedings and the outcome of voting on the items of business are released to the relevant stock exchanges and posted to our website as soon as they are available following the completion of the BHP Billiton Limited meeting.
5.3.1 Role and responsibilities of the Board
The Board’s role is to represent the shareholders and itshareholders. It is accountable to them for creating and delivering value through the effective governance of the business. The performance of theThis role requires a high-performing Board, and the corresponding contributions ofwith all Directors contributing to the Board’s collective decision-making processes are essential to fulfil this role.processes.
The Board has published aBoard Governance Document, which is a statement of the practices and processes the Board has adopted to discharge its responsibilities. It includes the processes the Board has implemented to undertake its own tasks and
activities; the matters it has reserved for its own consideration and decision-making; the authority it has delegated to the CEO, including the limits on the way in which the CEO can execute that authority; and provides guidance on the relationship between the Board and the CEO.
TheBoard Governance Document also specifies the role of the Chairman, the membership of the Board and the role and conduct of non-executiveNon-executive Directors. Further information is at sections 5.3.25.4 to 5.3.4.5.7.
The Board Governance Document can be foundis available online at
www.bhpbilliton.com/home/aboutus/governance.ourcompany/Pages/governance.aspx.
Allocation of decision-making authority
The matters that the Board has specifically reserved for its decision are:
the appointment of the CEO and approval of the appointments of direct reports to the CEO;
approval of the overall strategy and annual budgets of the business;
determination of matters in accordance with the approved delegations of authority;
formal determinations that are required by the Group’s constitutional documents, by statute or by other external regulation.regulation or governance codes.
The Board is free to alter the matters reserved for its decision, subject to the limitations imposed by the constitutional documents and the law.
Beyond those matters, the Board has delegated all authority to achieve the corporate objectivepurpose to the CEO, who is free to taketakes all decisions and actions which, in the CEO’s judgement, are reasonable having regard to the limits imposed by the Board. The CEO remains accountable to the Board for the authority that is delegated and for the performance of the business. The Board monitors the decisions and actions of the CEO and the performance of the business to gain assurance that progress is being made towards the corporate objective,purpose within the limits it has imposed through the Group’s governance assurance framework. The Board also monitors the performance of the Group and assesses its risk profile through its Committees.committees. Reports from each of the Committeescommittees are set out in section 5.5.5.13.
The CEO is required to report regularly in a spirit of openness and trust on the progress being made by the business. The Board and its Committeescommittees determine the information required from the CEO and any employee or external party, including the External Auditor. Open dialogue between individual members of the Board and the CEO and other employees is encouraged to enable Directors to gain a better understanding of our business.
Independent advice
The Board and its committees may seek advice from independent experts whenever it is considered appropriate. Individual Directors, with the consent of the Chairman, may seek independent professional advice on any matter connected with the discharge of their responsibilities, at the Group’s expense.
Strategic focus and review
Within this framework, at the start of the calendar year, the Board agrees its strategic focus for the year ahead. This ensures that the work of the Board is aligned with the corporate purpose and takes into account the relevant external environment, such as the markets in which we operate, and changes to the external and regulatory environment.
The Board also evaluates its activities on a regular basis taking into account:
matters considered by the Board (including time spent on those matters);
legal and governance requirements of the Board and its committees;
feedback from shareholders and other stakeholders;
the outcomes of its evaluation process.
The Board is satisfied that it has discharged its obligations as set out in the Board Governance Document.
Key activities during the year
A key activity during the year for the Board has been governing the Group through the current more challenging economic environment, in order to continue to focus on our strategy to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market. Disciplined investment throughout the economic cycle has established momentum in our major businesses; however, weakness in commodity markets and industry-wide cost pressure also had an effect over the year.
The Group’s long-stated priorities for capital management remain unchanged: firstly, to invest in high-return growth opportunities throughout the economic cycle; secondly, to maintain a solid ‘A’ credit rating and to grow our progressive dividend; and finally, to return excess capital to shareholders. Within this context, the Board approved a range of business decisions, including:
the acquisition of Petrohawk Energy Corporation for US$38.75 per share by means of an all cash tender offer;
the investment of US$1.2 billion in pre-commitment capital for the first phase of the Olympic Dam Project to develop an open-pit mine in South Australia. On 22 August 2012, we announced that we will investigate an alternative, less capital-intensive design of the Olympic Dam open-pit expansion, involving new technologies, to substantially improve the economics of the project. As a result of this change, we recognised an impairment and other charges of US$346 million before tax (US$242 million after tax) in respect of the Olympic Dam project;
the investment of US$2.1 billion for the development of the Caval Ridge project and the expansion of the Peak Downs mine in the Northern Bowen Basin in Central Queensland, Australia. On 22 August 2012, we announced we will delay indefinitely the expansion of Peak Downs;
the investment of US$1.2 billion in projects to underpin higher production at Escondida over the next decade;
the investment of US$708 million in pre-commitment funding for Mad Dog Phase 2 project in the deepwater Gulf of Mexico;
the investment of US$779 million in pre-commitment funding for the construction of an Outer Harbour facility associated with the Western Australia Iron Ore operations. On 24 August 2012, we announced that Western Australia Iron Ore has been granted the right, subject to the state approvals process to develop two additional berths in the Inner Harbour. We also announced that work on the Outer Harbour has been slowed while focus shifts to maximising the potential capacity from the Inner Harbour;
the investment of US$845 million to sustain operations at Illawarra Coal in Southern New South Wales;
the impairments against carrying value of the Fayetteville shale gas assets and Nickel West assets.
Another significant activity during the year was Board and Committee succession planning and renewal. The Board believes that orderly succession and renewal is in the best interests of the Group. In August 2009, after an 18-month succession process, the Board announced that Jacques Nasser would succeed Don Argus as Chairman. Mr Nasser subsequently assumed the role of Chairman on 31 March 2010. Two new non-executive Directors, Malcolm Broomhead and Carolyn Hewson, wereDuring FY2012, Pat Davies was appointed to the Board from 31 March 2010. Four non-executive Directors retired during the(from 1 June 2012). As disclosed last year, David Morgan, David Jenkins, Paul Anderson and Gail de Planque.following a detailed succession
Another significant activity during the year
process for the Board has been governingRisk and Audit Committee (RAC) Chairman, Lindsay Maxsted was appointed to that position in September 2011. The former RAC Chairman, David Crawford, is no longer a member of that committee but, at the Group in the contextrequest of the challenging global economic environment. We remain cautiousBoard and reflecting his experience, expertise and valuable corporate memory, he remains on the short-term outlook for the global economy. Despite our short-term caution, we remain positive on longer-term prospects, driven by the continuing urbanisationBoard and industrialisation of emerging economies. This path, however, will not be without volatility, reflecting normal business cycles. Accordingly, another key activity for the Board during the year was the consideration of investment and other major business decisions, including the consideration of capital projects and capital management strategies. Examples of business decisions and issues considered by the Board are:
the saleis Chairman of the Ravensthorpe Nickel Operation;
Finance Committee. He continues to make a significant contribution to the entry into binding agreements with Rio Tinto to establish an iron ore production joint venture covering both entities’ Western Australia Iron Ore Assets (subject to regulatory approval);Board’s work.
an investment of US$1.73 billion of capital expenditure to underpin accelerated growth ofIn addition, Board Committee assessments were finalised (see section 5.10 for further information) and the Western Australia Iron Ore business, representing early expenditure for Rapid Growth Project 6;
the impact of the proposed Australian mining tax; and
the Group’s all-cash offer to acquire all of the issued and outstanding common shares of Potash Corporation of Saskatchewan Inc.
Finance Committee was established. The Board is satisfiedof the view that it has discharged its obligations as set out in theBoard Governance Document.our governance structure is enhanced by a committee that focuses on capital structure and funding, capital management planning and initiatives and due diligence.
5.3.2 Membership5.4 Board membership
The Board currently has 1113 members. Of these, 10,12, including the Chairman, are independent non-executiveNon-executive Directors. The non-executiveNon-executive Directors are considered by the Board to be independent of management and free from any business relationship or other circumstance that could materially interfere with the exercise of objective, unfettered or independent judgement. Further information on the process for assessing independence is in section 5.3.5.
In March 2010, Jacques Nasser assumed the role of Chairman following the retirement of Don Argus as Chairman and non-executive Director. Mr Nasser was confirmed by the Board as Chairman following a comprehensive 18-month selection process undertaken by the Board as a whole, according to best practice governance requirements. The process followed is discussed in more detail in section 5.4.3.5.9.
There were also other changes to the composition of the Board during the year. David Morgan and David Jenkins retired fromThe Nomination Committee retains the Boardservices of external recruitment specialists to assist in November 2009. Malcolm Broomhead and Carolyn Hewson joined the Board in March 2010 following the earlier retirementidentification of Paul Anderson and Gail de Planque in January 2010.
The Board previously determined that it considered that the Group’s best interests were served by conducting the succession processpotential candidates for the Board Chairman and the Risk and Audit Committee (RAC) Chairman sequentially. Following completionBoard. The Board’s assessment of the succession planning process for the Board Chairman, the Board has continued the succession planning process for the Chairman of the RAC. This process for the role of Chairman of the RAC is well progressedoverall skills, experience and the Board expects to make an announcement later in FY2011. Mr Crawford is standing for election at the 2010 Annual General Meetings with a view to retiring as RAC Chairman in 2011, when succession planning and transition is complete. Given the complexity and size of the Group, and, taking into account that other RAC members are recent appointments, this approach is designed to facilitate orderly succession and transition for this key role. The Board strongly believes this approach isdiversity profile resulted in the best interestsappointment of the Group and its shareholders.Mr Davies with effect from 1 June 2012.
The Board considers that there is an appropriate balance between executiveExecutive and non-executiveNon-executive Directors with a view to promotingpromote shareholder interests and governinggovern the business effectively. While the Board includes a smaller number of executiveExecutive Directors than is common for UK listedUK-listed companies, its composition is appropriate for the Dual Listed CompanyDLC structure and is in line with Australian listedAustralian-listed company practice. In addition, the Board has extensive access to members of senior management. Members of the Group Management Committee (GMC) (the most senior executives in the Group) attend all the regularly scheduled Board meetings, by invitation, where they make presentations and engage in discussions with Directors, answer questions, and provide input and perspective on their areas of responsibility. The Board also deliberates in the absence of management for partat the beginning and end of each meeting, which is chaired by the Group Chairman.
The Directors of the Group are:
Mr JacquesJac Nasser (Chairman)
Mr Marius Kloppers (CEO)
Mr Alan Boeckmann
Mr Malcolm Broomhead
DrSir John Buchanan
Mr Carlos Cordeiro
Mr David Crawford
Mr Pat Davies
Ms Carolyn Hewson
Mr Lindsay Maxsted
Mr Wayne Murdy
Mr Keith Rumble
Dr John Schubert
Baroness Shriti Vadera
The biographical details of the Directors are set out in section 4.1 of this Annual Report.
5.3.3 Skills, knowledge, experience and attributes of Directors
The Board considers that a diverse range of skills, backgrounds, knowledge and experience is required in order to effectively govern the business. The Board and its Committees actively work to ensure that the executive and non-executive Directors continue to have the right balance of skills, experience, independence and Group knowledge necessary to discharge their responsibilities in accordance with the highest standards of governance.
The non-executive Directors contribute international and operational experience; understanding of the sectors in which we operate; knowledge of world capital markets; and an understanding of the health, safety, environmental and community challenges that we face. The executive Director brings additional perspectives to the Board’s work through a deep understanding of the Group’s business. The Board works together as a whole to oversee strategy for the Group and monitor pursuit of the corporate objective.
Directors must demonstrate unquestioned honesty and integrity, preparedness to question, challenge and critique, and a willingness to understand and commit to the highest standards of governance. Each Director must ensure that no decision or action is taken that places his or her interests in front of the interests of the business.
It is made clear in the Terms of Appointment that Directors must be prepared to commit sufficient time and resources to perform the5.5 Chairman’s role effectively. (Section 5.3.7 provides further information on the Director Terms of Appointment.) The Nomination Committee takes account of the other positions held by each potential Director candidate and assesses whether they will have adequate time to devote to the Board prior to making a recommendation to the Board on whether to appoint them as a Director.
Directors commit to the collective decision-making processes of the Board. Individual Directors debate issues openly and constructively and are free to question or challenge the opinions of others. Directors also commit to active involvement in Board decisions, the application of strategic thought to matters in issue and are prepared to question, challenge and critique. Directors are clear communicators and good listeners who actively contribute to the Board in a collegial manner.
The Nomination Committee assists the Board in ensuring that the Board is comprised of high-calibre individuals whose background, skills, experience and personal characteristics will augment the present Board and meet its future needs.
Diversity on the Board
Corporate governance reviews have highlighted that there is a continuing lack of diversity amongst experienced Director candidates in Australia, the UK and the US. The Board is reviewing its current practices, including assessing how the Board and the Nomination Committee presently take into account diversity criteria, including geographic location, race and gender, as part of a Director candidate’s general background and experience. This review will include an assessment of the Board Committees’ Terms of Reference to consider whether amendments are required to formalise diversity considerations. Further information in relation to how diversity is being addressed within the broader Group is contained in section 5.8.
Group and industry knowledge
In order to govern the Group effectively, non-executive Directors must have a clear understanding of the Group’s overall strategy, together with knowledge about the Group and the industries in which it operates. Non-executive Directors must be sufficiently familiar with the Group’s core business to be effective contributors to the development of strategy and to monitor performance.
Structured opportunities are provided to build Director knowledge through initiatives such as periodic visits to BHP Billiton sites. Non-executive Directors also build their Group and industry knowledge through the involvement of the Group Management Committee (GMC) and other senior employees in Board meetings and specific business briefings. In addition, while the Business Group Risk and Audit Committees (Business Group RACs) are management committees, and therefore do not entail any delegation of responsibility from the Board’s RAC, the Board believes that the link back to the Board RAC facilitates a deeper understanding of risk management and assurance issues throughout the Group. Further information on the Business Group RACs is at section 5.5.1 and further information on induction and training is at section 5.3.8.
Director skills and experience
The Board believes that a mix of skills and a breadth of experience is important to ensure that the Board and its Committees function cohesively as a whole and effectively lead the Group. The Nomination Committee has a formal process by which it assesses the overall skills and experience required on the Board and works with the Board to ensure that it has the appropriate mix of skills and experience to meet the future needs of the business. Further information on the Nomination Committee’s process is at 5.5.3.
In addition, Directors have an individual development plan to provide a personalised approach to updating industry knowledge in particular (discussed further in sections 5.3.8 and 5.4.1).
The following table sets out some of the key skills of the Directors and the extent to which they are represented on the Board and its Committees. In addition to the skills and experience indicators set out in the table, theBoard Governance Document provides that each Director must have the following skills, attributes and experience: unquestioned honesty and integrity; a proven track record of creating value for shareholders; time available to undertake the responsibilities; an ability to apply strategic thought to matters in issue; a preparedness to question, challenge and critique; and a willingness to understand and commit to the highest levels of governance. The Board considers that each Director has the skills, attributes and experience required by theBoard Governance Document.
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5.3.4 Chairman
The Chairman of the Group is responsible for leading the Board and ensuring that it is operating to the highest governance standards. The Chairman is charged with building an effective, high performinghigh-performing and collegial team of Directors and ensuring that they operate effectively as a Board.
The Chairman, JacquesJac Nasser, is considered by the Board to be independent. He was appointed Chairman of the Group from 31 March 2010 and has been a non-executiveNon-executive Director of the Group since 6 June 2006. Mr Nasser was last re-elected at the 2008 Annual General Meetings2011 AGMs and, in accordance with the Group’s policy that each Director stand for election annually, will stand for re-election in 2010.2012.
The Chairman’s role includes:
ensuring that the principles and processes of the Board are maintained, including the provision of accurate, timely and clear information;
encouraging debate and constructive criticism;
ensuring strategic focus is regularly reviewed, clearly understood and underpins the work of the Board;
setting agendas for meetings of the Board, in conjunction with the CEO and Group Company Secretary, that focus on the strategic direction and performance of our business;
ensuring that adequate time is available for discussion on all agenda items, including strategic issues;
leading the Board and individual Director performance assessments;
speaking and acting for the Board and representing the Board to shareholders;
presenting shareholders’ views to the Board;
facilitating the relationship between the Board and the CEO.
The Board considers that none of Mr Nasser’s other commitments (set out in section 4.1 of this Annual Report) interfere with the discharge of his responsibilities to the Group. The Board is satisfied that he makes sufficient time available to serve the Group effectively.
The Group does not have a Deputy Chairman, but has identified John Schubert to act as Chairman should the need arise at short notice.
5.6 Senior Independent Director
The Board has appointed John Buchanan isas the Senior Independent Director forof BHP Billiton Plc.Plc in accordance with the UK Corporate Governance Code. Sir John is available to shareholders who have concerns that cannot be
addressed through the Chairman, CEO or CFO. As Senior Independent Director, he also provides a sounding board for the Chairman and serves as an intermediary for other Directors if necessary.
5.7 Director skills, experience and attributes
Skills, experience and attributes required
The Board considers that a diversity of skills, backgrounds, knowledge, experience, geographic location, nationalities and gender is required in order to effectively govern the business. The Board and its committees work to ensure that the Board continues to have the right balance of skills, experience, independence and Group knowledge necessary to discharge its responsibilities in accordance with the highest standards of governance.
In order to govern the Group effectively, Non-executive Directors must have a clear understanding of the Group’s overall strategy, together with knowledge about the Group and the industries in which it operates. Non-executive Directors must be sufficiently familiar with the Group’s core business to be effective contributors to the development of strategy and to monitor performance.
The5.3.5Board Governance Document requires that Directors demonstrate unquestioned honesty and integrity, preparedness to question, challenge and critique, and a willingness to understand and commit to the highest standards of governance. Directors must commit to the collective decision-making processes of the Board. Individual Directors are required to debate issues openly and constructively, and are free to question or challenge the opinions of others. Directors must also commit to active involvement in Board decisions and the application of strategic thought to matters in issue. Directors must be clear communicators and good listeners who actively contribute to the Board in a collegial manner. Each Director must ensure that no decision or action is taken that places his or her interests in front of the interests of the business.
Directors must be prepared to commit sufficient time and resources to perform the role effectively. The Nomination Committee takes account of the other positions held by each potential Director candidate. It assesses whether they will have adequate time to devote to the Board, prior to making a recommendation to the Board on whether to appoint them as a Director. In addition, Directors are required to consult with the Chairman before accepting any additional commitments that could conflict with or impact on the time Directors can devote to their role.
The Nomination Committee is required to assist the Board in ensuring that the Board is comprised of high-calibre individuals whose background, skills, experience and personal characteristics will augment the present Board and meet its future needs and diversity aspirations.
Current Board profile
The following table sets out the key skills and experience of the Directors and the extent to which they are represented on the Board and its committees. In summary, the Non-executive Directors contribute:
international and operational experience;
understanding of the sectors in which we operate;
knowledge of world capital markets;
an understanding of the health, safety, environmental and community challenges that we face.
The Executive Director brings additional perspectives to the Board’s work through a deep understanding of the Group’s business.
In addition to the skills and experience set out in the table, the Board considers that each Director has the following attributes:
unquestioned honesty and integrity;
a proven track record of creating value for shareholders;
time available to undertake the responsibilities;
an ability to apply strategic thought to matters in issue;
a preparedness to question, challenge and critique;
a willingness to understand and commit to the highest standards of governance.
Skills and experience | Board | Risk and Audit | Nomination | Remuneration | Sustainability | Finance | ||||||||||||||||||
Total Directors | 13 Directors | 4 Directors | 3 Directors | 4 Directors | 3 Directors | 4 Directors | ||||||||||||||||||
Managing and leading | ||||||||||||||||||||||||
Sustainable success in business at a very senior level in a successful career. | 12 Directors | 3 Directors | 3 Directors | 4 Directors | 3 Directors | 4 Directors | ||||||||||||||||||
Global experience | ||||||||||||||||||||||||
Senior management or equivalent experience in multiple global locations, exposed to a range of political, cultural, regulatory and business environments. | 13 Directors | 4 Directors | 3 Directors | 4 Directors | 3 Directors | 4 Directors | ||||||||||||||||||
Governance | ||||||||||||||||||||||||
Commitment to the highest standards of governance, including experience with a major organisation which is subject to rigorous governance standards, and an ability to assess the effectiveness of senior management. | 13 Directors | 4 Directors | 3 Directors | 4 Directors | 3 Directors | 4 Directors | ||||||||||||||||||
Strategy | ||||||||||||||||||||||||
Track record of developing and implementing a successful strategy, including appropriately probing and challenging management on the delivery of agreed strategic planning objectives. | 13 Directors | 4 Directors | 3 Directors | 4 Directors | 3 Directors | 4 Directors |
Skills and experience | Board | Risk and Audit | Nomination | Remuneration | Sustainability | Finance | ||||||||||||||||||
Financial acumen | ||||||||||||||||||||||||
Senior executive or equivalent experience in financial accounting and reporting, corporate finance and internal financial controls, including an ability to probe the adequacies of financial and risk controls. | 13 Directors | 4 Directors | 3 Directors | 4 Directors | 3 Directors | 4 Directors | ||||||||||||||||||
Capital projects | ||||||||||||||||||||||||
Experience working in an industry with projects involving large-scale capital outlays and long-term investment horizons. | 11 Directors | 3 Directors | 3 Directors | 3 Directors | 3 Directors | 4 Directors | ||||||||||||||||||
Health, safety and environment | ||||||||||||||||||||||||
Experience related to workplace health and safety, environmental and social responsibility, and community. | 12 Directors | 4 Directors | 3 Directors | 3 Directors | 3 Directors | 4 Directors | ||||||||||||||||||
Remuneration | ||||||||||||||||||||||||
Board remuneration committee membership or management experience in relation to remuneration, including incentive programs and pensions/superannuation and the legislation and contractual framework governing remuneration. | 13 Directors | 4 Directors | 3 Directors | 4 Directors | 3 Directors | 4 Directors | ||||||||||||||||||
Mining | ||||||||||||||||||||||||
Senior executive experience in a large mining organisation combined with an understanding of the Group’s corporate purpose to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. | 5 Directors | 1 Director | 0 Directors | 1 Director | 2 Directors | 2 Directors |
Skills and experience | Board | Risk and Audit | Nomination | Remuneration | Sustainability | Finance | ||||||||||||||||||
Oil and gas | ||||||||||||||||||||||||
Senior executive experience in the oil and gas industry, including in depth knowledge of the Group’s strategy, markets, competitors, operational issues, technology and regulatory concerns. | 5 Directors | 1 Director | 2 Directors | 3 Directors | 1 Director | 1 Director | ||||||||||||||||||
Marketing | ||||||||||||||||||||||||
Senior executive experience in marketing and a detailed understanding of the Group’s corporate purpose to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. | 11 Directors | 2 Directors | 3 Directors | 4 Directors | 3 Directors | 4 Directors | ||||||||||||||||||
Public policy | ||||||||||||||||||||||||
Experience in public and regulatory policy, including how it affects corporations. | 13 Directors | 4 Directors | 3 Directors | 4 Directors | 3 Directors | 4 Directors |
Renewal
The Board plans for its own succession, with the assistance of the Nomination Committee. In doing this, the Board:
considers the skills, backgrounds, knowledge, experience and diversity of geographic location, nationality and gender necessary to allow it to meet the corporate purpose;
assesses the skills, backgrounds, knowledge, experience and diversity currently represented;
identifies any inadequate representation of those attributes and agrees the process necessary to ensure a candidate is selected who brings them to the Board;
reviews how Board performance might be enhanced, both at an individual Director level and for the Board as a whole.
The Board believes that orderly succession and renewal is achieved as a result of careful planning, where the appropriate composition of the Board is continually under review.
When considering new appointments to the Board, the Nomination Committee oversees the preparation of a position specification that is provided to an independent recruitment organisation retained to conduct a global search. Independent search firms are instructed to consider a wide range of candidates, including taking into account geographic location, nationality and gender. In addition to the specific skills, knowledge and experience deemed necessary, the specification contains the criteria required by theBoard Governance Document.
Newly appointed Directors must submit themselves to shareholders for election at the first AGM following their appointment.
The Board has adopted a letter of appointment that contains the terms on which Non-executive Directors will be appointed, including the basis upon which they will be indemnified. The letter of appointment clearly defines the role of Directors, including the expectations in terms of independence, participation, time commitment and continuous improvement. In summary, Directors are expected to constructively challenge; set values and standards of the Group; monitor the performance of management; satisfy themselves as to the adequacy and integrity of financial statements; and satisfy themselves that the systems for the identification and management of risks are robust and appropriate. Directors are also expected to commit sufficient time to carry out their role and to participate in continuous improvement programs and internal review to support ongoing development. The letter of appointment also makes it clear that Directors are required to disclose circumstances that may affect, or be perceived to affect, their ability to exercise independent judgement so that the Board can assess independence on a regular basis.
A copy of the terms of appointment is available online at |
Diversity
The Board has set an aspirational goal of increasing the number of women on the Board to at least three over the next two years. While this remains our medium-term target, the immediate business imperative in FY2012 was to add additional expertise in the oil and gas sector. The appointment of Mr Davies brings this experience, as well as relevant broader skills and experience. We continue to work to identify future candidates for the Board. The ongoing aim is to enhance the diversity of Directors consistent with our five-year outlook of the attributes currently present, and of those required, on the Board. There are currently two female Directors and the Board’s broader diversity mix is set out in the pie chart below. Further information in relation to how diversity is being addressed within the broader Group is contained in section 5.17.
Board skills, experience and diversity
5.8 Director induction, training and development
The Board considers that the development of industry and Group knowledge is a continuous and ongoing process.
Upon appointment, each new Non-executive Director undertakes an induction program specifically tailored to their needs.
A copy of an indicative induction program is available online at |
BHP Billiton’s long-stated strategy is to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market. The Board’s development activity reflects this diversification through the provision of regular updates to Directors on each of the Group’s commodities, geographies and markets.
Non-executive Directors also participate in continuous improvement programs, in accordance with their terms of appointment. Programs are designed to maximise the effectiveness of the Directors throughout their tenure and link in with their individual Director performance evaluations. The training and development program covers not only matters of a business nature, but also matters falling into the environmental, social and governance area.
Structured opportunities are provided to build knowledge through initiatives such as visits to BHP Billiton sites and business briefings provided at Board meetings. Non-executive Directors also build their Group and industry knowledge through the involvement of the GMC and other senior employees in Board meetings.
Business briefings, site visits and development sessions underpin and support the Board’s work in monitoring and overseeing progress towards the corporate purpose of creating long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. We therefore continuously build Directors’ knowledge to ensure that the Board remains up to date with developments within our Customer Sector Groups (CSGs), as well as developments in the markets in which we operate.
During the year, Non-executive Directors participated in the following activities:
business briefings intended to provide each Director with a deeper understanding of the activities, environment and key issues and direction of CSGs. These briefings are provided to the Board by senior executives, including CSG Presidents and GMC members. They are comprehensive briefings on the commodities, assets and markets in which we operate. The briefings provided during FY2012 covered iron ore, stainless steel materials, uranium, petroleum and manganese. When business briefings were combined with a site visit, they took place on-site, otherwise they took place at Board meetings where the relevant executives joined Directors;
development sessions on specific topics of relevance, such as climate change, commodity markets, world economy, changes in corporate governance standards, Directors’ duties and shareholder feedback;
visits to key BHP Billiton sites, including briefings on the assets and other relevant issues, and meetings with key personnel;
addresses by external speakers, who are generally experts in their field.
Director involvement and continuous development through site visits, Business Group Risk and Audit Committee (Business Group RAC) meetings and on-site business briefings is summarised in the site visit and business briefing map, below.
Business Group RAC meetings take place twice yearly as part of our financial governance framework. Directors who are members of the Board’s RAC chair the Business Group RAC meetings. Half-year Business Group RAC meetings take place via video conference and full year meetings take place face-to-face to ensure maximum interaction between the Business Group RAC and other meeting participants. Further information on Business Group RACs is at section 5.13.1
Director site visits, on-site business briefings and Business Group RAC meetings 2010-2012
The Nomination Committee oversees the Directors’ Training and Development Program. The benefit of this approach is that induction and learning opportunities can be tailored to Directors’ committee memberships, as well as the Board’s specific areas of focus. In addition, this approach ensures a coordinated process in relation to succession planning, Board renewal, training and development and committee composition, which are all relevant to the Nomination Committee’s role in securing the supply of talent to the Board.
In addition, each Board Committee provides a standing invitation for any Non-executive Director to attend committee meetings (rather than just limiting attendance to committee members). Committee agendas are provided to all Directors to ensure that Directors are aware of matters to be considered by the Committees and can elect to attend meetings where appropriate.
The Board is committed to ensuring a majority of Directors are independent. The Board considers that all the current Non-executive Directors, including the Chairman, are independent.
Process to determine independence
The Board has a policy that it uses to determine the independence of its Directors. This determination is carried out upon appointment, annually and at any other time where the circumstances of a Director change such as to warrant reconsideration.
A copy of the Policy on Independence of Directors is available online at |
Under the Policy on Independence of Directorspolicy, an ‘independent’ Director is available atwww.bhpbilliton.com/aboutus/governance.
The policy provides that the test of independence is whether the Directorone who is: ‘independent of management and any business or other relationship that could materially interfere with the exercise of objective, unfettered or independent judgement by the Director or the Director’s ability to act in the best interests of the BHP Billiton Group’.
Where a Director is considered by the Board to be independent, but is affected by circumstances that may give riseappear relevant to a perception that the Director is not independent,Board’s assessment of independence, the Board has undertaken to explain the reasons why it reached its conclusion. In applying the independence test, the Board considers relationships with management, major shareholders, subsidiary and associated companies and other parties with whom the Group transacts business against predetermined materiality thresholds, all of which are set out in the policy. A summary of the factors that may be perceived to impact the independence of Directors is set out below.
Tenure
The Board has a policy requiring non-executive Directors who have served on the Board for nine years or more from the date of their first election to stand for annual re-election after the conclusion of their current term.
TwoThree Directors, David Crawford, John Schubert and John Schubert,Buchanan, have each served on the Board for more than nine years from the date of their first election. Bothyears. Mr Crawford, and Dr Schubert and Sir John are standing for re-election at the 2010 Annual General Meetings,2012 AGMs, having each undergone a formal performance assessment. Although Mr Crawford was first appointed to the BHP Limited Board in 1994, the Board considers that he makes a significant contribution to the work of the Board and that his deep knowledge of the Group is particularly important when a significant proportion of the Non-executive Directors have between zero to three years tenure. Following an extensive succession planning process, in 2011 Mr Crawford stepped down from the role of Risk and Audit Committee Chairman. However, he continues to make a valuable contribution to the work of the Board, in particular in his role as RiskFinance Committee Chairman.
Dr Schubert was first elected to the Board of BHP Limited in 2000. The Board is of the view that Dr Schubert continues to make a valuable contribution, through his role as Chairman of the Sustainability Committee, his roles on the Remuneration and AuditNomination Committees, as well as to the work of the Board more broadly. Dr Schubert’s extensive experience, as an executive (particularly in the international oil industry) and subsequently as a public company director across multiple industries, adds significantly to the skills and expertise of the Board.
Sir John was first appointed to the Board (and as Senior Independent Director) in February 2003. The Board believes that he continues to act independently in the best interests of the Group. His expertise and broad international experience materially enhance the skills and experience profile of the Board and he continues to make a substantial contribution in his roles, as a member of the Board, Chairman of the Remuneration Committee, (RAC) Chairman. a member of the Nomination Committee and as Senior Independent Director.
The Board does not believe that either Mr Crawford’s, or Dr Schubert’s or Sir John’s tenure materially interferes with their ability to act in the best interests of the Group. The Board also believes that each of them has retained independence of character and judgement and has not formed associations with management (or others) that might compromise their ability to exercise independent judgement or act in the best interests of the Group.
The Board previously determined that it considered that it was in the Group’s best interests for the succession planning process for the Board Chairman and the RAC Chairman to be conducted sequentially. Following completion of the succession planning process for Board Chairman, during the year, the Board continued the succession planning process for the RAC Chairman. Given the complexity and size of the Group, the succession planning process involves careful consideration of the skills, knowledge and experience required on the Board, in particular the skills and experience required to properly fulfil the duties of the RAC Chairman. In addition, the Board strongly believes an orderly succession and transition for this key role is in the best interests of the Group and its shareholders. For these reasons, Mr Crawford is standing for re-election at the 2010 Annual General Meetings with a view to retiring as RAC Chairman in 2011, when succession planning and transition is complete. The succession planning process for the role of Chairman of the RAC is well progressed and the Board expects to make an announcement in relation to this matter later in FY2011.
Retirement plan
As former Directors of BHP Limited, DavidMr Crawford and JohnDr Schubert participated in a retirement plan approved by shareholders in 1989. The plan was closed on 24 October 2003 and benefits2003. Benefits accrued to that date, together with interest earned on the benefits, have been preserved and will be paid on retirement. The Board does not believe that the independence of any participating Director is compromised as a result of this plan.
Relationships and associations
David CrawfordLindsay Maxsted was the National ChairmanCEO of KPMG in Australia. He retired in JuneAustralia from 2001 and has no ongoing relationship with KPMG. KPMG was a joint auditor of Billiton Plc prior to the merger with BHP Limited and of BHP Billiton up to 2003 and the sole auditor of BHP Billiton from December 2003.until 2007. The Board considers that this matter on an annual basis andprior relationship with KPMG does not considermaterially interfere with Mr Crawford’sMaxsted’s exercise of objective, unfettered or independent judgement, or his ability to act in the best interests of the BHP Billiton Group. The Board has determined, consistent with its policy on the independence of Directors, that Mr Maxsted is independent. The Board notes in particular that:
at the time of his appointment to be compromised. the Board, more than three years had elapsed since Mr Maxsted’s retirement from KPMG. The Director independence rules and guidelines that apply to the Group – which are
a combination of Australian, UK and US rules and guidelines – all use three years as the benchmark ‘cooling off’ period for former audit firm partners; |
Mr Maxsted has no financial (e.g. pension, retainer or advisory fee) or consulting arrangements with KPMG;
Mr Maxsted was not part of the KPMG audit practice after 1980 and, while at KPMG, was not in any way involved in, or able to influence, any audit activity associated with BHP Billiton.
The Board considers Mr Crawford’sMaxsted’s financial acumen and extensive experience in the corporate restructuring field to be important in the discharge of the Board’s responsibilities. Accordingly, hisHis membership of the Board and Chairmanship of the Risk and Audit Committee isRAC are considered by the Board to be appropriate and desirable. As discussed
Mr Crawford was a partner of KPMG in sections 5.3.2Australia until his retirement in June 2001. He has had no relationship with KPMG since that time and 5.4.3,the Board does not consider Mr Crawford’s independence to be compromised as a succession planning processresult of this association that ended more than 11 years ago.
Carolyn Hewson was, until 30 June 2012, a Non-executive Director of Westpac Banking Corporation and Lindsay Maxsted is underway fora Non-executive Director and the Chairman of Westpac Banking Corporation. Until 30 June 2012, Mr Maxsted and Ms Hewson each served on Westpac’s Nominations and Risk Management Committees. The Board has assessed this cross directorship and Audit Committee Chairman.concluded that it does not interfere with the Directors’ exercise of objective, unfettered or independent judgement or the Directors’ ability to act in the Group’s best interests. In any event, Ms Hewson retired as a Non-executive Director of Westpac from 30 June 2012.
Some of the Directors hold or previously held positions in companies with which we have commercial relationships. Those positions and companies are set out in section 4.1 of this Annual Report. The Board has assessed all of the relationships between the Group and companies in which Directors hold or held positions and has concluded that in all cases the relationships do not interfere with the Directors’ exercise of objective, unfettered or independent judgement or their ability to act in the best interests of our business. A specific instance is Alan Boeckmann,Malcolm Broomhead, who is the Chairman and CEOa Non-executive Director of Fluor Corporation,Coates Group Holdings Pty Limited, a company with which BHP Billiton has commercial dealings. Fluor Corporation operates in the engineering, procurement, construction and project management sectors, and it is Mr Boeckmann’s breadth of current management experience across these sectors that brings significant valueCoates Group provides equipment hire to the Board.mining and resources industry (among others). Prior to and since the appointment of Mr BoeckmannBroomhead as a Director of BHP Billiton, the Board has assessed the relationshipsrelationship between BHP Billiton and Fluor CorporationCoates Group and remains satisfied that Mr BoeckmannBroomhead is able to apply objective, unfettered and independent judgement and act in the best interests of the BHP Billiton Group notwithstanding his role with Fluor Corporation.Billiton. In addition, no commercial dealings with Fluor CorporationCoates Group were discussed at Board or Board Committee level, and to the extent they are in the future, Mr BoeckmannBroomhead will absent himself fully from those deliberations.
Transactions during the year that amounted to related-party transactions with Directors or Director-related entities under International Financial Reporting Standards (IFRS) are outlined in note 30 ‘Key Management Personnel’ to the financial statements.
Executive Director
The executiveExecutive Director, Marius Kloppers, is not considered independent because of his executive responsibilities. Mr Kloppers does not hold directorships in any other company included in the ASX 100 or FTSE 100.
Conflicts of interest
The UK Companies Act requires that BHP Billiton Directors avoid a situation where they have, or can have, an unauthorised direct or indirect interest that conflicts, or possibly may conflict, with the company’s interests.Company’s interests,
unless approved by non-interested Directors. In accordance with the UK Companies Act, BHP Billiton Plc’s Articles of Association were amended at the 2008 Annual General Meetings to allow the Directors to authorise conflicts and potential conflicts where appropriate. A procedure operates to ensure the disclosure of conflicts and for the consideration and, if appropriate, the authorisation of them by non-conflicted Directors. The Nomination Committee supports the Board in this process, both by reviewing requests from Directors for authorisation of situations of actual or potential conflict and making recommendations to the Board, and by regularly reviewing any situations of actual or potential conflict that have previously been authorised by the Board, and making recommendations regarding whether the authorisation remains appropriate. In addition, in accordance with Australian law, if a situation arises for consideration in which a Director has a material personal interest, the affected Director takes no part in decision-making.
5.3.6 Senior Independent Director
The5.10 Board has appointed John Buchanan as the Senior Independent Director of BHP Billiton Plc in accordance with the UK Corporate Governance Code. Dr Buchanan is available to shareholders who have concerns that cannot be addressed through the Chairman, CEO or CFO. Dr Buchanan, as Senior Independent Director, also provides a sounding board for the Chairman and serves as an intermediary for other Directors if necessary. Dr Buchanan, as Senior Independent Director, oversaw the Chairman succession process.
5.3.7 Terms of appointment
The Board has adopted a letter of appointment that contains the terms on which non-executive Directors will be appointed, including the basis upon which they will be indemnified. The letter of appointment clearly defines the role of Directors, including the expectations in terms of independence, participation, time commitment and continuous improvement. In summary, Directors are expected to constructively challenge; set values and standards of the Group; monitor the performance of management; monitor the adequacy and integrity of financial statements; and satisfy themselves that the systems for the identification and management of risk are robust and appropriate. Directors are also expected to commit sufficient time to carry out their role and to participate in continuous improvement programs and internal review to support ongoing development. The letter of appointment also makes it clear that Directors are required to disclose circumstances that may affect, or be perceived to affect, their ability to exercise independent judgement so that the Board can assess independence on a regular basis.
A copy of the letter of appointment is available atwww.bhpbilliton.com/aboutus/governance.
5.3.8 Induction and training
The Board considers that the development of Group and industry knowledge is a continuous and ongoing process.
Upon appointment, each new non-executive Director undertakes an induction program specifically tailored to their needs.
A copy of an indicative induction program is available atwww.bhpbilliton.com/aboutus/governance.
Non-executive Directors undertake to participate in continuous improvement programs, as required by their terms of appointment.
Structured opportunities for improvement are provided to continuously build a Director’s knowledge. During the year, non-executive Directors participated in development activities including:
business briefings intended to provide each Director with a deeper understanding of the activities, environment and key issues and direction of Customer Sector Groups (CSGs);
development sessions on specific topics of relevance, such as climate change, commodity markets and changes in corporate governance standards;
visits to key sites;
addresses by external speakers, who are generally experts in their field.
In addition, each non-executive Director has an individual development plan in order to provide a personalised approach to updating the Director’s skills and knowledge. The program is designed to maximise the effectiveness of the Directors throughout their tenure and links in with their individual performance reviews (discussed further in section 5.4.1). The training and development program covers not only matters of a business nature, but also matters falling into the environmental, social and governance (ESG) area.
The Nomination Committee has oversight of the Directors’ Training and Development Program. The benefit of this approach is that induction and learning opportunities can be tailored to Directors’ Committee memberships and that the process in relation to Committee composition, succession and training and development is coordinated to ensure a link with the Nomination Committee’s role in securing the supply of talent to the Board.
5.3.9 Independent advice
The Board and its Committees may seek advice from independent experts whenever it is considered appropriate. Individual Directors, with the consent of the Chairman, may seek independent professional advice on any matter connected with the discharge of their responsibilities, at the Group’s expense.
5.3.10 Remuneration
Details of our remuneration policies and practices and the remuneration paid to the Directors (executive and non-executive) are set out in the Remuneration Report in section 6 of this Annual Report. Shareholders will be invited to consider and to approve the Remuneration Report at the 2010 Annual General Meetings.
5.3.11 Share ownership
Non-executive Directors have agreed to apply at least 25 per cent of their remuneration to the purchase of BHP Billiton shares until they achieve a shareholding equivalent in value to one year’s remuneration. Thereafter, they must maintain at least that level of shareholding throughout their tenure. All dealings by Directors are subject to the Group’s Securities Dealing procedure and are reported to the Board and to the stock exchanges.
Information on our policy governing the use of hedge arrangements over shares in BHP Billiton by both Directors and members of the Group Management Committee is set out in section 6.5 of this Annual Report.
Details of the shares held by Directors are set out in section 7.20 of this Annual Report.
5.3.12 Meetings
The Board meets as often as necessary to fulfil its role. Directors are required to allocate sufficient time to the Group to perform their responsibilities effectively, including adequate time to prepare for Board meetings. During the reporting year the Board met nine times, with six of those meetings being held in Australia and three in the UK. Generally, meetings run for two days. The non-executive Directors meet during each Board meeting in the absence of the executive Director and management and the session is chaired by the Group Chairman. Attendance by Directors at Board and Board Committee meetings is set out in the table in section 5.4.1.
Members of the Group Management Committee and other members of senior management attended meetings of the Board by invitation. Senior managers delivered presentations on the status and performance of our businesses and matters reserved for the Board, including the approval of budgets, annual financial statements and business strategy.
5.3.13 Company Secretaries
Jane McAloon is the Group Company Secretary. The Group Company Secretary is responsible for developing and maintaining the information systems and processes that enable the Board to fulfil its role. The Group Company Secretary is also responsible to the Board for ensuring that Board procedures are complied with and advising the Board on governance matters. All Directors have access to the Group Company Secretary for advice and services. Independent advisory services are retained by the Group Company Secretary at the request of the Board or Board Committees. Ms McAloon is supported by Fiona Smith, who is Deputy Company Secretary of BHP Billiton Limited, and Elizabeth Hobley and Geof Stapledon, who are Deputy Company Secretaries of BHP Billiton Plc. The Board appoints and removes the Company Secretaries.
5.4 Board of Directors – Review, re-election and renewal
5.4.1 Reviewevaluation
The Board is committed to transparency in determining Board membership and in assessing the performance of Directors. The Board assessesevaluates its performance through a combination of both internal peer review and externally facilitated evaluation.assessments. Contemporary performance measures are considered an important part of this process. Directors’ performance is also measured against their individual development plans (see section 5.3.8).plans.
The Board conducts regular evaluations of its performance, the performance of its Committees,committees, the Chairman, individual Directors and the governance processes that support the Board’s work. The Board evaluation process comprises both assessment and review, as summarised in the diagram below. This includes analysis of how the Board and its Directors are functioning, the time spent by the Board considering matters and whether the Termsterms of Referencereference of the Board Committeescommittees have been met, as well as compliance with theBoard Governance Document.
The evaluationassessment of the Board’s performance is conducted by focusing on individual Directors and Board Committeescommittees in one year and the Board as a whole in the following year. In addition, each year the Board, with the assistance of the Nomination Committee, conducts evaluationsa review of the performance of Directors retiring andeach Director seeking re-election and uses the results of the evaluationthat review when considering whether to recommend the re-election of particular Directors.each Director. As the Board has adopted a policy of annual election, this effectively means that all Directors are subject to performance review annually should they wish to remain on the Board.
Board Review
During internally facilitated individual Director reviews, each of the Directors giveprovide anonymous feedback on their peers’ performance and individual contributions to the Board, which is passed on to the relevant Director via the Chairman. In respect of the Chairman’s performance, Directors provide feedback directly to John Schubert to be passed on anonymously to the Chairman. External independent advisers are engaged to assist these processes as necessary and an externally facilitated reviewassessment of the Board, Directors or Committees takes place at least every two years. It is thought that theThe involvement of an independent third party has assisted in ensuring that the evaluation processes to beare both rigorous and fair.
There was a review of the Board to assess its performance and progress in preparation for the transition of the Chairmanship from Don Argus to Jacques Nasser. This followed an externally assisted
Director evaluation of individual Directors undertaken in the previous financial year. The review of the Board as a whole indicated that the Board is continuing to function effectively and in accordance with the terms of the Board Governance Document. An externally facilitated evaluation of the Board is currently being undertaken.
The evaluation of individual Directors focuses on the contribution of the Director to the work of the Board and the expectations of Directors as specified in the Group’s governance framework. The performance of individual Directors is assessed against a range of criteria, including the ability of the Director to:
consistently take the perspective of creating shareholder value;
contribute to the development of strategy;
understand the major risks affecting the business;
provide clear direction to management;
contribute to Board cohesion;
commit the time required to fulfil the role and perform their responsibilities effectively;
listen to and respect the ideas of fellow Directors and members of management.
Board effectiveness
The effectiveness of the Board as a whole and of its Committeescommittees is assessed against the accountabilities set down in theBoard Governance Document and each of the Committees’ Termscommittees’ terms of Reference.reference. Matters considered in the assessmentevaluations include:
the effectiveness of discussion and debate at Board and Committeecommittee meetings;
the effectiveness of the Board’s and Committees’committees’ processes and relationship with management;
the quality and timeliness of meeting agendas, Board and Committeecommittee papers and secretariat support;
the composition of the Board and each Committee,committee, focusing on the blend of skills, experience, independence and experience.knowledge of the Group and its diversity, including geographic location, nationality and gender.
The process is managed by the Chairman, but feedback on the Chairman’s performance is provided to him by JohnDr Schubert.
Information about the performance review process for executives is set out in section 5.7.5.15.
Evaluations conducted in FY2012
During the year, with the assistance of an external adviser, recommendations were implemented from the assessment of each Board committee that was finalised in FY2012. An assessment of each Director was also completed. Enhancements identified from previous years’ evaluations have continued to be implemented.
Committee assessment
At the end of FY2011, each committee retained the services of an external adviser (JCA Group, a UK-based provider of board evaluation services, that has no other connections with the BHP Billiton Group) to assist with an assessment of the committee’s effectiveness, and this assessment continued into FY2012. The assessments indicated that the Board’s committees continue to function effectively and in accordance with their terms of reference.
Director assessment
During FY2011, an external adviser (Heidrick and Struggles Leadership Consulting Practice) was retained in relation to the assessment of each Director, and this assessment continued into FY2012. Although Heidrick and
Struggles’ Executive Search Practice also provides services in respect of Board renewal, the Leadership Consulting Practice and the Executive Search Practice operate independently.
The process involves each Director, including the Chairman and CEO, being interviewed by the external facilitator. The interview considers each Director’s contribution and the value they bring to the work of the Board. It also provides the opportunity for each Director to provide comments and feedback on fellow Directors, as well as their views on the focus of the Board.
The overall findings are presented to the Board and discussed. Each Director is provided with feedback on their individual and collective contribution to the Board and its committees.
Board review
As the assessment completed in FY2012 focused on individual Directors and Board committees, a short form review of the Board as a whole was conducted to assess compliance with theBoard Governance Document, time spent by the Board in considering matters and compliance with corporate governance requirements.
The review of the Board as a whole indicated that the Board is continuing to function effectively and in accordance with theBoard Governance Document.
Internal Board process enhancements
Over the past two years, a number of enhancements have been made to the internal processes surrounding Board meetings as a result of evaluations.
Chairman’s matters: In the past, the Board held a closed session at the end of Board meetings. An additional closed session has been incorporated so that all Board meetings start with a closed session of all Directors (there are no members of the GMC present other than the Executive Director). This allows the Chairman to outline matters to be considered by the Board and set the context for the meeting. It is also an opportunity for Directors to raise the items of business they believe should be particularly considered or any other relevant issues.
Assurance items: The Board agenda provides more time for reports from the committee chairmen to the Board. This ensures that the Board is properly and formally informed of the work of its committees and relevant committee papers are also provided to the Board. Where it is considered appropriate, presentations made to committees are also presented to the Board during its meeting.
Training and development: sessions are scheduled during the Board meeting program.
Closed session: Directors continue to have the opportunity to raise matters during the closed session at the end of each Board meeting, which is attended only by the Non-executive Directors.
5.11 Board meetings and attendance
The Board meets as often as necessary to fulfil its role. Directors are required to allocate sufficient time to the Group to perform their responsibilities effectively, including adequate time to prepare for Board meetings. During the reporting year, the Board met 10 times, with five of those meetings being held in Australia, three in the United Kingdom and two in the United States. Generally, meetings run over three days (including committee meetings).
Members of the GMC and other members of senior management attended meetings of the Board by invitation. Senior managers delivered presentations on the status and performance of our businesses and matters reserved for the Board, including the approval of budgets, annual financial statements and business strategy. Attendance at Board and Board Committee Meetings during the year ended 30 June 2012 is set out in the table below.
Attendance at Board and Board Committee meetings during the year ended 30 June 20102012
Board | Risk and Audit | Nomination | Remuneration | Sustainability | ||||||||||||||||
A | B | A | B | A | B | A | B | A | B | |||||||||||
Paul Anderson(1) | 6 | 6 | — | — | — | — | — | — | 4 | 4 | ||||||||||
Don Argus(2) | 7 | 7 | — | — | 4 | 4 | — | — | — | — | ||||||||||
Alan Boeckmann | 9 | 7 | — | — | — | — | 7 | 6 | — | — | ||||||||||
Malcolm Broomhead(3) | 2 | 2 | — | — | — | — | — | — | 2 | 2 | ||||||||||
John Buchanan | 9 | 8 | — | — | 6 | 6 | 7 | 7 | — | — | ||||||||||
Carlos Cordeiro | 9 | 9 | — | — | — | — | 7 | 7 | — | — | ||||||||||
David Crawford | 9 | 9 | 9 | 9 | — | — | — | — | — | — | ||||||||||
E Gail de Planque(4) | 6 | 6 | — | — | — | — | 4 | 4 | 4 | 4 | ||||||||||
Carolyn Hewson(5) | 2 | 2 | 2 | 2 | — | — | — | — | — | — | ||||||||||
David Jenkins(6) | 4 | 3 | 4 | 3 | — | — | 3 | 2 | — | — | ||||||||||
Marius Kloppers | 9 | 9 | — | — | — | — | — | — | — | — | ||||||||||
David Morgan(7) | 3 | 3 | 3 | 2 | — | — | — | — | — | — | ||||||||||
Wayne Murdy | 9 | 9 | 9 | 9 | — | — | — | — | — | — | ||||||||||
Jacques Nasser(8) | 9 | 9 | 7 | 7 | 2 | 2 | — | — | — | — | ||||||||||
Keith Rumble | 9 | 8 | — | — | — | — | — | — | 7 | 7 | ||||||||||
John Schubert(9) | 9 | 9 | — | — | 6 | 6 | 3 | 3 | 7 | 7 |
Board | Risk and Audit | Nomination | Remuneration | Sustainability | Finance (5) | |||||||||||||||||||||||||||||||||||||||||||
A | B | A | B | A | B | A | B | A | B | A | B | |||||||||||||||||||||||||||||||||||||
Malcolm Broomhead | 10 | 10 | – | – | – | – | – | – | 7 | 7 | 4 | 4 | ||||||||||||||||||||||||||||||||||||
John Buchanan | 10 | 9 | – | – | 7 | 6 | 8 | 7 | – | – | – | – | ||||||||||||||||||||||||||||||||||||
Carlos Cordeiro | 10 | 10 | – | – | – | – | 8 | 7 | – | – | – | – | ||||||||||||||||||||||||||||||||||||
David Crawford(1) | 10 | 10 | 4 | 4 | – | – | – | – | – | – | 4 | 4 | ||||||||||||||||||||||||||||||||||||
Pat Davies(2) | 1 | 1 | – | – | – | – | 1 | 1 | – | – | – | – | ||||||||||||||||||||||||||||||||||||
Carolyn Hewson | 10 | 10 | 11 | 11 | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||
Marius Kloppers | 10 | 10 | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||
Lindsay Maxsted(3) | 10 | 10 | 11 | 11 | – | – | – | – | – | – | 4 | 4 | ||||||||||||||||||||||||||||||||||||
Wayne Murdy | 10 | 10 | 11 | 11 | – | – | – | – | – | – | 4 | 4 | ||||||||||||||||||||||||||||||||||||
Jac Nasser | 10 | 10 | – | – | 7 | 7 | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||
Keith Rumble | 10 | 10 | – | – | – | – | – | – | 7 | 7 | – | – | ||||||||||||||||||||||||||||||||||||
John Schubert | 10 | 10 | – | – | 7 | 7 | 8 | 8 | 7 | 7 | – | – | ||||||||||||||||||||||||||||||||||||
Shriti Vadera(4) | 10 | 10 | 10 | 10 | – | – | – | – | – | – | – | – |
Column A – indicates the number of meetings held during the period the Director was a member of the Board and/or Committee.committee.
Column B – indicates the number of meetings attended during the period the Director was a member of the Board and/or Committee.committee.
(1) |
|
(2) |
|
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(3) | Lindsay Maxsted was appointed Chairman of the RAC on 6 September 2011. |
(4) |
|
|
|
|
|
|
5.4.2 Re-election5.12 Director re-election
At least one-third ofThe Board has adopted a policy consistent with the UK Corporate Governance Code, under which all Directors retiremust seek re-election by shareholders annually, if they wish to remain on the Board. This policy took effect at eachthe 2011 Annual General Meeting.Meetings. It replaced the previous system, as set out in the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc, under which Directors are not appointed for a fixed term and mustrequired to submit themselves to shareholders for re-election at least every three years. The periodadoption of annual re-election reflects the Board’s long-standing commitment that, Directors have served onwhere governance principles vary across jurisdictions, the Board will adopt what it considers to be the higher of the prevailing standards. The Board believes that annual re-election promotes and the years in which they were first appointed and last elected are set out in section 4.1 of this Annual Report.
In addition, the Board has a policy that non-executive Directors who have served on the Board for more than nine years from the date of their first election must stand for re-election annually from the first Annual General Meeting after the expiration of their current term.supports accountability to shareholders.
Board support for reappointment is not automatic. Retiring Directors who are seeking re-election are subject to a performance appraisal overseen by the Nomination Committee. Following thatCommittee of the Board. Annual re-election effectively means all Directors are subject to a performance appraisal theannually. The Board, on the recommendation of the Nomination Committee, makes a determination as to whether it will endorse a retiring Director for re-election. The Board will not endorse a Director for re-election if his or her performance is not considered satisfactory. The Board will advise shareholders in the Notice of Meeting whether or not re-election is supported.
BHP Billiton does not apply or implement a ‘no vacancy’ rule in relation to Board appointments. Accordingly, Director candidates can be elected to the Board by ordinary resolution and are not required to out-poll an incumbent Director in order to be elected.
The Board notes the recommendation in the new UK Corporate Governance Code that Directors of FTSE 350 companies be subject to annual election by shareholders. The Board strongly believes in accountability to shareholders. BHP Billiton’s approach to governance necessarily takes into account the standards in all the jurisdictions in which we have securities listed, and, in particular, BHP Billiton’s Dual Listed Company structure means that standards in both the UK and Australia must be carefully monitored. The Board intends to carefully consider the implementation of annual election, including monitoring investor views, and expects to be able to form a concluded view during the course of FY2011 on whether annual election is appropriate for the Group.
5.4.3 Renewal
The Board plans for its own succession with the assistance of the Nomination Committee. In doing this, the Board:
considers the skills, knowledge and experience necessary to allow it to meet the strategic vision for the business;
assesses the skills, knowledge and experience currently represented;
identifies any skills, knowledge and experience not adequately represented and agrees the process necessary to ensure a candidate is selected that brings those traits;
reviews how Board performance might be enhanced, both at an individual Director level and for the Board as a whole.
The Board believes that an orderly succession and renewal process is in the best interests of the Group. The Board believes that orderly succession and renewal is achieved as a result of careful planning, where the appropriate composition of the Board is continually under review.
When considering new appointments to the Board, the Nomination Committee oversees the preparation of a position specification that is provided to an independent recruitment organisation retained to conduct a global search. Independent search firms retained are instructed to consider a wide range of candidates, including taking into account geographic location, race and gender. In addition to the specific skills, knowledge and experience deemed necessary, the specification contains criteria such as:
a proven track record of creating shareholder value;
unquestioned integrity;
a commitment to the highest standards of governance;
having the required time available to devote to the job;
strategic mind set, an awareness of market leadership, outstanding monitoring skills;
a preparedness to question, challenge and critique;
an independent point of view.
Newly appointed Directors must submit themselves to shareholders for election at the first Annual General Meeting following their appointment.
Chairman succession
As announced in early August 2009, Jacques Nasser succeeded Don Argus as Chairman when Mr Argus retired as Chairman and a non-executive Director on 30 March 2010. The decision to appoint Mr Nasser was agreed by the Board following a comprehensive 18-month selection process. The Board oversaw the entire succession process and was assisted in its deliberations by the Nomination Committee. Senior Independent Director for BHP Billiton Plc, John Buchanan, chaired the Board and the Nomination Committee during consideration of all matters relating to succession and internal candidates were not involved in any deliberations. In addition, the global recruitment firm, Heidrick & Struggles, was engaged as independent adviser by the Board to assist in deliberations and consideration of both internal and external candidates. KPMG supported the final process as scrutineer of a secret ballot. The Director renewal process in place for the past seven years ensured high-quality internal candidates. The process adopted by the Board complied with best practice governance requirements, including the UK Corporate Governance Code’s recommendation that the incumbent Chairman not chair the Board or the Nomination Committee when chairman succession is being considered.
Risk and Audit Committee Chairman succession
The Board has previously determined that it is in the Group’s best interests for the succession process for the Board Chairman and the Risk and Audit Committee (RAC) Chairman to be conducted sequentially. Board renewal activities during the year included changes to the membership of the RAC therefore an orderly transition is a key consideration. Following completion of the succession planning process for Board Chairman, the Board continued the succession planning process for the Chairman of the RAC. The succession planning process involves careful consideration of the skills, knowledge and experience required on the Board, in particular the skills and experience required to properly fulfil the duties of the RAC Chairman, given the size and complexity of the Group. The succession planning process for the role of Chairman of the RAC is well developed and the Board expects to make an announcement later in FY2011. As part of the succession plan and transition process, Mr Crawford is standing for election at the 2010 Annual General Meetings with a view to retiring as RAC Chairman in 2011, when succession planning and transition is complete. This approach is designed to facilitate an orderly succession and transition for the role of Chairman of the RAC, which the Board strongly believes is in the best interests of the Group and its shareholders.
5.55.13 Board Committeescommittees
The Board has established Committeescommittees to assist it in exercising its authority, including monitoring the performance of the business to gain assurance that progress is being made towards the corporate objectivepurpose within the limits imposed by the Board. During the year the Board approved the formation of a new standing committee: the Finance Committee, the mandate of which is outlined below. The permanent CommitteesBoard is of the Board areview that the RiskGroup’s governance structure is enhanced by a committee that focuses on capital and Auditfinance matters. The Finance Committee sits alongside the other permanent committees of the Board: the RAC, the Sustainability Committee, the Nomination Committee and the Remuneration Committee. Other Committeescommittees are formed from time to time to deal with specific matters.
Each of the permanent Committeescommittees has Termsterms of Referencereference under which authority is delegated by the Board.
The Termsterms of Referencereference for each Committee can be foundcommittee are available online at
www.bhpbilliton.com/home/aboutus/governance.ourcompany/Pages/governance.aspx.
The office of the Company Secretary provides secretariat services for each of the Committees.committees. Committee meeting agendas, papers and minutes are made available to all members of the Board. Subject to appropriate controls and the overriding scrutiny of the Board, Committee Chairmencommittee chairmen are free to use whatever resources they consider necessary to discharge their responsibilities.
Reports from each of the Committeescommittees appear below.
5.5.15.13.1 Risk and Audit Committee Report
The Risk and Audit Committee (RAC) met nine times during the year. Information on meeting attendance by Committee members is included in the table in section 5.4.1.
Risk and Audit Committee members during the year
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Role and focus
The role of the RAC is to assist the Board in monitoring the decisions and actions of the CEO and the Group and to gain assurance that progress is being made towards the corporate objectivepurpose within the CEO limits.limits imposed by the Board, as set out in theBoard Governance Document. The RAC undertakes this by overseeing:
the integrity of the financial statements;
the appointment, remuneration, qualifications, independence and performance of the External Auditor and the integrity of the audit process as a whole;
the performance and leadership of the internal audit function;
the effectiveness of the systemsystems of internal controls and risk management;
compliance with applicable legal and regulatory requirements;
compliance by management with constraints imposed by the Board.
The role of the Committee in the context of the Board’s broader governance framework is summarised in the diagram below. Further information about our approach to risk can be found in sections 1.5 and 5.14.
BHP Billiton governance structure – Risk and Audit Committee
The RAC met 11 times during the year. Information on meeting attendance by Committee members is included in the table in section 5.11 and information on their qualifications is included in section 4.1.
In addition to the regular business of the year, the Committee discussed reform proposals from Europe and the United Kingdom relating to:
audit regime;
role of risk and audit committees;
annual reporting regime.
The RAC continues to monitor the debate in these important areas and will review and assess the Group’s response to the updated recommendations as they progress.
Business Group Risk and Audit Committeescommittees
To assist management in providing the information necessary to allow the RAC to discharge its responsibilities, Risk and Audit Committees have been established, for each of our Business Groups, incorporating each Customer Sector Group (CSG)CSG, and for key functional areas such as Marketing and Treasury. As illustrated in the diagram below, these Committees,These committees, known as Business Group RACs, have been established and operate as committees of management, but are chaired by members of the RAC. TheyThe responsible member of the GMC participates in those meetings. Business Group RACs perform an important monitoring function in the overall governance of the Group.
Significant financial and risk matters raised at Business Group RAC meetings are reported to the RAC by the Head of Group Reporting and Taxation and the Head of Group Risk Assessment and Assurance.
Risk and Audit Committee members during the year
Name | Status | |
Lindsay Maxsted (Chairman)(1)(2) | Member for whole period | |
David Crawford(2) | Member to 6 September 2011.(1) | |
Carolyn Hewson | Member for whole period | |
Wayne Murdy | Member for whole period | |
Shriti Vadera | Member from 16 August 2011 |
(1) | Lindsay Maxsted was appointed as the Committee’s Chairman from 6 September 2011 when David Crawford retired from the Committee. |
(2) | Mr Crawford was, until 6 September 2011, the Committee’s financial expert nominated by the Board, and effective from 6 September 2011 the nominated financial expert has been Mr Maxsted. |
Activities undertaken during the year
Integrity of financial statements
The RAC assists the Board in assuring the integrity of the financial statements. The RAC evaluates and makes recommendations to the Board about the appropriateness of accounting policies and practices, areas of judgement, compliance with Accounting Standards, stock exchange and legal requirements and the results of the external audit. It reviews the half yearlyhalf-yearly and annual financial statements and makes recommendations on specific actions or decisions (including formal adoption of the financial statements and reports) the Board should consider in order to maintain the integrity of the financial statements. From time to time, the Board may delegate authority to the RAC to approve the release of the statements to the stock exchanges, shareholders and the financial community.
The CEO and CFO have certified that the 20102012 financial statements fairly presents,present a true and fair view, in all material respects, of our financial condition and operating results and are in accordance with applicable regulatory requirements.
External Auditor
The RAC manages the relationship with the External Auditor on behalf of the Board. It considers the reappointment of the External Auditor each year, as well as remuneration and other terms of engagement, and makes a recommendation to the Board. The last competitive audit review was in 2003, when KPMG was appointed by the Board on the recommendation of the RAC. There are no contractual obligations that restrict the RAC’s capacity to recommend a particular firm for appointment as auditor. Shareholders are asked to approve the reappointment of the auditor each year in the UK.United Kingdom.
The RAC evaluates the performance of the External Auditor during its term of appointment against specified criteria, including delivering value to shareholders and ourselves.the Group. The RAC reviews the integrity, independence and objectivity of the External Auditor. This review includes:
confirming that the External Auditor is, in its judgement, independent of the Group;
obtaining from the External Auditor an account of all relationships between the External Auditor and the Group;
monitoring the number of former employees of the External Auditor currently employed in senior positions within the Group and assessing whether those appointments impair, or appear to impair, the External Auditor’s judgement or independence;
considering whether the various relationships between the Group and the External Auditor collectively impair, or appear to impair, the External Auditor’s judgement or independence;
determining whether the compensation of individuals employed by the External Auditor who conduct the audit is tied to the provision of non-audit services and, if so, whether this impairs, or appears to impair, the External Auditor’s judgement or independence;
reviewing the economic importance of our business to the External Auditor and assessing whether that importance impairs, or appears to impair, the External Auditor’s judgement or independence.
The External Auditor also certifies its independence to the RAC.
The audit engagement partner rotates every five years.
Although the External Auditor does provide some non-audit services, the objectivity and independence of the External Auditor is safeguarded through restrictions on the provision of these services. For example, certain types of non-audit service may only be undertaken by the External Auditor with the prior approval of the RAC (as described below), while other services may not be undertaken at all, including services where the External Auditor:
may be required to audit its own work;
participates in activities that would normally be undertaken by management;
is remunerated through a ‘success fee’ structure;
acts in an advocacy role for our business.
Our Policy on ProvisionThe RAC has adopted a policy entitled ‘Provision of Audit and Other Services by the External Auditor’ covering the RAC’s pre-approval policies and procedures to maintain the independence of the External Auditor.
Our Policy on Provision of Audit and Other Services by the External Auditor can be found on our website atwww.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx. |
In addition to audit services, the External Auditor will be permitted to provide other (non-audit) services that are not, and are not perceived to be, in conflict with the role of the External Auditor. In accordance with the requirements of the Securities Exchange Act and guidance contained in Public Company Accounting Oversight Board (PCAOB) Release 2004-001, certain specific activities are listed in our detailed policy which have been ‘pre-approved’ by the RAC.
The categories of ‘pre-approved’ services are as follows:
Audit services – work that constitutes the agreed scope of the statutory audit and includes the statutory audits of the Group and its entities (including interim reviews). The RAC will monitor the Audit services engagements and approve, if necessary, any changes in terms and conditions resulting from changes in audit scope, Group structure or other relevant events.
Audit-related/assurance services – work that is outside the required scope of the statutory audit, but is consistent with the role of the external statutory auditor. This category includes work that is reasonably related to the performance of an audit or review and is a logical extension of the audit or review scope, is of an assurance or compliance nature and is work that the External Auditor must or is best placed to undertake.
Tax services – work of a tax nature that does not compromise the independence of the External Auditor.
Other advisory services – work of an advisory nature that does not compromise the independence of the External Auditor.
Activities not listed specifically are therefore not ‘pre-approved’ and must be approved by the RAC prior to engagement, regardless of the dollar value involved. Additionally, any engagement for other services with a value over US$100,000, even if listed as a ‘pre-approved’ service, can only be approved by the RAC, and all engagements for other services, whether ‘pre-approved’ or not, and regardless of the dollar value involved, are reported quarterly to the RAC.
While not specifically prohibited by our policy, any proposed non-audit engagement of the External Auditor relating to internal control (such as a review of internal controls or assistance with implementing the regulatory requirements, including the Securities Exchange Act) must obtain specific prior approval by the RAC. With the exception of the external audit of the Group financial report, any engagement identified that contains an internal control-related element is not considered to be pre-approved. In addition, whilst the categories shown above include a list of certain pre-approved services, the use of the External Auditor to perform such services shall always be subject to our overriding governance practices as articulated in the policy.
An exception can be viewed atwww.bhpbilliton.com/aboutus/governance.made to the above policy where such an exception is in our interests and appropriate arrangements are put in place to ensure the integrity and independence of the External Auditor. Any such exception requires the specific prior approval of the RAC and must be reported to the Board. No exceptions were approved during the year ended 30 June 2012.
In addition, the RAC approved no services during the year ended 30 June 2012 pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of the SEC Regulation S-X.
Fees paid to the Group’s External Auditor during the year for audit and other services were US$22.234.9 million of which 6061 per cent comprised audit fees, 2428 per cent related to legislative requirements (including Sarbanes-Oxley) and 1611 per cent was for other services. Details of the fees paid are set out in note 34 ‘Auditor’s remuneration’ to the financial statements.
Based on the review by the RAC, the Board is satisfied that the External Auditor is independent.
Internal Audit
The Internal Audit function is carried out internally by Group Audit Services (GAS)Risk Assessment and Assurance (RAA). The role of GASRAA is to determine whether risk management, control and governance processes are adequate and functioning. The Internal Audit function is independent of the External Auditor. The RAC reviews the mission and charter of GAS,RAA, the staffing levels and its scope of work to ensure that it is appropriate in light of the key risks we face. It also reviews and approves the annual internal audit plan.
The RAC also approves the appointment and dismissal of the Head of Group Risk Assessment and Assurance and assesses his or her performance, independence and objectivity. The role of the Head of Group Risk Assessment and Assurance includes achievement of the internal audit objectives, risk management policies and insurance strategy. The position is held by Stefano Giorgini. Mr Giorgini reports to senior management and has all necessary access to management and the right to see information and explanations, and has unfettered access to the RAC. During the year, HSEC audit activities were transferred to the Risk Assessment and Assurance Function.
Effectiveness of systems of internal control and risk management
In delegating authority to the CEO, the Board has established CEO limits set out in the Board Governance Document. Limits on the CEO’s authority require the CEO to ensure that there is a system of control in place for identifying and managing risk. The Directors, through the RAC, review the systems that have been established for this purpose and regularly review their effectiveness. These reviews include assessing thatwhether processes continue to meet evolving external governance requirements.
The RAC is responsible for the oversight of risk management and reviews the internal controls and risk management systems. In undertaking this role the RAC reviews the following:
procedures for identifying business and operational risks and controlling their financial impact on the Group and the operational effectiveness of the policies and procedures related to risk and control;
budgeting and forecasting systems, financial reporting systems and controls;
policies and practices put in place by the CEO for detecting, reporting and preventing fraud and serious breaches of business conduct and whistle-blowing procedures;
procedures for ensuring compliance with relevant regulatory and legal requirements;
arrangements for protecting intellectual property and other non-physical assets;
operational effectiveness of the Business Group RAC structures;
overseeing the adequacy of the internal controls and allocation of responsibilities for monitoring internal financial controls;
policies, information systems and procedures for preparation and dissemination of information to shareholders, stock exchanges and the financial community.controls.
For further discussion on our approach to risk management, refer to section 5.6.sections 1.5 and 5.14.
During the year, the Board conducted reviews of the effectiveness of the Group’s system of internal controls for the financial year and up to the date of this Annual Report in accordance with the UK Corporate Governance Code (Turnbull Guidance) and the Principles and Recommendations published by the ASXAustralian Securities Exchange (ASX) Corporate Governance Council. These reviews covered financial, operational and compliance controls and risk assessment. During the year, management presented an assessment of the material business risks facing the Group and the level of effectiveness of risk management over the material business risks. The reviews were overseen by the RAC, with findings and recommendations reported to the Board. In addition to considering key risks facing the Group, the Board received an assessment of the effectiveness of internal controls over key risks identified through the work of the Board Committees.committees. The Board is satisfied that the effectiveness of the internal controls has been properly reviewed.
Management’s assessment of our internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the US Securities Exchange Act of 1934). Under the supervision and with the participation of our management, including our CEO and CFO, certificationwe have evaluated the effectiveness of the Group’s internal control over financial reporting based on the framework and criteria established in Internal Controls – Integrated Framework, issued by the Sponsoring Organization of the Treadway Commission (COSO). Based on this evaluation, management has concluded that internal control over financial reporting was effective as at 30 June 2012. There were no material weaknesses in the Group’s internal controls over financial reporting identified by management.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
BHP Billiton has engaged our independent registered public accounting firms, KPMG and KPMG Audit Plc, to issue an audit report on our internal control over financial reporting for inclusion in the financial statements section of our Annual Report on Form 20-F as filed with the SEC.
There have been no changes in our internal control over financial reporting during FY2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The CEO and CFO have certified to the Board that the financial statements are founded on a sound system of risk management and internal compliancecontrol and that the system is operating efficiently and effectively in all material respects.
During the year, the RAC reviewed our compliance with the obligations imposed by the US Sarbanes-Oxley Act, including evaluating and documenting internal controls as required by section 404 of the Act.
Management’s assessment of our disclosure controls and procedures
Our management, with the participation of our CEO and CFO, has performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of 30 June 2010.2012. Disclosure controls and procedures are designed to provide reasonable assurance that the material financial and non-financial information required to be disclosed by BHP Billiton, including in the reports that it files or submits under the US Securities Exchange Act of 1934, is recorded, processed, summarised and reported on a timely basis and that such information is accumulated and communicated to BHP Billiton’s management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on the foregoing, our management, including the CEO and CFO, has concluded that our disclosure controls and procedures are effective in providing that reasonable assurance.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Further, in the design and evaluation of our disclosure controls and procedures, our management was necessarily required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures.
There have been no changes in our internal control over financial reporting (as that term is defined by the US Securities Exchange Act of 1934) during FY2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Further information on our controls and procedures, including our internal control over financial reporting can be found in Section 5.13.
Assessment of RAC performanceCommittee evaluation
During FY2011, the year,Committee retained the RAC assessedservices of an external adviser to assist with an assessment of the Committee’s effectiveness, and this continued into FY2012. The Committee also reviewed its performance in accordance with its Termsterms of Reference.reference. As a result of that assessment,this evaluation, the Committee is satisfied it has met its Termsterms of Reference.reference.
5.5.25.13.2 Remuneration Committee Report
The Remuneration Committee met seven times during the year. Information on meeting attendance by Committee members is included in the table in section 5.4.1.
Remuneration Committee members during the year
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Role and focus
The role of the Remuneration Committee is to assist the Board in its oversight of:overseeing:
the remuneration policy and its specific application to the CEO and the CEO’s direct reports, and its general application to all employees;
the determination of levels of reward for the CEO and approval of reward to the CEO’s direct reports;
the annual evaluationprovision of guidance to the Chairman on the performance of the CEO, by giving guidance to the Chairman;CEO;
effective communication to shareholders regarding remuneration policy and the Committee’s work on behalf of the Board, including the preparation of the Remuneration Report for inclusion in the Annual Report;
compliance with applicable legal and regulatory requirements associated with remuneration matters.matters;
the review, at least annually, of remuneration by gender, the relative proportion of men and women in the Group’s workforce and the Group’s progress in achieving its diversity objectives.
Activities undertaken during the year
Full detailsThe role of the Committee’s work on behalf of the Board are set outRemuneration Committee in the context of BHP Billiton’s broader governance framework is summarised in the diagram below.
BHP Billiton governance structure – Remuneration Report in section 6.Committee
During the year, the Committee assessed its performance in accordance with its Terms of Reference. As a result of that assessment, the Committee is satisfied it has met its Terms of Reference.
5.5.3 Nomination Committee Report
The NominationRemuneration Committee met sixeight times during the year. Information on meeting attendance by Committee members is included in the table in section 5.4.1.5.11.
Full details of the Committee’s work on behalf of the Board, including the review of our remuneration structures conducted by the Committee during FY2012, are set out in the Remuneration Report in section 6.
NominationRemuneration Committee members during the year
Name | Status | |
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John Buchanan (Chairman) | Member for whole period | |
Carlos Cordeiro | Member for whole period | |
Pat Davies | Member since 1 June 2012 | |
John Schubert | Member for whole period |
Committee evaluation
During FY2011, the Committee retained the services of an external adviser to assist with an assessment of the Committee’s effectiveness, and this continued into FY2012. The Committee also reviewed its performance in accordance with its terms of reference. As a result of this evaluation, the Committee is satisfied it has met its terms of reference.
5.13.3 Nomination Committee Report
Role and focus
The role of the Committee is to assist in ensuring that the Board comprises individuals who are best able to discharge the responsibilities of a Director, having regard to the highest standards of governance.governance, the strategic direction of the Group and the diversity aspirations of the Board. It does so by focusing on:
reviewingassessing the skills, backgrounds, knowledge, experience and diversity of geographic location, nationality and gender represented on the Board and identifying any inadequate representation of those attributes;
reviewing the skills, that may be required;backgrounds, knowledge, experience and gender represented on the Board committees and recommending committee composition to the Board;
retaining the services of independent search firms and identifying suitable candidates (possessing the skills identified by the skills analysisassessment referred to above) for the Board;
overseeing the review of the assessmentevaluation of the performance of individual Directors and making recommendations to the Board on the endorsement of retiring Directors seeking re-election (see section 5.4.2)5.12);
the plan for succession of the Chairman and the CEO and theits periodic evaluation of it;evaluation;
the provision of appropriate training and development opportunities for Directors;
supporting the Board in its review and, where appropriate, authorisation of actual and potential conflicts (see section 5.3.5)5.9);
communicating to shareholders regarding the work of the Committee on behalf of the Board.
The Board has set an aspirational goal of increasing the number of women on the Board to at least three over the next two years and the Nomination Committee will continue to take diversity into account in its deliberations. Further information regarding the Group’s approach to diversity is set out in section 5.17.
The Nomination Committee also has oversight of training and development activity for all Directors. The Board considers this enhances the Committee’s ongoing consideration and review in relation to the appropriate skills mix for the Board.
Activities undertaken during the year
There were changes to the compositionThe role of the Board during the year. Malcolm Broomhead and Carolyn Hewson joined the Board on 31 March 2010 following the retirement of Paul Anderson and Gail de Planque on 31 January 2010. David Morgan and David Jenkins retired from the Board in November 2009 and Don Argus retired as Chairman and non-executive Director on 30 March 2010. As discussed in section 5.4.3, the Nomination Committee played a significant role supporting the Board during the Chairman succession process at which time John Buchanan, as Senior Independent Director, chaired the meeting. Jacques Nasser assumed the role of Chairman on 31 March 2010, bringing the Chairman succession process to a conclusion. The Committee retained the services of Heidrick & Struggles and Egon Zehnder to assist in the identificationcontext of potential candidates forBHP Billiton’s broader governance framework is summarised in the Board. The Committee also oversaw the Director training and development program and the induction of new Directors (see section 5.3.8 for further information on Director induction and training).
During the year, the Committee assessed its performance. As a result of that assessment, the Committee is satisfied that it is functioning effectively and it has met its Terms of Reference.diagram below.
5.5.4 SustainabilityBHP Billiton governance structure – Nomination Committee Report
The SustainabilityNomination Committee met seven times during the year. Information on meeting attendance by Committee members is included in the table in section 5.4.1.5.11.
There were changes to the composition of the Board during the year. The Committee retained the services of independent recruitment specialists to assist in the identification of potential candidates for the Board, with the result that Pat Davies was appointed with effect from 1 June 2012. This followed a detailed search which included consideration of skills, experience and diversity of geographic location, nationality and gender.
The Committee also oversaw the Director training and development program for 2012 and the induction program for the new Director.
SustainabilityNomination Committee members during the year
Name | Status | |
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Committee evaluation
During FY2011, the Committee retained the services of an external adviser to assist with an assessment of the Committee’s effectiveness and this continued into FY2012. The Committee also reviewed its performance in accordance with its terms of reference. As a result of this evaluation, the Committee is satisfied it has met its terms of reference.
5.13.4 Sustainability Committee Report
Role and focus
The role of the Sustainability Committee is to assist the Board in its oversight of:
the effectiveness of the Group’s strategies, policies and systems associated with health, safety, environmentHealth, Safety, Environment and communityCommunity (HSEC) matters;
our compliance with applicable legal and regulatory requirements associated with HSEC matters;
our performance in relation to HSEC matters;
the performance and leadership of the HSEC and the Sustainable Development functions;function;
HSEC risks and the performance requirements described in our Group Level Documents (GLDs) to control HSEC risks;
our Annualannual Sustainability Report;
communication to shareholders regarding the work of the Committee on behalf of the Board.
Our approach to sustainability is reflected inOur BHP Billiton Charter, which defines our values, purpose and how we measure success, and in our sustainable development policy, which defines our public commitments to safety, health and environmental and social responsibility. Further information is set out in the Group’s Sustainability Report. The Committee provides oversight of the preparation and presentation of the Sustainability Report by management, including oversight of internal control systems relevant to the preparation of the Sustainability Report.
The role of the Sustainability Committee in the context of BHP Billiton’s broader governance framework is summarised in the diagram below.
BHP Billiton governance structure – Sustainability Committee
Sustainable development governance
Our approach to HSEC and sustainable development governance is characterised by:
the Sustainability Committee overseeing thematerial HSEC matters and risks across the Group;
business line management having primary responsibility and accountability for HSEC performance;
the HSEC function providing advice and guidance directly, as well as through a series of networks across the business;
seeking input and insight from external experts such as our Forum for Corporate Responsibility;
clear links between remuneration and HSEC performance.
Activities undertakenThe Sustainability Committee met seven times during the yearyear. Information on meeting attendance by Committee members is included in the table in section 5.11.
During the year, the Sustainability Committee considered reports oncontinued to assist the Board in its oversight of HSEC issues and performance. This included consideration of strategic environmental strategic issues, HSEC audits and trends, review of health and hygiene standards, learningsidentifying and implementing findings from fatal accidents and other incidents,incidents. The Committee considered climate change scenarios and the potential impact of climate change regulation on the Group’s portfolios and actions being taken to manage the implications of thisclimate change regulation. It also reviewed the Group’s performance against the HSEC public targets and the Key Performance Indicators for the HSEC and Sustainable Development functions. The Committee also reviewed the performance of the Head, Group HSEC and Sustainable Development. The Committee reviewed and recommended to the Board the approval of the annual Sustainability Report for publication. The Sustainability Report identifies our targets for HSEC matters and itsour performance against those targets, with an emphasis on fact based measurement and quality data in setting targets. The Committee reviewed and recommended to the Board the public targets for FY2013-FY2017. Finally, the Committee oversaw the appointment of a new Head of HSEC, with the appointment continuing the Group’s practice of bringing an asset president with deep operational experience, into this key role.
A copy of the Sustainability Report and further information can be found on our website atwww.bhpbilliton.com/sustainabledevelopment.home/aboutus/sustainability/Pages/default.aspx.
Sustainability Committee members during the year
Name | Status | |
John Schubert (Chairman) | Member for whole period |
Malcolm Broomhead | Member for whole period | |
Keith Rumble | Member for whole period |
Committee evaluation
During FY2011, the Committee retained the services of an external adviser to assist with an assessment of the Committee’s effectiveness, and this review continued into FY2012. The Committee also assessedreviewed its performance in accordance with its Termsterms of Reference.reference. As a result of that assessment,this evaluation, the Committee is satisfied it has met its Termsterms of Reference.reference.
5.13.5 Finance Committee Report
Role and focus
The role of the Finance Committee is to assist the Board in its consideration for approval and ongoing oversight of matters pertaining to:
capital structure and funding;
capital management planning and initiatives;
due diligence on acquisitions and investments, including proposals that may have a material impact on the Group’s capital position;
matters the Board may refer to the Committee from time to time in connection with the Group’s capital position.
The Board is of the view that our governance structure is enhanced by a committee that focuses on capital structure and funding, capital management planning and initiatives, and due diligence.
Recognising that the focus of the Committee’s activities encompasses matters of strategy reserved for the Board, the Committee does not, as a matter of course, have a decision-making role. Instead, its focus is to advise the Board and make recommendations. The Board may, where it considers it appropriate, delegate decision-making power to the Committee in relation to specific matters.
The Board recognises that in establishing a new Board committee, it is important to avoid introducing complexity or overlap in the current governance framework. The matters specified for the consideration of the Finance Committee are not within the current scope or mandate of any of the other Board committees (because they were previously dealt with by ad hoc committees). However, to avoid any perceived overlap of responsibilities, the terms of reference of each of the Finance Committee and the RAC allow the respective committee chairmen to agree the most appropriate committee to fulfil the obligation in question.
The role of the Finance Committee in the context of BHP Billiton’s broader governance framework is summarised in the diagram below.
BHP Billiton governance structure – Finance Committee
The Finance Committee met four times during the year. The formation of the Committee brought together the work of previous sub-committees of the Board and assisted the work of the Board by considering matters relating to capital structure and funding, capital management planning and initiatives, due diligence on acquisitions and divestments and other matters referred to the Committee. The Committee’s considerations resulted in recommendations to the Board on the matters considered.
Finance Committee members during the year (established in April 2012)
Name | Status | |
David Crawford (Chairman) | Member since Committee established | |
Malcolm Broomhead | Member since Committee established | |
Lindsay Maxsted | Member since Committee established | |
Wayne Murdy | Member since Committee established |
Committee Evaluation
As part of the Board’s commitment to continuous improvement, the role and functions of the Finance Committee will be evaluated not later than 12 months after its establishment.
5.6.1 Approach to risk management governance structure
We believe that the identification and management of risk is central to achieving the corporate objectivepurpose of deliveringcreating long-term shareholder value. Our approach to risk is set out in section 1.5.
The principal aim of the Group’s risk management governance structure and internal control systems is to identify, evaluate and manage business risks, with a view to enhancing the value to shareholders. of shareholders’ investments and safeguarding assets.
Each year, the Board reviews and considers the risk profile for the whole business. This risk profile covers both operational and strategic risks. The risk profile is assessed to ensure it supports the achievement of the Group’s strategy while maintaining a strongsolid ‘A’ credit rating.
The Board has delegated the oversight of risk management to the RAC.RAC, although the Board retains overall accountability for the Group’s risk profile. In addition, the Board specifically requires the CEO to implement a system of control for identifying and managing risk. The Directors, through the RAC, review the systems that have been established for this purpose and regularly review their effectiveness.
The Group has established a Risk Management Policy with supporting processes and performance requirements that provide an overarching and consistent framework forRAC regularly reports to the identification, assessment and management of risks. Risks are ranked using a common methodology. Where a risk is assessed as materialBoard to enable it is reported and reviewed by senior management. During the year, updated Risk Management Group Level Documents were approved and implemented across the Group.
Our Risk Management Policy can be found atwww.bhpbilliton.com/aboutus/governance.
5.6.2 Business risks
The scope of our operations and the number of industries in which we operate and engage mean that a range of factors may impact our results. Material risks that could negatively affect our results and performance include:
impacts arising from the global financial crisis;
fluctuations in commodity prices;
fluctuations in currency exchange rates;
failure or non-performance of counterparties;
influence of demand from China as well as related investments aimed at achieving resource security;
failure to discover new reserves, maintain or enhance existing reserves or develop new operations;
actions by governments, including additional taxation, infrastructure development and political events in the countries in which we operate;
inability to successfully integrate acquired businesses;
inability to recover investments in mining and oil and gas projects;
non-compliance with the Group’s standards by non-controlled assets;
operating cost pressures and shortages could negatively impact our operating margins and expansion plans;
impact of increased costs or schedule delays on development projects;
impact of health, safety, environmental and community exposures and related regulations on operations and reputation;
unexpected natural and operational catastrophes;
climate change and greenhouse effects;
inadequate human resource talent pool;
breaches in information technology security;
breaches in governance processes.
These risks are described in more detail in section 1.5.
5.6.3 Risk management governance structure
The principal aim ofreview the Group’s risk management governance structureframework.
The RAC has established review processes for the nature and internalextent of material risks taken in achieving our purpose. These processes include the application of materiality and tolerance criteria to determine and assess material risks. Materiality criteria include maximum foreseeable loss and residual risk thresholds and are set at Group, CSG and Asset organisational levels. Tolerance criteria additionally assess the control systems is to identify, evaluate and manage business risks, with a view to enhancingeffectiveness of material risks.
The diagram below outlines the value of shareholders’ investments and safeguarding assets.risk reporting process.
Management has put in place a number of key policies, processes, performance requirements and independent controls to provide assurance to the Board and the RAC as to the integrity of our reporting and effectiveness of our systems of internal control and risk management. The BHP Billiton Governance structure diagram in section 5.1 highlights the relationship between the Board and the various controls in the assurance process. Some of the more significant internal control systems include Board and management committees, Business Group RACs the Risk Management Policy and internal audit.
Business Group Risk and Audit Committees
The Business Group RACs illustrated in the diagram in section 5.5.1 assist the RAC to monitor the Group’s obligations in relation to financial reporting, internal control structure, risk management processes and the internal and external audit functions.
Board Committeescommittees
Directors also monitor risks and controls through the RAC, the Remuneration Committee and the Sustainability Committee.
Management Committeescommittees
Management committees also perform roles in relation to risk and control. Strategic risks and opportunities arising from changes in our business environment are regularly reviewed by the GMC and discussed by the
Board. The Financial Risk Management Committee (FRMC) reviews the effectiveness of internal controls relating to commodity price risk, counterparty credit risk, currency risk, financing risk, interest rate risk and insurance. Minutes of the GMC and the FRMC meetings are provided to the Board. The Investment Committee provides oversight for investment processes across the business and coordinates the investment toll-gating process for major investments. Reports are made to the Board on findings by the Investment Committee in relation to major capital projects. The Disclosure Committee oversees the Group’s compliance with securities dealing and continuous and periodic disclosure requirements, including reviewing information that may require disclosure through stock exchanges and overseeing processes to ensure information disclosed is timely, accurate and complete.
Below the level of the Board, key management decisions are made by the CEO, the GMC, other management committees and individual members of management to whom authority has been delegated. The diagram below describes the positionresponsibilities of the CEO and threefour key management committees.
Performance evaluation for executives
The performance of executives and other senior employees is reviewed on an annual basis. For the most senior executives (membersmembers of the GMC),GMC, this review includes their contribution, engagement and interaction at Board level. The annual performance review process that we employ considers the performance of executives against criteria designed to capture both ‘what’ is achieved and ‘how’ it is achieved. All performance assessments of executives consider how effective they have been in undertaking their role; what they have achieved against their specified key performance indicators; how they match up to the behaviours prescribed in our leadership model and how those behaviours align with theBHP BillitonOur Charter values. The assessment is therefore holistic and balances absolute achievement with the way performance has been delivered. Progression within the Group is driven equally by personal leadership behaviours and capability to produce excellent results.
A performance evaluation as outlined above was conducted for all members of the GMC in FY2010.FY2012. For the Chief Executive Officer,CEO, the performance evaluation was led by the Chairman of the Board on behalf of all the non-executiveNon-executive Directors, drawing on guidance from the Remuneration Committee.
Code of Business Conduct
We have published theCode of Business Conduct. TheCode of Business Conduct reflectsOur Charter values of integrity and respect. It provides clear direction and advice on conducting business internationally, interacting with communities, governments and business partners and general workplace behaviour. The Code of Business Conduct applies to Directors and to all employees, regardless of their position or location. Consultants and contractors are also expected to act in accordance with the Code of Business Conduct.
The Code of Business Conduct can be found on our website at
www.bhpbilliton.com/home/aboutus/ourcompany/Pages/codeofbusconduct.aspx.
Anti-corruption investigation
Following requests for information in August 2009 from the US Securities and Exchange Commission, the Group commenced an internal investigation and disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials. The internal investigation is continuing and the Group is cooperating with the relevant authorities and reporting the facts found in the investigation. It is not possible at this time to predict the likely outcomes of the matter.
Insider trading
We have a Securities Dealing GLD that covers dealings by Directors and identified employees, is consistent with the UK Model Code contained in the UK Financial Services Authority Listing Rules and complies with the ASX Listing Rule requirements for a trading policy. The Securities Dealing GLD restricts dealings by Directors and identified employees in shares and other securities during designated prohibited periods and at any time that they are in possession of unpublished price-sensitive information. As part of a regular, planned process, the Securities Dealing GLD was reviewed in FY2012 to ensure it remains current, fit for purpose and in line with our broader governance framework.
A copy of the Securities Dealing GLD can be found on our website at
www.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
Business Conduct Advisory Service
We have established a Business Conduct Advisory Service so that employees can seek guidance or express concerns on business-related issues and report cases of suspected misappropriations, fraud, bribery or corruption. Reports can be made anonymously and without fear of retaliation. Arrangements are in place to investigate such matters. Where appropriate, investigations are conducted independently. Levels of activity and support processes for the Business Conduct Advisory Service are monitored, with activity reports presented to the Board. Further information on the Business Conduct Advisory Service can be found in theCode of Business Conduct.
Political donations
We maintain a position of impartiality with respect to party politics and do not make political contributions/donations for political purposes to any political party, politician, elected official or candidate for public office. We do, however, contribute to the public debate of policy issues that may affect our business in the countries in which we operate.
5.17 Diversity at BHP Billiton
Corporate governance reviews have highlighted that there is a continuing lack of diversity among experienced Director candidates in Australia and the UK. The Board is reviewing its current practices, including assessing how the Board and the Nomination Committee presently take into account diversity criteria, including geographic location, race and gender, as part of a Director candidate’s general background and experience. This review will include an assessment of the Board Committees’ Terms of Reference to consider whether amendments are required to formalise diversity considerations. The BHP BillitonHuman Resources Policy guides the Board and management in developing diversity objectives for the Group.on all aspects of human resource management. TheHuman Resources Policy is supported by internal processes that will set out measurable objectives to support the achievement of diversity across the Group. The Board believes that critical mass is important for diversity and, in relation to gender, has set an aspirational goal of increasing the number of women on the Board to at least three over the next two years. The Board continues to focus on diversity in the context of the overall skills and experience mix on the Board. See section 5.7 for further detail about gender diversity on the Board. In addition, the Board considers and approves the Group’s measurable objectives, and oversees the Group’s progress. Further information about the Group’s measurable objectives and progress against those objectives is set out below.
A summary of our
Our Human Resources Policy and the measurable objectives adopted to support diversity can be found on our website at
www.bhpbilliton.com/home/aboutus/governance.ourcompany/Pages/governance.aspx.
Our approach to diversity is underpinned by key principles, including:
a diverse workforce is necessary to the delivery of our strategy that is predicated on diversification by commodity, geography and market;
our aspiration is to have a workforce that best represents the communities in which our assets are located and our employees live;
actions that support our diversity aspirations should be consistent with our established approach to talent, performance and reward;
achieving an appropriate level of diversity will require structured programs at an early career stage that ensure the development of necessary skills and experience for leadership roles;
measurable objectives in support of diversity will be transparent, achievable over a period of time and fit for purpose;
the set of measurable objectives will focus on (i) enabling a diverse workforce by way of removing barriers to diversity and (ii) establishing appropriate workforce representation targets.
The
Progress against measurable objectives
In FY2011, we committed to three key measurable objectiveobjectives to enhance our gender diversity profile. A summary of those objectives and a report of our progress is set out below:
Continue to focus on increasing female participation in the Accelerated Leadership Development Program (ALDP), moving to 40 per cent for FY2012. We are pleased to report that participation in the ALDP was 29 per cent in FY2011 will beand is 43 per cent for FY2012.
Reviewing our graduate recruitment process and identifying and implementing the developmentnecessary actions to address low female representation. The following are highlights of the work executed during FY2012 to increase female graduate intake representation:
The Australian Graduate Intake Recruitment campaign incorporated a number of new initiatives focused on attracting female graduates such as: targeted digital media advertising, active promotion of female graduate opportunities directly with university faculties and implementationfeaturing graduate opportunities for women in our marketing materials, industry events and engagement activities.
At a global level, the assets have coordinated with universities and mining industry bodies on a range of diversity plans by eachpromotional and sponsorship initiatives to raise the profile of both graduate and broader opportunities for women within the mining sector.
We continued to support the South African GirlEng Program that aims to attract, retain and develop women engineers. The GirlEng Program uses peer mentors, who are final year engineering students and engineers working at BHP Billiton, to inspire high school students and encourage them to study engineering.
The above initiatives, coupled with the continued focus during the selection and recruitment process for graduates globally has demonstrated an improvement in the percentage of female graduates hired from 29.0 per cent in FY2011 to 32.5 per cent in FY2012.
Each CSG, Group Function, Marketing and Minerals Exploration and Marketing as mandated under Group Level Documents. Each will bewas required to develop and implement a diversity plan that takestaking into account the objectives of the Human Resources Policy and the principles set out above. In FY2012, each business was required to refine its multi-year diversity plan by identifying measurable objectives that would result in an improved diversity profile. The measurable objectives identified through this process formed a part of each business’s performance requirements. Each plan must be implemented before the endbusiness’s performance was evaluated against its FY2012 measurable objectives and that evaluation was taken into account in determining bonus remuneration. All businesses made progress against their measurable objectives set out in their multi-year diversity plan. The following are highlights of the financialwork that was delivered:
Manager level and above participated in inclusive leadership workshops to bolster their understanding of unconscious bias and actions that support or impede inclusion.
Manager toolkits were developed and implemented on diversity and inclusion.
Diversity champions were identified and helped drive diversity.
High-potential women were identified as part of the succession management process and development plans were created to foster their development.
Recruitment practices were reviewed to assist with removing unconscious bias and to assist in attracting women.
Clear expectations and targets were set with external recruitment partners in providing qualified diverse candidates.
Mentoring programs for Indigenous employees were delivered.
Focus groups were held with female employees to better understand and identify actions that would help support retention.
Employees and managers participated in diversity awareness events.
Continuous improvement
In FY2013, we will take the following steps to further enhance our gender diversity profile:
• | Embed diversity and inclusion in the behaviours that demonstrateOur Charter values through Our Charter Values in Action. Employees will be assessed on how they demonstrate Our Charter Values in Action as part of the annual performance review process. |
Implement targeted graduate attraction initiatives, focused on shortage disciplines, to increase the proportion of female graduates hired year on year. The requirement
For FY2013, each business will continue to formulatebe evaluated on progress in executing its measurable objectives that form part of its multi-year diversity plan. These will again be taken into account in determining bonus remuneration. Monitoring and implement atracking performance against diversity planplans will continue to be auditedundertaken as part of the Group’s internal compliance requirements. Outcomes from the audits will be linked to the performance scorecards and consequential bonus outcomes. Going forward, progress
Progress against each year’s measurable objectives will continue to be disclosed in the Annual Report, along with the proportion of women in our workforce, in senior management and on the Board. There isare currently one womantwo women on the Board andBoard. For further information on the proportion of women in our workforce and in senior management, is set out in section 2.10, where you can also find further information on diversity and our employee profile more generally.generally, please see section 2.9.
Code of Business Conduct
We have published theBHP BillitonCode of Business Conduct, which is available in four languages. The Code reflects our Charter values of integrity, respect, trust and openness. It provides clear direction and advice on conducting business internationally, interacting with communities, governments and business partners and general workplace behaviour. The Code applies to Directors and to all employees, regardless of their position or location. Consultants, contractors and business partners are also expected to act in accordance with the Code.
TheBHP Billiton Code of Business Conduct can be found at our website atwww.bhpbilliton.com/aboutus/governance.
Insider trading
We have a Securities Dealing document that covers dealings by Directors and identified employees, and is consistent with the Model Code contained in the Financial Services Authority Listing Rules in the UK. The Securities Dealing document restricts dealings by Directors and identified employees in shares and other securities during designated prohibited periods and at any time that they are in possession of unpublished price-sensitive information.
A copy of the Securities Dealing Document can be found at our website atwww.bhpbilliton.com/aboutus/governance.
Global Ethics Advisory Panel
The CEO has formed a Global Ethics Advisory Panel to:
advise on matters affecting the values and behaviours of the Group;
assist business leaders in assessing acceptable outcomes on issues of business ethics;
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Panel members have been selected on the basis of their knowledge of and experience in contemporary aspects of ethics and culture that are relevant to the Group. The panel consists of both employees and external members and is chaired by the Group Executive and Chief People Officer.
Business Conduct Advisory Service
We have established a Business Conduct Advisory Service so that employees can seek guidance or express concerns on business-related issues and report cases of suspected misappropriations, fraud, bribery or corruption. Reports can be made anonymously and without fear of retaliation. Arrangements are in place to investigate such matters. Where appropriate, investigations are conducted independently. Levels of activity and support processes for the Business Conduct Advisory Service are monitored with activity reports presented to the Board. Further information on the Business Conduct Advisory Service can be found in theBHP BillitonCode of Business Conduct.
Political donations
We maintain a position of impartiality with respect to party politics and do not contribute funds to any political party, politician or candidate for public office. We do, however, contribute to the public debate of policy issues that may affect our business in the countries in which we operate.
SEC investigation
In FY2010, an internal investigation was commenced into allegations of possible misconduct involving interactions with government officials. Following requests from the US Securities and Exchange Commission, the Group has disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials. The Group is cooperating with the relevant authorities and the internal investigation is continuing. It is not possible at this time to predict the scope or duration of the investigation or its likely outcomes.
We are committed to maintaining the highest standards of disclosure ensuring that all investors and potential investors have the same access to high-quality, relevant information in an accessible and timely manner to assist them in making informed decisions. A Disclosure Committee manages our compliance with the market disclosure obligations and is responsible for implementing reporting processes and controls and setting guidelines for the release of information.
Disclosure Officers have been appointed in the Group’s CSGs and Group Functions. These officers are responsible for identifying and providing the Disclosure Committee with material information about the activities of the CSG or functional areas using disclosure guidelines developed by the Committee.
To safeguard the effective dissemination of information we have developed a Market Disclosure and Communications document, which outlines how we identify and distribute information to shareholders and market participants.
A copy of the Market Disclosure and Communications document is available online at
www.bhpbilliton.com/home/aboutus/governance.ourcompany/Pages/governance.aspx.
Copies of announcements to the stock exchanges on which we are listed, investor briefings, half-yearly financial statements, the Annual Report and other relevant information are posted to the Group’scan be found on our website atwww.bhpbilliton.com.www.bhpbilliton.com. Any person wishing to receive advice by email of news releases can subscribe atwww.bhpbilliton.com.www.bhpbilliton.com.
Details of our remuneration policies and practices and the remuneration paid to the Directors (Executive and Non-executive) and members of the GMC are set out in the Remuneration Report in section 6 of this Annual Report. Shareholders will be invited to consider and to approve the Remuneration Report at the 2012 AGMs.
5.20 Directors’ share ownership
Non-executive Directors have agreed to apply at least 25 per cent of their remuneration to the purchase of BHP Billiton shares until they achieve a shareholding equivalent in value to one year’s remuneration. Thereafter, they must maintain at least that level of shareholding throughout their tenure. All dealings by Directors are subject to the Group’s Securities Dealing GLD and are reported to the Board and to the stock exchanges.
Information on our policy governing the use of hedge arrangements over shares in BHP Billiton by both Directors and members of the GMC is set out in section 6.3.4 of this Annual Report.
Details of the shares held by Directors are set out in section 7.20 of this Annual Report.
Jane McAloon is the Group Company Secretary. Ms McAloon’s qualifications and experience are set out in section 4.1. The Group Company Secretary is responsible for developing and maintaining the information systems and processes that enable the Board to fulfil its role. The Group Company Secretary is also responsible to the Board for ensuring that Board procedures are complied with and advising the Board on governance matters. All Directors have access to the Group Company Secretary for advice and services. Independent advisory services are retained by the Group Company Secretary at the request of the Board or Board committees. Ms McAloon is supported by Nicola Evans, who was appointed in December 2011 as Deputy Company Secretary of BHP Billiton Limited, and Elizabeth Hobley and Geof Stapledon, who are Deputy Company Secretaries of BHP Billiton Plc. The Board appoints and removes the Company Secretaries.
5.22 Conformance with corporate governance standards
Our compliance with the governance standards in our home jurisdictions of Australia and the UK,United Kingdom, and with the governance requirements that apply to us as a result of our New York Stock Exchange (NYSE) listing and our registration with the SEC in the United States, is summarised in this Corporate Governance Statement, the Remuneration Report, the Directors’ Report and the financial statements.
The Listing Rules and the Disclosure and Transparency Rules of the UK Financial Services Authority require UK-listed companies to report on the extent to which they comply with the Main Principles of Good Governance and Codethe provisions of Best Practice, which are contained in Section 1 of the Combined Code (recently renamed the UK Corporate Governance Code (UK Code), and explain the reasons for any non-compliance. The UK Corporate Governance Code is available online atwww.frc.org.uk/corporate/ukcgcode.cfm.
The Listing Rules of the ASX require Australian-listed companies to report on the extent to which they meet the Corporate Governance Principles and Recommendations published by the ASX Corporate Governance Council (ASX Principles and Recommendations) and explain the reasons for any non-compliance. The ASX Principles and Recommendations are available online atwww.asx.com.au/about/corporate_governance/index.htm.
Both the CombinedUK Code and the ASX Principles and Recommendations require the Board to consider the application of the relevant corporate governance principles, while recognising that departures from those principles are appropriate in some circumstances. We have complied with the provisions set out in Section 1 of the CombinedUK Code and with the ASX Principles and Recommendations throughoutduring the financial period and have continuedcontinue to comply up to the date of this Annual Report.
A checklist summarising our compliance with the UK Combined Code and the ASX Principles and Recommendations has been posted to thecan be found on our website atwww.bhpbilliton.com/home/aboutus/governance.ourcompany/Pages/governance.aspx.
BHP Billiton Limited and BHP Billiton Plc are registrants with the Securities and Exchange CommissionSEC in the US.United States. Both companies are classified as foreign private issuers and both have American Depositary ReceiptsShares listed on the NYSE.
We have reviewed the governance requirements currently applicable to foreign private issuers under the Sarbanes-Oxley Act (US) including the rules promulgated by the Securities and Exchange CommissionSEC and the rules of the NYSE and are satisfied that we comply with those requirements.
Section 303A of the NYSE Listed Company Manual has institutedcontains a broad regime of corporate governance requirements for NYSE-listed companies. Under the NYSE rules, foreign private issuers, such as ourselves, are permitted to follow home country practice in lieu of the requirements of Section 303A, except for the rule relating to compliance with Rule 10A-3 of the Securities Exchange Act of 1934 (audit committee independence) and certain notification provisions contained in Section 303A of the Listed Company Manual. Section 303A.11 of the Listed Company Manual, however, requires us to disclose any significant ways in which our corporate governance practices differ from those followed by US listed companies under the NYSE corporate governance standards. Following a comparison of our corporate governance practices with the requirements of Section 303A of the NYSE Listed Company Manual followed by domestic issuers,US companies, the following significant differences were identified:
The NYSE rules require domestic listed companies to have a Compensation (Remuneration) Committee composed entirely of independent directors. The Board considers that all members of our Remuneration Committee are independent, however notes that the test of independence set out in the Board’s Policy on Independence differs in some respects from that prescribed by the NYSE. The NYSE rules permit the Group as a foreign private issuer to follow home practice rules, both in considering the independence of Directors and in the composition of its Remuneration Committee.
Our Nomination Committee’s Terms of Reference (charter) do not include the purpose of developing and recommending to the Board a set of corporate governance principles applicable to the corporation. While we have a Nomination Committee, it is not specifically charged with this responsibility. We believe that this task is integral to the governance of the Group and is therefore best dealt with by the Board as a whole.
Rule 10A-3 of the Securities Exchange Act of 1934 requires NYSE-listed companies to ensure that their audit committees are directly responsible for the appointment, compensation, retention and oversight of the work of the external auditor unless the company’s governing law or documents or other home country legal requirements require or permit shareholders to ultimately vote on or approve these matters. While the RAC is directly responsible for remuneration and oversight of the External Auditor, the ultimate responsibility for appointment and retention of the External AuditorsAuditor rests with our shareholders, in accordance with UK law and our constitutional documents. The RAC does, however, make recommendations to the Board on these matters, which are in turn reported to shareholders.
While the Board is satisfied with its level of compliance with the governance requirements in Australia, the UKUnited Kingdom and the US,United States, it recognises that practices and procedures can always be improved, and there is merit in continuously reviewing its own standards against those in a variety of jurisdictions. The Board’s program of review will continue throughout the year ahead.
5.125.23 Additional UK disclosure
The information specified in the UK Financial Services Authority Disclosure and Transparency Rules, DTR 7.2.6, is located elsewhere in this Annual Report. The Directors’ Report, at section 7.23, provides cross-references to where the information is located.
5.13.1 Management’s assessment of our internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the Group’s internal control over financial reporting based on the framework and criteria established in Internal Controls – Integrated Framework, issuedThis Corporate Governance Statement was approved by the Sponsoring Organisation of the Treadway Commission (COSO). BasedBoard on this evaluation, management has concluded that internal control over financial reporting was effective as at 30 June 2010. There were no material weaknesses in the Group’s internal controls over financial reporting identified by management
Because of12 September 2012 and signed on its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our independent registered public accounting firms, KPMG and KPMG Audit Plc, have issued an audit report on our internal control over financial reporting which is contained on page F-1 of this Annual Report.
There have been no changes in our internal control over financial reporting during the year ended 30 June 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.behalf by:
5.13.2 Principal Accountant fees and servicesJac Nasser AO
Fees billedChairman
Refer to note 34 ‘Auditor’s remuneration’ in the financial statements for a description of the fees paid to, and the services provided by, our independent accountants.
Policies and procedures
We have adopted a policy entitled ‘Provision of Audit and Other Services by the External Auditor’ covering the Risk and Audit Committee’s pre-approval policies and procedures to maintain the independence of the External Auditor.
The full policy can be accessed in the BHP Billiton internet site at:
www.bhpbilliton.com/aboutus/governance.
In addition to audit services, the External Auditor will be permitted to provide other (non-audit) services that are not, and are not perceived to be, in conflict with the role of the External Auditor. In accordance with the requirements of the Securities Exchange Act and guidance contained in PCAOB Release 2004-001, certain specific activities are listed in our detailed policy which have been ‘pre-approved’ by our Risk and Audit Committee.
The categories of ‘pre-approved’ services are as follows:
Audit services – This is the work that constitutes the agreed scope of the statutory audit and includes the statutory audits of the Group and its entities (including interim reviews). Our Risk and Audit Committee will monitor the Audit services engagements and approve, if necessary, any changes in terms and conditions resulting from changes in audit scope, Group structure or other relevant events.
Audit-related/assurance services – This is work that is outside the required scope of the statutory audit, but is consistent with the role of the external statutory auditor. This category includes work that is reasonably related to the performance of an audit or review and is a logical extension of the audit or review scope, is of an assurance or compliance nature and is work that the External Auditor must or is best placed to undertake.
Tax services – This work is of a tax nature that does not compromise the independence of the External Auditor.
Other advisory services – This work is of an advisory nature that does not compromise the independence of the External Auditor.
Activities not listed specifically are therefore not ‘pre-approved’ and must be approved by our Risk and Audit Committee prior to engagement, regardless of the dollar value involved. Additionally, any engagement for other services with a value over US$100,000, even if listed as a ‘pre-approved’ service, can only be approved by our Risk and Audit Committee, and all engagements for other services, whether ‘pre-approved’ or not, and regardless of the dollar value involved, are reported quarterly to our Risk and Audit Committee.
While not specifically prohibited by our policy, any proposed non-audit engagement of the External Auditor relating to internal control (such as a review of internal controls or assistance with implementing the regulatory requirements including the Securities Exchange Act) must obtain specific prior approval by our Risk and Audit Committee. With the exception of the external audit of the Group financial report, any engagement identified that contains an internal control-related element is not considered to be pre-approved. In addition, whilst the categories shown above include a list of certain pre-approved services, the use of the External Auditor to perform such services shall always be subject to our overriding governance practices as articulated in the policy.
An exception can be made to the above policy where such an exception is in our interests and appropriate arrangements are put in place to ensure the integrity and independence of the External Auditor. Any such exception requires the specific prior approval of our Risk and Audit Committee and must be reported to our Board. No exceptions were approved during the year ended 30 June 2010.
In addition, our Risk and Audit Committee approved no services during the year ended 30 June 2010 pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.12 September 2012
Using this Remuneration Report
The following guide is intended to help the reader to understand and navigate throughuse this Remuneration Report, and to understandReport. It explains the linkages between BHP Billiton’s remuneration strategy and the remuneration outcomes for Directors and senior executives.members of the Group Management Committee (GMC) (as listed in sections 6.7.1 and 6.10.1 of the Remuneration Report). All acronyms used are defined in the Remuneration Report are defined on this contents page, or in the Glossary to thesection 10 of this Annual Report.
Section | Subsection | What it covers | Page number | |||||
6.1 | Message from the Remuneration Committee Chairman | 168 | ||||||
6.2 |
Remuneration |
Remuneration principles |
The key principles that underpin the Group’s remuneration strategy. | 168 | ||||
Strategic alignment |
Shows how BHP Billiton’s remuneration policy is linked to our strategic objectives, and how remuneration is structured to reinforce these linkages. | 169 | ||||||
Risk alignment |
Explains how the structure ofat risk remuneration encourages effective risk management and long-term decision-making by management. | 171 | ||||||
Performance alignment |
Demonstrates the linkages between the Group’s earnings and Total Shareholder Return (TSR) performance and remuneration outcomes for members of the GMC. | 171 | ||||||
6.3 |
Executive |
Determining Total Remuneration |
Describes how the Remuneration Committee determines remuneration outcomes for members of the GMC. | 174 | ||||
Remuneration mix |
Describes the core components of Total Remuneration and their different roles.
| 174 | ||||||
Fixed remuneration
| Details the components of GMC remuneration that are notat risk. | 176 | ||||||
Short-term incentives (STI) |
Outlines the key features of the Group Incentive Scheme (GIS), and Key Performance Indicators (KPIs) and STI rewards for GMC members. | 177 | ||||||
Long-term incentives (LTI) |
Outlines the key features of the Long Term Incentive Plan (LTIP), LTI rewards for GMC members, and proposed changes to the LTIP terms for FY2011. | 182 | ||||||
Share ownership guidelines |
Describes the Group’s minimum shareholding requirements for the Chief Executive Officer (CEO) and other members of the GMC. | 185 | ||||||
6.4 |
Executive |
Senior management in FY2010 |
Shows details of the individuals comprising the Key Management Personnel (KMP), which are the GMC, with a summary of key service contract terms (including termination entitlements). | 186 | ||||
Total remuneration: statutory disclosures |
Provides total remuneration for GMC members calculated pursuant to legislative and accounting requirements. | 186 | ||||||
Equity awards |
Sets out the interests of GMC members resulting from BHP Billiton’s remuneration programs (including those granted and vested during FY2010). | 190 | ||||||
6.5 |
Remuneration |
Explains how the Board and Remuneration Committee make remuneration decisions, including the use of external remuneration consultants. | 196 | |||||
6.6 |
Aggregate |
The total remuneration provided to executive and non-executive Directors compared with the aggregate cap amount as approved by shareholders. | 197 | |||||
6.7 |
Non-executive |
Non-executive Directors in FY2010 |
Shows details of the individual non-executive Directors in FY2010. | 198 | ||||
Remuneration structure |
Explains the basis on which non-executive Director remuneration is set and outlines the components. | 198 | ||||||
Retirement benefits |
Details the retirement benefits payable to participating Directors under the now-closed Retirement Plan. | 199 | ||||||
Total remuneration: statutory disclosures |
Provides total remuneration for non-executive Directors (calculated pursuant to legislative and accounting standards). | 200 |
Section | What it covers | |||
6.1 | Message from the Remuneration Committee Chairman | An introduction to the 2012 Remuneration Report from the Remuneration Committee Chairman, John Buchanan. | ||
6.2 | Remuneration at a glance | An overview of the remuneration of the Group’s Chief Executive Officer (CEO) and what influences remuneration outcomes. | ||
6.3 | Remuneration governance | Explains how the Board and the Remuneration Committee make remuneration decisions, including how they use external remuneration consultants. | ||
6.4 | Our remuneration strategy | Outlines our remuneration policy and how it supports our strategic objectives and is focused on the long term. | ||
6.5 | Setting Total Remuneration for the GMC | Describes how the Board determines Total Remuneration and its core components. | ||
6.6 | How performance impacts remuneration outcomes | An in-depth explanation of the components of remuneration and how performance has impacted remuneration outcomes. | ||
6.7 | Statutory remuneration disclosures for the GMC | Presents total remuneration for the GMC calculated pursuant to legislative and accounting requirements. | ||
6.8 | Equity awards | Provides details of interests in equity awards resulting from BHP Billiton’s remuneration programs. | ||
6.9 | Aggregate Directors’ remuneration | The total remuneration provided to Executive Directors and Non-executive Directors (a UK disclosure requirement). | ||
6.10 | Non-executive Director arrangements | Discloses the individual Non-executive Directors, details their fee arrangements and retirement benefits, and presents their total remuneration calculated pursuant to legislative and accounting standards. |
6.1 Message from the Remuneration Committee Chairman
Over the course ofDear Shareholder,
I am pleased to introduce BHP Billiton’s Remuneration Report for the year executive remuneration has beenended 30 June 2012.
Last year, I shared with you our plan to conduct a prominent topic with shareholders and policy makers, resulting in significant changes to corporate governance requirements. Against this background, the Committee continued to assess the effectivenesscomprehensive review of our remuneration policy.arrangements. We believehave completed the review and, after consideration of all relevant issues, concluded that it remains fundamentally sound.
Our remuneration policy is designed to deliver strong alignment of interests betweenour current arrangements, including the executives and the shareholder. Our policy reflects effective management of business risk and is consistent with the implementation of our business strategy. The assessment of performance is concluded through a balanced scorecard of measures encompassing financial performance, Health, Safety, Environment and Community (HSEC) together with effective capital deployment and individual performance. The total remuneration policy reflects the drivers of sustainable shareholder return, with the Long Term Incentive Plan (LTIP) providing direct alignment to the generation of superior shareholder returns.
For FY2011, we are proposing a small number of changes to the executive LTIP. long-term incentive plan approved by shareholders in 2010, remain
appropriate. Importantly, we believe that the arrangements continue to support our focus on operational excellence, risk management and the execution of the Group’s strategy. While several feasible alternatives were examined, including introducing a ‘second measure’ to operate in conjunction with total shareholder return, we have elected not to introduce significant change at this time. As always, we will continue to seek further improvement opportunities, including an appropriate ‘second measure’. Further details of our review and its outcomes are in section 6.4.4.
Shareholders have provided a strong level of support for the Remuneration Report in recent years through your votes at annual general meetings. In addition, our policies and approach to providing appropriate remuneration for our senior executives have been broadly endorsed during regular consultation sessions with shareholders. In particular our long-term incentive plan, approved in 2004 and applied consistently since, is a five-year plan, a longer period than most other companies employ. This remains a very important feature for the Remuneration Committee and shareholders.
The LTIPCommittee and the Board will continue to adopt an open-door approach to existing shareholders’ views so they can be factored into the Group’s future approach to pay.
Two remuneration outcomes for FY2012 provide tangible evidence of our policy in action. First, as a result of the impairment against the carrying value of the Fayetteville shale gas assets acquired from Chesapeake Energy in March 2011, CEO Marius Kloppers and Group Executive and Chief Executive – Petroleum Mike Yeager advised the Remuneration Committee that they did not wish to be considered for an incentive under the short-term incentive plan for FY2012. The Committee and the Board respected and agreed with that decision. Short-term incentives for other members of the GMC are significantly lower than in FY2011. Second, as a consequence of the base salary review for GMC members undertaken this year, and in recognition of the prevailing business climate, a decision has been in place since 2004taken to freeze the base salaries of GMC members for FY2013. The Board also decided not to adjust remuneration for Non-executive Directors. These outcomes represent an appropriate alignment of remuneration with minimal alteration duringbusiness outcomes.
In this year’s Remuneration Report, we have included a period of considerable industry change. The Committee completednew ‘Remuneration at a thorough reviewglance’ section to provide a clearer explanation of the LTIPremuneration provided to our CEO. This addition, in FY2010. We concluded thatsection 6.2, reinforces the core structure of the plan is robust and remains appropriate. In particular,importance we concluded that performance assessed against relative TSR primarily based on our industry sector and that the challenging five-year performance measurement period should be retained.
The proposed enhancementssee in seeking to the LTIP reflectexplain clearly how BHP Billiton’s portfolio and strategy today and strengthen the alignment of participants with the creation ofremuneration policies support long-term, sustainable shareholder value. Our review identified the need to address the inherent counter cyclicality and excess leverage in the plan. This is achieved by introducing some modest vesting at median and a second relative TSR benchmark measured against a general market index. The effect of the proposals will not weaken the performance requirements. Targets remain stretching, requiring material outperformance of both the sector and market index. The proposals will reduce the volatility of reward outcomes and reduce the maximum outcome in exchange for a higher possibility of some vesting.value creation.
As in prior years, we have strived to produce aJohn Buchanan
Chairman, Remuneration Report that is clear and concise, meeting regulatory requirements, providing you with the information required to assess the linkage between executive remuneration and company performance.Committee
12 September 2012
6.2.1 Context of remuneration at BHP Billiton
At BHP Billiton, our executive remuneration arrangements are designed to attract, retain and motivate highly skilled people and ensure that their interests are aligned with the interests of our shareholders.Executives are only eligible to receive their maximum remuneration if we perform exceptionally well in the short term and our shareholders have also benefited significantly from the relative performance of the Group in the longer term.
Executive remuneration is linked substantially to relative shareholder returns. However, it is also linked to the wellbeing of the Group, meaning that other elements that may not be reflected so directly or immediately in shareholder returns are also taken into account in determining the quantum of executive remuneration, including various health, safety, environment, community (HSEC), financial and capital management measures.
Regulatory requirements also change from time to time, which means our reporting has to change too. We are aware of deliberations taking place in the UK and Australian jurisdictions that will provide additional
guidance to companies in respect of the reporting of executive remuneration; however, those deliberations have not yet reached the stage necessary to provide certainty as to their outcomes for inclusion in this Remuneration Report. We will be making the necessary changes to our Remuneration Report in future years in accordance with those reporting requirements when the outcomes are known.
We have continued to try to improve the transparency of our reporting by including this new section to provide a clearer explanation of the remuneration provided to the CEO, Marius Kloppers, in relation to FY2012.
Further details of all of the remuneration aspects described below can be found in later sections of the Remuneration Report.
6.2.2 Remuneration of the CEO for FY2012
BHP Billiton ensures that the remuneration arrangements for the CEO, Marius Kloppers, include a large proportion that is at risk – meaning that set performance targets must be achieved in order to receive part or all of the remuneration available.
The following table shows the actual remuneration received by the CEO as determined by the Remuneration Committee in relation to the FY2012 and FY2011 performance years. Descriptions of all of the remuneration components in the table are included in section 6.5.2.
Non-statutory table: The ‘non-statutory remuneration’ data set out in the final two columns of the table below do not match the Statutory Total Remuneration Table in section 6.7.2, which complies with the requirements to use Accounting Standards under the Australian Corporations Act 2001 and the UK Companies Act 2006, including allocation of the IFRS fair value of equity awards across the vesting period(1).
Mr Kloppers’ STI is at risk. The Committee determined an individual scorecard of measures for the CEO at the commencement of the performance year. These measures have been chosen as they reward the CEO for overall performance in the current year, comprising both financial performance and delivery against measures that impact the long-term sustainability of the Group, along with his individual contribution to the business. The Board believes this method of assessment is transparent, rigorous and balanced, and provides an appropriate, objective and comprehensive assessment of performance.
The maximum possible cash STI Mr Kloppers can be paid is 160 per cent of base salary, with a target of 80 per cent of base salary.
Mr Kloppers’ STI scorecard includes HSEC, financial, capital management and personal elements. In assessing performance against elements such as financial measures, we do not include impacts that are outside management’s control, such as movements in exchange rates or commodity prices. Removing those elements means remuneration is tied to the things management can control – primarily, safety, volume and cost.
As a result of the impairment against the carrying value of Fayetteville shale gas assets acquired from Chesapeake Energy in March 2011, Mr Kloppers advised the Remuneration Committee that he did not wish to be considered for a STI award for FY2012. The Committee and the Board respected and agreed with that decision. For the FY2011 performance year, Mr Kloppers received 69 per cent of the maximum possible.
Mr Kloppers’ cash STI outcome is ordinarily matched in value by an award of Deferred Shares, vesting in two years. These Deferred Shares are also at risk, because they are matched to the cash STI measured against scorecard outcomes and have service conditions attached.
Mr Kloppers’ LTI outcome is also at risk. The purpose of the LTI is to focus the CEO’s efforts on the achievement of sustainable long-term growth and success of the Group (including appropriate management of business risks) and to align CEO rewards with sustained shareholder wealth creation through the relative US$ Total Shareholder Return (TSR) performance condition.
The five-year duration of the Long-Term Incentive Plan (LTIP) is longer than most other plans in the market, and has received strong voting support from shareholders since it was introduced in 2004.
The actual value on vesting will not be known until the vesting time (i.e. five years from award allocation) and will depend on the level of achievement against the performance condition (as detailed in section 6.8.5), achievement of the service conditions (continued employment or leaving the Group under specific circumstances) and on the share price at the time of vesting. The actual value of the award may ultimately be zero.
Further information on how the Committee determines remuneration and how each component of remuneration is measured for the purposes of that process is provided in section 6.5. Details of how the determinations made by the Committee translate into remuneration as measured by accounting standards under Australian and United Kingdom disclosure regulations are provided in section 6.7.
6.2.3 2007 allocation under the LTIP – tested to the end of FY2012 and vested in FY2013
The five-year performance period for the 2007 LTIP ended on 30 June 2012 and 333,327 Performance Shares that were allocated to the CEO in December 2007 will vest. This was the first LTIP allocation to Mr Kloppers as CEO. The allocation of 225,000 Performance Shares that vested last year was made prior to him becoming CEO. Over the five-year performance period, BHP Billiton’s US$ TSR was 41.6 per cent. In contrast, the weighted average US$ TSR for the peer group against which the Group’s performance was measured was -4.0 per cent. Of the 15 peer companies, only two companies recorded US$ TSR outcomes in excess of BHP Billiton’s 41.6 per cent US$ TSR performance (one at 45.6 per cent and one at 41.9 per cent), and eight peer companies recorded negative US$ TSR performance over the five-year performance period. The impact of this 45.6 per cent US$ TSR outperformance by BHP Billiton over the weighted average was to add US$75.4 billion of shareholder value from 1 July 2007 to 30 June 2012 over and above performance in line with the weighted average of the comparators (as shown in the following graphs).
The table below shows the share prices for BHP Billiton Limited and BHP Billiton Plc in US$ for the three months up to and including 30 June 2007 and 30 June 2012 and the dividends paid over the five-year performance period. The three-month average US$ share prices have been determined with reference to three-month average share prices quoted on the London Stock Exchange in £ and the Australian Stock Exchange in A$, converted to US$ at the relevant three-month average exchange rates.
Share price growth and dividend yield
Three-month average share price to 30 June 2007 | Three-month average share price to 30 June 2012 | Growth in share price over the five-year performance period | Dividends paid over the five years from 1 July 2007 to 30 June 2012 | Indicative dividend yield over the performance period (1) | ||||||||||||||||
BHP Billiton Limited | US$26.30 | US$33.62 | 27.8 | % | US$4.22 | 16.0 | % | |||||||||||||
BHP Billiton Plc | US$24.39 | US$29.04 | 19.1 | % | US$4.22 | 17.3 | % |
(1) | The table shows the dividends paid over the five-year period divided by the three-month average share price to 30 June 2007. The actual calculation of TSR for the LTIP performance hurdle assumes that the dividends paid are reinvested in the relevant company on the date that the dividends are paid. The contribution of dividends to TSR performance will therefore vary from the indicative numbers shown in the table above. |
6.3.1 Board oversight
The Board is responsible for ensuring that the Group’s remuneration arrangements are equitable and aligned with the long-term interests of BHP Billiton and its shareholders. In performing this function, it is critical that the Board is independent of management when making decisions affecting remuneration of the CEO, the CEO’s direct reports and the Group’s employees.
Accordingly, the Board has established a Remuneration Committee to assist it in making decisions affecting employee remuneration. The Committee is comprised solely of Non-executive Directors, all of whom are independent. In order to ensure that it is fully informed when making remuneration decisions, the Committee receives regular reports and updates from members of management (who the Committee invites to attend meetings as and when appropriate) and can draw on services from a range of external sources, including remuneration consultants.
6.3.2 Remuneration Committee
The activities of the Remuneration Committee are governed by Terms of Reference (approved by the Board in May 2011), which are available on our website. The purpose of the Committee is to assist the Board in its oversight of:
the remuneration policy and its specific application to the CEO, the Executive Directors and executives reporting to the CEO, and its general application to all Group employees;
the determination of levels of reward for the CEO and approval of reward to the CEO’s direct reports;
the annual evaluation of the performance of the CEO, by providing guidance to the Group Chairman;
communication with shareholders on the Group’s remuneration policy and the Committee’s work on behalf of the Board;
the Group’s compliance with applicable legal and regulatory requirements associated with remuneration matters;
the preparation of the Remuneration Report to be included in the Group’s Annual Report;
the review, at least annually, of remuneration by gender, the relative proportion of men and women in the Group’s workforce and the Group’s progress in achieving its diversity objectives.
Remuneration Committee members | John Buchanan (Chairman) Carlos Cordeiro Pat Davies (from 1 June 2012) John Schubert | |
Number of meetings in FY2012 | Eight | |
Other individuals who regularly attended meetings (1) | Jac Nasser (Chairman) Shriti Vadera (Non-executive Director) Marius Kloppers (CEO) Karen Wood (Group Executive and Chief People & Public Affairs Officer) Gerard Bond (Head of Group Human Resources to 2 September 2011) Gary Brown (Head of Group Human Resources from 6 September 2011) Richard Doody (Vice President Group Reward and Recognition to 30 November 2011) Andrew Fitzgerald (Vice President Group Reward and Recognition from 1 December 2011) Jane McAloon (Group Company Secretary) Geof Stapledon (Vice President Governance) |
(1) | Other individuals who regularly attended meetings were not present when matters associated with their own remuneration were considered. |
6.3.3 Use of remuneration consultants
The Remuneration Committee seeks and considers advice from independent remuneration advisers where appropriate. Remuneration consultants are engaged by, and report directly to, the Committee. Potential conflicts of interest are taken into account when remuneration consultants are selected and their terms of engagement regulate their level of access to, and require their independence from, BHP Billiton’s management. The advice and recommendations of external advisers are used as a guide, but do not serve as a substitute for thorough consideration of the issues by each Director.
Kepler Associates was appointed by the Committee to act as an independent remuneration adviser to provide specialist remuneration advice and does not provide other services to the Group. Kepler Associates is a member of the UK Remuneration Consultants Group and adheres to its Code of Conduct. During the year, Kepler Associates provided advice and assistance to the Committee on a wide range of matters, including:
analysis and support for the strategic review of GMC remuneration arrangements conducted during the year;
benchmarking of pay of senior executives against comparable roles at a range of relevant comparator groups, including sector and size peers;
provision of information and commentary on global trends in executive remuneration;
calculation of accounting fair values of equity awards and performance analysis for LTI awards;
review of, and commentary on, management proposals;
other ad hoc support and advice as requested by the Committee.
As part of its role, Kepler Associates provided ‘remuneration recommendations’ to the Committee during the year. Each time Kepler Associates provides a remuneration recommendation, Kepler Associates provides a declaration that the remuneration recommendation was made free from undue influence by the member of Key Management Personnel (KMP) to whom the recommendation relates. The Board considered the processes outlined above, the constraints incorporated into Kepler Associates’ terms of engagement, the implementation of a comprehensive protocol for the engagement of remuneration advisers and the receipt of the declaration of no undue influence. It is satisfied that the remuneration recommendations received from Kepler Associates were made free from undue influence by any of the members of KMP to whom the recommendations related.
Total fees paid to Kepler Associates for the above services for the period from 1 July 2011 to 30 June 2012 were £362,000, of which £54,000 was for attendance at Committee meetings and commentary on management proposals, and a total of £98,000 for the provision of remuneration recommendations. The remainder is mainly a non-recurring item relating to the review of GMC remuneration arrangements conducted during the year, advice on arrangements for new KMP and the provision of technical advice on executive remuneration.
Management also appoints external firms from time to time to assist with remuneration benchmarking, data provision and the like; however, Kepler Associates is the only remuneration consultant appointed by the Committee. No other remuneration adviser provided ‘remuneration recommendations’ during the year in relation to KMP.
6.3.4 Prohibition on hedging of BHP Billiton shares and equity instruments by KMP
KMP are not allowed to protect the value of any unvested BHP Billiton securities allocated to them under employee programs or the value of shares and securities held as part of meeting BHP Billiton’s Minimum Shareholder Requirement (MSR) (as described in section 6.3.5). The policy also prohibits KMP from using unvested BHP Billiton securities as collateral in any financial transaction, including hedging and margin loan arrangements. Any securities that have vested and are no longer subject to restrictions or performance conditions may be subject to hedging arrangements or used as collateral, provided that consent is obtained from
BHP Billiton in advance of the employee entering into the arrangement. BHP Billiton treats compliance with this policy as a serious issue, and takes appropriate measures to ensure that the policy is adhered to.
6.3.5 Share ownership guidelines
The CEO is required to hold BHP Billiton securities with a value at least equal to 300 per cent of (i.e. three times) one year’s pre-tax (gross) base salary under the Group’s MSR policy. For other members of the GMC, the minimum requirement is 200 per cent of (i.e. two times) one year’s pre-tax (gross) base salary. The value of the securities for the purposes of the policy is the market value of the underlying shares. Unvested securities do not qualify. Most members of the GMC currently hold sufficient securities to meet these requirements. Those that do not are expected to grow their holdings to the required level from the scheduled vesting of employee awards over an acceptable time frame. Detailed share ownership information of the CEO and members of the GMC can be found in sections 7.20 and 7.21 of this Annual Report.
Under the policy, employees are not required to meet the holding requirement before awards are allocated to them, but if they are not holding the required number of shares at the time of exercise of an award, then they will be prohibited from selling all of the underlying shares on exercise.
This section outlines the overarching approachremuneration strategy and framework that guides decisions on remuneration arrangementsdesign and outcomes for senior executives, including the GMC members. Details
6.4.1 The overarching principles of GMC membership are included in section 6.4.1.
6.2.1 Remuneration principlesour remuneration policy
The key principles of our remuneration policy are unchanged and are to:
support the execution of the Group’s business strategy in accordance with a risk-appetiterisk framework that is appropriate for the organisation;
provide competitive rewards to attract, motivate and retain highly-skilledhighly skilled executives willing to work around the world;
apply demanding key performance measures, including key financial and non-financial measures of performance;
link a large component of pay to our performance and the creation of value for our shareholders;shareholders from relative performance;
ensure remuneration arrangements are equitable and facilitate the deployment of people around our businesses;the Group;
limit severance payments on termination to pre-established contractual arrangements (which do not commit us to making any unjustified payments).
The Remuneration Committee is confident that these principles which were applied in the year under review and are expected to be applied in FY2011 and beyond, continue to meet the Group’s objectives.
6.2.2 Strategic alignment
The Remuneration Committee recognises that we operate in a global environment and that our performance depends on the quality of our people. Remuneration is used to reinforce the Group’s strategic objectives, and the committee keeps the remuneration policy under regular review to ensure it is appropriate for the needs of the Group.
The diagram below illustrates how BHP Billiton’s6.4.2 Our remuneration policy is linkedfocused on the long term
Our remuneration arrangements are designed to the six key drivers of our strategy and how the remuneration structures for executives (including the members of the GMC) serve to support and reinforce these linkages.
6.2.3 Risk alignment
The global financial crisis has heightened the focus on risk management within organisations, and in particular on remuneration frameworksensure that work to ensure executives take a long-term approach to decision-making - minimisingand minimise activities that focus only on short-term results at the expense of longer termlonger-term business growth and success.
The Remuneration Committee has considered the ways in which risk management isand the long-term horizon are reflected throughout BHP Billiton’s reward structureremuneration arrangements for all executives, and is satisfied that itthe approach reinforces the desired behaviours.
This is largely achieved through the Group’s approach to STI and LTI rewards, which comprise a significant portion of total remuneration for the members of the GMC.
The equity component of STI rewards is deferred for a two-year period, and performance under the LTIP is measured over a five-year period. The actual rewards received by members of the GMC therefore reflect the Group’s performance and share price over an extended period.
It is the Committee’s view that this provides an appropriate focus on BHP Billiton’s sustained performance beyond the end of the initial measurement period. This approach also provides a transparent mechanism for clawback or adjustment in the event of a restatement of Group results, through changes to the vesting or non-vesting of deferred equity.
In addition, STI and LTI outcomes are not driven by a purely formulaic approach. The Remuneration Committee applies a qualitative judgementholds some discretion to determining STI rewards and to vesting under the LTIP, and may determine that rewards are not to be provided or vested in circumstances where the committee determines it towould be inappropriate or would provide unintended outcomes. The Remuneration Committee does not apply anyhas no discretion to allow vesting when performance hurdlesconditions have not been satisfied.
6.4.3 Our remuneration policy supports6.2.4 Performance alignmentOur BHP Billiton Charter
While the Board recognises that market forces necessarily influence remuneration practices, it strongly believes that the fundamental driver behind our remuneration structure is business performance. Accordingly, while target remuneration is structured to attract and retain executives, the amount of remuneration actually received is dependent on the achievement of superior business and individual performance and on generating sustained shareholder value.
Short-term performance indicators and outcomes
An individual scorecard of measures is set for each executive at the commencement of each financial year. These scorecards include the key financial and non-financial measures that the Board believes will drive BHP Billiton’s performance. At the conclusion of the financial year, each individual’s achievement against their measures is assessed by the Remuneration Committee and Board and their cash STI reward is determined. This is matched with an allocation of Deferred Shares or Options (or a combination of the two), to which the individual will not have access for two years (unless they leave the Group under specific circumstances).
The relationship between STI rewards and the performance of the Group over the past five years indicates the success of our remuneration strategy in aligning executive rewards with shareholder interests (as shown in the graphs below). Further details of the Group’s Attributable Profit and Basic Earnings per Share over the past five years can be found in section 3 of this Annual Report (including descriptions of these terms).
Long-term performance indicators and outcomes
Under the LTIP, vesting outcomes are directly linked to BHP Billiton’s relative TSR performance, which is a measure of share price and dividend performance as described in the table in section 6.3.5. As detailed in that section, the LTIP runs over a performance period of five years. The performance hurdle requires BHP Billiton’s TSR to exceed the weighted median TSR of a group of peer companies by 5.5 per cent per annum (on average over the five years) which is 30.7 per cent over five years. Details of the comparator group companies are set out in section 6.4.3.
The performance period is an important design feature for the Group, as the Remuneration Committee believes it reflects not only the long-term nature of our business, but gives sufficient time to ensure that there is real alignment with shareholders.
2004 allocations under the LTIP – vested in FY2010
The current LTIP was introduced in 2004, with the first five-year performance period finishing on 30 June 2009 and vesting occurring in August 2009. The vested amounts for each GMC member are shown in section 6.4.3.
Over the performance period, BHP Billiton’s TSR was 220 per cent. In contrast, the average TSR for the peer group against which the Group’s performance was measured was 71.8 per cent. The impact of our performance was to add US$80.6 billion of shareholder value from 1 July 2004 to 30 June 2009 over and above performance in line with the average of the peer group.
2005 allocations under the LTIP – tested to the end of FY2010
BHP Billiton’s TSR performance from 1 July 2005 to 30 June 2010 was assessed by the independent adviser to the Remuneration Committee as 187.7 per cent compared with an average TSR performance for the comparator group companies of 113.6 per cent. This outperformance of 74.1 per cent based on BHP Billiton’s 1 July 2005 market capitalisation of US$80 billion represents outperformance of US$59.2 billion (over and above performance in line with the average of the peer group).
The Remuneration Committee has considered the TSR outcome in the context of Group financial performance over the five-year performance period and determinedrecognises that the recorded TSR outperformance is a genuine reflection of BHP Billiton’s underlying financial outperformance. This qualitative judgement, which is applied before vesting is confirmed, isremuneration has an important risk management aspectrole to ensure that vesting is not simply driven by a formula which may give unexpected or unintended remuneration outcomes.
The graphs below highlight BHP Billiton’s strong comparative performance againstplay in supporting the LTIP comparator group companiesimplementation and the ASX 100 and FTSE 100. Further detailsachievement of the Group’s share pricestrategy and dividends performance overour ongoing performance.
Our Charter sets out our purpose, strategy, values and how we judge our success.Our Charter is shown on the past five years can be found in sections 1.4.1 and 11.4inside front cover of this Annual Report.
6.3 ExecutiveThe diagram below illustrates how BHP Billiton’s remuneration outcomespolicy and arrangements serve to supportOur Charter, and specifically how those arrangements reinforce the achievement of our success as set out inOur Charter, and focus executives on a long-term approach and on minimising business risks.
This section describes how executive
6.4.4 Review of GMC remuneration is determined annually byarrangements during FY2012
As foreshadowed in our 2011 Remuneration Report, the Remuneration Committee has reviewed the remuneration arrangements for members of the GMC. The review began in 2011 and Board. This information iscontinued into 2012.
Our current remuneration arrangements, including the changes to the LTIP approved by shareholders at the 2010 Annual General Meetings (AGMs), have served us well. The changes in 2010 included several measures designed to providedeleverage the LTIP and reduce the number of awards granted accordingly; for example, through TSR performance being benchmarked against a complementary ‘shareholder-friendly’ viewbroader comparator group (sector peer companies 67 per cent and Morgan Stanley Capital Index (MSCI) World index 33 per cent). ‘Out-pay for out-performance’ had been an explicit design feature in 2004, but by 2010 there was a recognition – among shareholders, the Board and management – that leverage should be reduced.
Notwithstanding these changes in 2010, the Committee remains cognisant of the changing needs of shareholders, participants and the Group, and a review was considered prudent. The Committee’s aims in undertaking the review were to ensure our remuneration policy continues to reinforce the Group’s strategy; to review the external environment in which we operate and how that environment may evolve; consider the global market status, the risk environment and strategic priorities for BHP Billiton; develop proposals that support our focus on operational excellence, risk management and execution of the Group’s strategy; and meet expectations inherent in effective governance and clear reporting.
The review confirmed that our current remuneration arrangements, including the changes to the LTIP approved in 2010, remain appropriate and support our focus on operational excellence, risk management and the execution of the Group’s strategy. Accordingly, despite there being several options that have some attractive features, including the introduction of long-term KPIs as a second LTIP performance measure in addition to TSR, the statutoryCommittee concluded that a compelling case has not been made to change our arrangements at this time.
Our current relative TSR approach is well understood, transparent and accountingsimple, and is demonstrably aligned to the interests of shareholders, particularly through its five-year duration, longer than most other LTI plans in the market. It is difficult to identify substantive long-term KPIs as a ‘second measure’ that are differentiated from TSR or are not already covered in the STI plan. The Committee noted that such KPIs do not generally have the transparency and rigour preferred by both shareholders and participants.
Nevertheless, the Committee believes there is merit in the search for a ‘second measure’ that does not replicate TSR or the STI metrics, to operate in conjunction with TSR to measure performance under the LTIP. The Committee is also aware through consultations with shareholders that this is a shared view, albeit with disparate views on the nature of the ‘second measure’. Accordingly, the Committee will continue to seek further opportunities to enhance our LTIP and our remuneration as set out in section 6.4.2.arrangements generally.
The information inIn conducting this section demonstrates howreview and reaching this conclusion, the remuneration strategy (as described in section 6.2) translates into practiceCommittee has been supported by its independent adviser, Kepler Associates.
6.5 Setting Total Remuneration for the members of the GMC (as listed in section 6.4.1), and the basis for change (if any) in each remuneration component.
6.3.1 Determining6.5.1 How Total Remuneration is determined
The Remuneration Committee considers the appropriate level of Total Remuneration for each member of the GMC by examining the total rewardremuneration provided to comparable roles in organisations of similar global complexity, size, reach and reach. Total Remuneration comprises the components set out in the table in section 6.3.2 below.industry.
Each year, the committee’sCommittee’s independent adviser, Kepler Associates, sources and consolidates relevant remuneration data for appropriate roles, based on their analysis of relevant organisations and markets. The adviser prepares a comparison to current GMC remuneration, but does not make specific recommendations regarding individual executives’ remuneration. For more information on the services provided to the Committee by Kepler Associates, please refer to section 6.3.
From this market comparison, the Remuneration Committee determines the appropriate Total Remuneration level for each individual, taking into account their location, skills, experience and performance within the Group. In doing so,
For
the Committee recognises that levels of remuneration should be sufficient to attract, motivate and retain highly skilled executives, but also that the Group should avoid paying more information on the services provided to the Remuneration Committee by Kepler Associates, please refer to section 6.5.than is necessary for this purpose.
6.3.2 Remuneration mix
The committee then considers the appropriate mix and weighting of different remuneration components which make up each individual’s Total Remuneration package.is allocated across different elements of remuneration to reflect a balance between fixed and variable remuneration and between short- and long-term incentives. The mix of remuneration packageelements and how the remuneration outcome from each element is impacted by performance are described in detail in section 6.6.
6.5.2 Total Remuneration for each GMC member includes fixed andat risk components, which are designed to deliver appropriate ‘pay’ over a one to fivethe FY2012 performance year time horizon.At risk components are subject to performance conditions and to ongoing service.
The components of Total Remuneration which are considered byfor each member of the committee are shownGMC in respect of the table below. More detail in regard to each componentFY2012 performance year is included in the following sections.
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The Remuneration Committee assesses Total Remuneration target opportunities on an aggregate basis before determining the level of each remuneration component. The delivery time frame of each component varies, so the Total Remuneration determined by the Remuneration Committee, and delivery of these elements occurs over different time frames as shown in August 2009 consisted of:the table and diagram below.
The process followed by the Committee was as follows:
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Aa review of base salary effective from 1 September 2011 applying over the period from 1 September 2011 to 31 August 2012 (along with retirement benefits as a percentage of base salary) was conducted. As a consequence of the base salary review undertaken this year, and in recognition of the prevailing business climate, a decision has been taken to freeze the base salaries of GMC members for FY2013. Base salary shown in the table below was provided over the period 1 July 2011 to 30 June 2012;
benefit policy (under which other benefits shown in the table below were provided over the period 1 July 2011 to 30 June 2012) was confirmed;
a target STI for the 2010 financial year,was determined to reflect performance from 1 July 2011 to 30 June 2012, with performance assessed in August 2010 as described in section 6.3.4. 2012:
Cash awards will be provided in September 2010, and 2012;
Deferred Shares and/or Options are expected to be allocated in December 20102012, following the Group’s 2010 Annual General Meetings;2012 AGMs;
the fair value of an LTI award for each member of the GMC was determined as the target Total Remuneration (determined by the Committee) less the sum of base salary, benefits and target STI. An LTI award of Performance Shares was allocated in December 2009, as described in section 6.3.5,2011, following the Group’s 2009 Annual General Meetings.2011 AGMs.
Non-statutory table: The following table shows Total Remuneration for the GMC as a result of the determinations of the Committee. The crystallisation of the Deferred STI and the LTI awards will be after a two-year and five-year period respectively and will depend on service and performance conditions. Given the requirements to use Accounting Standards under the Australian Corporations Act 2001 and the UK Companies Act 2006 for determining and measuring executive remuneration, including allocation across the vesting period for longer-term incentives, the ‘non-statutory remuneration’ data set out below do not reconcile directly to the Statutory Total Remuneration Table as shown in section 6.7.2.
US dollars | Total Remuneration as determined by the Remuneration Committee in respect of FY2012 | Base salary | Retirement benefits | Other benefits (1) | Cash STI awards to be provided in September 2012 | Deferred STI awards to be allocated in December 2012 (face value) | LTI awards allocated in December 2011 (fair value) | |||||||||||||||||||||
Marius Kloppers (2) | 6,631,744 | 2,201,000 | 880,400 | 109,344 | 0 | 0 | 3,441,000 | |||||||||||||||||||||
Alberto Calderon | 4,776,861 | 1,136,667 | 397,833 | 231,307 | 603,444 | 603,444 | 1,804,166 | |||||||||||||||||||||
Mike Henry (3) | 1,788,592 | 591,667 | 147,917 | 101,808 | 473,600 | 473,600 | – | |||||||||||||||||||||
Graham Kerr (3) | 1,889,854 | 591,667 | 147,917 | 203,070 | 473,600 | 473,600 | – | |||||||||||||||||||||
Andrew Mackenzie | 4,686,513 | 1,183,333 | 426,000 | 13,504 | 629,755 | 629,755 | 1,804,166 | |||||||||||||||||||||
Marcus Randolph | 5,361,597 | 1,271,000 | 432,140 | 57,832 | 892,693 | 892,693 | 1,815,239 | |||||||||||||||||||||
Karen Wood | 3,771,545 | 999,750 | 343,914 | 14,446 | 561,475 | 561,475 | 1,290,485 | |||||||||||||||||||||
J Michael Yeager (2) | 3,679,258 | 1,281,333 | 458,717 | 123,969 | 0 | 0 | 1,815,239 |
(1) | Other benefits are as described in footnotes (3) and (4) to the table in section 6.7.2. |
(2) | As a result of the impairment against the carrying value of Fayetteville shale gas assets acquired from Chesapeake Energy in March 2011, both Marius Kloppers and Mike Yeager advised the Remuneration Committee that they did not wish to be considered for a STI award for FY2012. The Committee and the Board respected and agreed with that decision. |
(3) | For Graham Kerr and Mike Henry, the table shows the base salary and benefits earned from 28 November 2011 for their new roles as GMC members (as detailed in section 6.7.1) and the pro-rated STI award provided to them for performance during the period from 28 November 2011 to the end of the FY2012 performance year. Mr Kerr and Mr Henry received awards under the Management Award Plan (MAP) long-term incentive plan prior to their appointment as GMC members (as described in section 6.8.3). Their initial allocation of LTI awards as GMC members under the LTIP will be determined by the Committee and allocated in December 2012. |
6.6 How performance impacts remuneration outcomes
6.6.1 Remuneration mix
While the Board recognises that market forces necessarily influence remuneration practices, it strongly believes that the fundamental driver of our remuneration arrangements should be business performance. Accordingly, while target Total Remuneration is structured to attract and retain executives, the amount of remuneration actually received is dependent on the achievement of superior business and individual performance and on generating sustained shareholder value from relative performance. At risk components of remuneration therefore represent a significant portion of Total Remuneration, are subject to performance conditions and to ongoing service, and are designed to deliver appropriate pay over one-, three- and five-year time horizons.
Maximum and actual remuneration mix
The diagram below illustrates the relative proportion of these componentseach remuneration component for the members of the GMC.
Base salary forms the foundation of the remuneration mix and each of the other components is described as a percentage of base salary. The average mix fordiagram therefore shows base salary as 100 per cent with each additional component relative to that base salary.
The first column of the GMC members is shown below, comparingactualTotal Remuneration received, todiagram shows the mix that would have applied if themaximumat risk rewards had been earned. The mix is the same for all GMC members. The second column shows the comparative actual Total Remuneration received in relation to FY2012 as shown in the table in section 6.5.2 (as an average across the six full-year GMC members, excluding Mike Henry, Graham Kerr and Alex Vanselow).
6.3.36.6.2 Fixed remuneration
Fixedremuneration at BHP Billiton comprises baseBase salary together with retirement
Base salary is reviewed annually and other benefits.Fixed remuneration is notat risk.any changes are effective from 1 September each year. It is determinedbenchmarked relative to comparable roles in global companies of similar complexity, size, reach and reach, but set within the Total Remuneration mix with reference toindustry and reflects an individual’s responsibilities, location, performance, qualifications and experience within the Group.
Base Reviews also consider general economic conditions and salary
reviews across the rest of the Group. As a consequence of the base salary review undertaken this year, and in recognition of the prevailing business climate, a decision has been taken to freeze the base salaries of GMC members for FY2013. Base salary is generally reviewed annuallystated and effective from 1 September each year. The following table shows the base salary provided to each GMC member in the currency in which they were determined by the Remuneration Committee at the time of each review (salaries are shownpaid in US dollars unless otherwise noted). The Remuneration Committee determined that from 1 September 2009for all GMC salaries would be expressed in US dollars.members.
Non-statutory table: Base salary amounts in the table below are effective 1 September and are not linked to any specific financial year. They therefore do not match with the 1 July 20092011 to 30 June 20102012 salaries shown in section 6.4.2sections 6.5.2 and 6.7.2.
Name | 1 September 2008 base salary | 1 September 2009 base salary | |||||||||||||||||||||||
US dollars | 1 September 2010 | 1 September 2011 | % change | 1 September 2012 | % change | ||||||||||||||||||||
Marius Kloppers | 1,979,500 | 2,038,885 | 2,130,000 | 2,215,200 | 4.0 | 2,215,200 | 0.0 | ||||||||||||||||||
Alberto Calderon | 1,056,602 | 1,057,000 | 1,100,000 | 1,144,000 | 4.0 | 1,144,000 | 0.0 | ||||||||||||||||||
Mike Henry(1) | – | 1,000,000 | – | 1,000,000 | 0.0 | ||||||||||||||||||||
Graham Kerr(1) | – | 1,000,000 | – | 1,000,000 | 0.0 | ||||||||||||||||||||
Andrew Mackenzie | £ | 550,000 | 1,057,000 | 1,100,000 | 1,200,000 | 9.1 | 1,200,000 | 0.0 | |||||||||||||||||
Marcus Randolph | 1,182,751 | 1,182,751 | 1,230,000 | 1,279,200 | 4.0 | 1,279,200 | 0.0 | ||||||||||||||||||
Alex Vanselow | A$ | 1,337,500 | 1,057,000 | ||||||||||||||||||||||
Karen Wood | A$ | 1,043,250 | 930,000 | 967,500 | 1,006,200 | 4.0 | 1,006,200 | 0.0 | |||||||||||||||||
J Michael Yeager | 1,148,549 | 1,190,000 | 1,240,000 | 1,289,600 | 4.0 | 1,289,600 | 0.0 |
Note
(1) | For Graham Kerr and Mike Henry the |
Retirement benefits
As part offixed remuneration, all GMC members are entitled to retirement benefits under defined contribution plans (for all new entrants) and legacy defined benefit plans. New entrants are given a choice of funding vehicles: a Defined Contribution Plan, an Unfunded Retirement Savings Plan, an International Retirement Plan or a cash payment in lieu. Employees in legacy defined benefit plans continue to accrue benefits in those plans for past and future service unless they have elected to transfer to a defined contribution plan. The table below sets out the retirement benefits payable to each individual.member of the GMC during the year.
Name | Pension | % of base salary | Name | Pension | % of base salary | |||||||||
Marius Kloppers(1) | Defined Contribution | 40.0 | Marcus Randolph | Defined Contribution | 34.0 | |||||||||
Alberto Calderon | Defined Contribution | 35.0 | Alex Vanselow(2) | Defined Benefit | 38.0 | |||||||||
Mike Henry | Defined Contribution | 25.0 | Karen Wood | Defined Contribution | 34.4 | |||||||||
Graham Kerr | Defined Contribution | 25.0 | J Michael Yeager | Defined Contribution | 35.8 | |||||||||
Andrew Mackenzie | Defined Contribution | 36.0 |
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Notes
Prior to his appointment as CEO, and under the terms of a pre-existing contract, Marius Kloppers had the choice of a |
FY2012 from 7.5 per cent in FY2011. Upon his succession as CEO on 1 October 2007, Mr Kloppers relinquished all future defined benefit entitlements. |
US dollars
| Increase in accrued pension during the year | Increase in transfer value over the year | Transfer value of total accrued pension | |||||||||||||
Accumulated total accrued | ||||||||||||||||
at 30 June 2012 | at 30 June 2011 | |||||||||||||||
31,348 | 446 | 174,965 | 778,527 | 603,562 |
The increase in accrued pension during the year is the difference between the accrued pension at the end of the previous year and the accrued pension at the end of the current year without any allowance for inflation. The increase in transfer value over the year is the difference between the transfer value at the end of the year and the transfer value at the beginning of the year less the contributions made to the scheme by the participant (nil), also without any allowance for inflation. The increase in accrued pension after making an allowance for inflation of 5.0 per cent was (US$1,099) and the transfer value of that increase less the contributions made to the scheme by the participant was (US$27,293).
(2) | The treatment of these benefits upon Alex Vanselow’s retirement is described in section 6.7.2. |
Other benefits
GMC members are reimbursed for costs such as health and other insurances, tax return preparation (sometimes in multiple jurisdictions and to a capped amount) and relocation allowances and assistance. Other benefits also include any payments in lieu of annual leave for GMC members based in the US, as they are not allowed to roll forward annual leave entitlements from one financial year to the next. The total value of benefits provided to each GMC member during FY2012 is shown in the tables in section 6.5.2 and 6.7.2.
Shareplus all-employee share purchase plan
Like all permanent employees, membersMembers of the GMC are also eligible to participate in Shareplus, an all-employee share purchase plan. Participants in Shareplus contribute up to US$5,000 per annum from their post-tax base salary (capped at US$5,000 per year) to acquire sharesparticipate in BHP Billiton. Each ofShareplus, the GMC members chose to contribute the maximum allowable amount to the plan from their post-tax salary in FY2010.
Provided the participant remains employed by BHP Billiton on the third anniversary of the shares being acquired, the plan provides for a matching grant of shares on a 1:1 basis (‘Matching Shares’). The accounting value of the rights acquired is included in remuneration over theall-employee share purchase period (as per the table in section 6.4.2).
The first grant of Matching Shares was made to participants (including the members of the GMC) on 1 April 2010, andplan. More details of the resulting shareplan and of the current holdings forof GMC members under the plan are shown in section 6.4.3. Further details regarding Shareplus are6.8.2.
The Remuneration Committee does not consider the value of these benefits when determining Total Remuneration as shown in section 6.5.2. An IFRS fair value is ascribed to any Matched Shares and included in remuneration as described in section 6.7.2.
6.6.3 Short-term incentives
Setting performance measures
An individual scorecard of measures is set out in note 32 of this Annual Report.
6.3.4 Short-term incentives
STI targets are setfor each executive at the beginningcommencement of each financial year, with actual STI rewards determined at the end of each year under the Group Incentive Scheme (GIS).
The GIS rewards the executives for achieving annual goals in regard to critical KPIs of the Group. Each individual has a scorecard of These measures that are linked to the achievement of the business strategy and financial outcomes and also individual non-financial objectives reflecting theirindividual contribution to the businessbusiness. The Sustainability Committee assists the Remuneration Committee in determining appropriate HSEC metrics to be included in GMC scorecards.
The GMC scorecard for the FY2012 performance year is shown below. The scorecard measures and their relative weightings have been chosen by the Remuneration Committee as the Committee believes that they will appropriately incentivise members of the GMC to drive overall performance in the current year, including both financial performance and delivery against measures that impact the long-term sustainability of the Group.
As a result of the impairment against the carrying value of Fayetteville shale gas assets acquired from Chesapeake Energy in March 2011, both Marius Kloppers and Mike Yeager advised the Remuneration
Committee that they did not wish to be considered for a STI award for FY2012. The Committee and the management team.Board respected and agreed with that decision, and would have reached the same conclusion had they been required to consider the STI award for those executives for FY2012. In addition, this impairment impacted the outcomes for the Group PAT metric for the STI award for FY2012. Accordingly, this has resulted in no incentive attributable to the Group PAT metric being awarded for any current GMC members in office for all of FY2012.
This scorecard applies for Mr Henry and Mr Kerr for the portion of the year from their appointment as members of the GMC effective 28 November 2011.
Determining STI outcomes
At the conclusion of the financial year, each executive’s achievement against their measures is assessed by the Remuneration Committee and the Board and their STI award determined. The Remuneration Committee is assisted by the Sustainability Committee and by the Risk and Audit Committee in relation to assessment of performance against HSEC and financial measures, respectively. The Board believes this method of assessment is transparent, rigorous and balanced and provides an appropriate, objective and objectivecomprehensive assessment of performance.
Cash awardsFor the CEO and GMC members without direct CSG responsibility, all non-individual measures are paid in September following the release of the Group’s annual results. The rules of the GIS outline the circumstances in which participants may be entitled to a cash award for the financial year in which they cease employment. Such circumstances dependassessed on the reason for leaving. The only circumstancesbasis of Group performance. For those GMC members with direct CSG responsibility, measures are assessed either on Group or CSG performance as shown in which the Remuneration Committee has considered using its discretion to allow members of the GMC to receive a cash award in event of departure is for those individuals who have retired or are retiring.
The value of any cash award is matched by an equivalent face value of Deferred Shares (or an approximately equivalent value of Options, or a combination of the two, at the election of the participant). Deferred Shares and Options are allocated in December after the Annual General Meetings. Allocations to the CEO are subject to shareholder approval.
Deferral of short-term incentives
Each Deferred Share and each Option is a conditional right to acquire one ordinary BHP Billiton share upon satisfaction of the vesting conditions. It will not deliver any value to the holder for at least two years from the end of the financial year (unless the executive’s employmenttable below, with the exception of HSEC, which includes consideration of both Group ends earlier in specific circumstances such as on death, serious injury, disability or illness, retirement and redundancy/retrenchment).CSG performance. The Remuneration Committee regards it as an important principle that Deferred Shares and Options will be forfeited by the individual in specific circumstances, including if they resign from the Group without the committee’s consent (or are terminated for cause) within the two-year vesting period. Deferred Shares are not ordinary shares, and do not carry entitlements to ordinary dividends or other shareholder rights. Dividends are not received by the executives during the vesting period. A Dividend Equivalent Payment (as described in section 6.4.2) will be provided when the vesting period is over and the executive exercises their Deferred Shares and/or Options. This payment is not made in relation to any securities that are forfeited during the vesting period.
Deferred Shares that vest may be exercised at no cost to the participant. Options have an exercise price which reflects the market price of BHP Billiton shares at the time of allocation, and a greater number of Options are therefore allocated if an executive chooses this alternative. The terms of the GIS prohibit participants from entering into hedge arrangements in respect of unvested Deferred Shares and Options. Upon vesting, Deferred Shares and Options may be exercised subject to the Securities Dealing Procedure (as described in section 6.5).
The following diagram illustrates the operation and timeline of the GIS in relation to STI rewards determined as part of Total Remuneration in August 2009 (as described in section 6.3.2). Two years will elapse between the assessment of performance against KPIs in August 2010 and the vesting of any deferred portion of STI rewards in August 2012.
Determining STI outcomes
The key measures for the GMC in FY2010, and the level of achievement against Groupeach of the non-individual measures arefor the FY2012 performance year as determined by the Remuneration Committee is set out below. The Remuneration Committee believes thatin the KPIs set, and the relative weightings given to the different categories of KPI, effectively incentivise short-term performance.
For the Group CEO and the other Group Executives, all measures are assessed on a Group basis. For the Business CEOs, the weighting of assessment for the non-financial measures is equally split between the Group and the businesses for which they are responsible.table.
FY2010 key performance indicators | Weighting for Group CEO | Weighting for Business CEOs(1) | Weighting for other Group Executives(2) | FY2010 assessment for Group-based measures(3) | |||||||
Health, Safety, Environment and Community (HSEC) - Total Recordable Injury Frequency (TRIF) | 15 | % | 15 | % | 15 | % | Overall performance in HSEC was considered to be between Threshold and Target reflecting the disappointing safety performance in 2010. The Sustainability and Remuneration Committees reviewed performance including the existence and cause of the five fatalities that occurred during the year.(4)Positive progress was made on key Health and Environment initiatives. | ||||
Profit After Tax (adjusted for foreign exchange, price and exceptional items) | 50 | % | 25 | % | 25 | % | Performance was considered to be between Target and Stretch, reflecting positive outcomes against targets, primarily in respect of product volumes and cost management. | ||||
Adjusted EBIT for the businesses for which the Business CEO is responsible | — | 25 | % | — | Performance was considered to be between Target and Stretch, reflecting positive outcomes against targets, primarily in respect of product volumes and cost management. | ||||||
Capital management - cost and schedule | 15 | % | 15 | % | 10 | % | Overall performance was between Target and Stretch for a portfolio of 11 major projects. This reflected all projects essentially working to schedule. One project experienced cost overruns while all others delivered to capital target or under. | ||||
Individual measures based on contribution to management team, key project deliverables of each role, business and industry leading initiatives, etc | 20 | % | 20 | % | 50 | % | Personal performance of the CEO and other members of the GMC was strong across the range of personal measures. |
FY2012 KPIs | % Weighting for CEO (1) | % Weighting for GMC members with CSG responsibility (1) (2) | % Weighting for other GMC members(3) | FY2012 assessment (4) | ||||||||||
HSEC includes:
• Total recordable injury frequency (TRIF) • Fatalities/Significant environmental incidents • HSE risk management • Human rights impact assessment • Environment and occupational health | 15.0 | 15.0 | 15.0 | The Remuneration Committee takes advice from the Sustainability Committee on HSEC performance for the year. The Sustainability Committee assesses performance against the designated measures (derived from the Group’s HSEC public targets set out on page 4 of the Group’s Sustainability Report) set at the beginning of the year in the first instance. Following the assessment against the designated measures, the Committee also considers it appropriate to then take a holistic view of how the Group has performed in critical areas. The Sustainability Committee has again followed that approach this year. Guiding the outcomes was the tragic loss of three lives – two in Energy Coal and one in Iron Ore. Once |
FY2012 KPIs FY2012 assessment (4) %
Weighting
for
CEO (1) % Weighting for
GMC members
with CSG
responsibility (1) (2) % Weighting
for other
GMC
members(3) again, they are a reminder of the vigilance and constant focus on safety that is required, and these elements were paramount in the Committees’ considerations when determining the outcomes for the Group and the businesses. Against this background, both Committees noted good year-on-year improvement in TRIF across the Group and positive outcomes of our endeavours in respect of community. Solid performances in HSE risk management, occupational health and environment were also observed. Performance in HSEC was differentiated across the businesses, with the overall Group result considered marginally above expectations (between Target and Stretch). Petroleum performed very well against targets set (between Stretch and Exceptional), Non-Ferrous businesses and Aluminium and Nickel were considered above expectations (between Target and Stretch), with Ferrous and Coal businesses (where the three fatalities occurred) considered to have performed well below expectations (at Threshold). PAT for the Group (adjusted for foreign exchange movements, commodity prices and exceptional items) 50.0 25.0 35.0 No incentive attributable to this metric was awarded for any current GMC members in office for all of FY2012 due to the impairment against the carrying value of Fayetteville shale gas assets acquired from Chesapeake Energy in March 2011. Other than this impairment, Group PAT was below expectations (between Threshold and Target) due mainly to under-achievement of
FY2012 KPIs FY2012 assessment (4) Capital management for the Group – cost and schedule Capital management for the relevant CSG(s) – cost and schedule – 7.5 – %
Weighting
for
CEO (1) % Weighting for
GMC members
with CSG
responsibility (1) (2) % Weighting
for other
GMC
members(3) cost management targets (this metric was applied to Mike Henry and Graham Kerr, not part of the GMC at the time of the acquisition of the Fayetteville assets). EBIT for the relevant CSG(s) (adjusted for foreign exchange movements, commodity prices and exceptional items) – 25.0 – Performances for the businesses varied on this metric, with results for Petroleum at zero due to the impairment against the carrying value of Fayetteville shale gas assets acquired from Chesapeake Energy in March 2011. Performance for the Ferrous and Coal businesses were well above targets set at the start of the year and was rated very highly (at Exceptional), primarily due to very positive results in respect of FY2012 Iron Ore production volumes. Performance for the Non-Ferrous businesses and Aluminium and Nickel were below expectations (between Threshold and Target) as a consequence of below-target performance on production volumes and cost management. 15.0 7.5 10.0 Performances for the business in respect of capital project management metrics varied for FY2012. The overall Group outcome was positive for capital cost performance (between Target and Stretch), reflecting cost underruns on several major projects, partly offset by performance on capital schedule metrics being less than expected (marginally below Target). Ferrous and Coal businesses performed positively on both capital cost and schedule performance metrics (between Target and Stretch), while both the Non-Ferrous businesses and Aluminium and Nickel
FY2012 KPIs FY2012 assessment (4) %
Weighting
for
CEO (1) % Weighting for
GMC members
with CSG
responsibility (1) (2) % Weighting
for other
GMC
members(3) performed below expectations on both capital cost (between Threshold and Target) and schedule performance metrics (between Threshold and Target). Petroleum performed very well against expectations on capital cost performance (between Stretch and Exceptional), offset by less than expected performance on capital schedule performance metrics (between Threshold and Target). These outcomes reflected the varied cost and schedule outcomes for the 17 major projects in the portfolio for FY2012. Individual measures based on contribution to management team, key project deliverables of each role and the operating model (1SAP system, scalable organisational structure and people strategy, including diversity) 20.0 20.0 40.0 Individual measures for GMC members are determined at the commencement of the financial year. The Group Chairman determines the measures for the CEO, and the CEO determines measures for remaining GMC members. These comprise contribution to the GMC, delivery against projects and initiatives within the scope of his or her role, and his or her contribution to the performance of the Group. Personal performance of those GMC members considered for an incentive in respect of FY2012 was reviewed against these measures by the Committee and, on average, was considered marginally below expectations (marginally below Target).
Notes
As a result of the impairment against the carrying value of Fayetteville shale gas assets acquired from Chesapeake Energy in March 2011, both Marius Kloppers and Mike Yeager advised the Remuneration Committee that they did not wish to be considered for a STI award for FY2012. The Committee and the Board respected and agreed with that decision. |
(2) | Applicable weightings set for Andrew Mackenzie, Marcus Randolph, Mike Yeager and |
Applicable weightings set for Alberto Calderon (for the period 1 July 2011 to 31 December 2011), Alex Vanselow and Karen |
A performance range is set for each measure with the level of performance against each KPI determined as: |
Threshold: the minimum necessary to qualify for any reward.
Target: where the performance requirements are met.
Stretch: where the performance requirements are exceeded.
Exceptional: where the performance requirements are significantly exceeded.
For FY2011, GMC scorecards will continue to be based on health and safety, financial measures, capital management and individual performance as shown below.
FY2011 key performance indicators | Weighting for Group CEO | Weighting for Business CEOs | Weighting for other Group Executives | ||||||
HSEC(1) - The HSEC measures will reflect a holistic approach towards sustainable performance. The measures shall include a continued focus on safety and the risk management of fatalities and significant environmental events. All operations shall complete Human Rights impact assessments under the Articles of the United Nations Universal Declaration of Human Rights | 15 | % | 15 | % | 15 | % | |||
Profit After Tax (adjusted for foreign exchange, price and exceptional items) | 50 | % | 25 | % | 35 | % | |||
Adjusted EBIT for the businesses for which the Business CEO is responsible | — | 25 | % | — | |||||
Capital management - cost and schedule | 15 | % | 15 | % | 10 | % | |||
Individual measures based on contribution to management team, key project deliverables of each role, business and industry leading initiatives, etc | 20 | % | 20 | % | 40 | % |
Note
Actual STI provided for FY2010 performance
STI targets for FY2010the FY2012 performance year were set by the Remuneration Committee in August 2009 as part of Total Remuneration as described in section 6.3.2.6.5.2. The target cash award was 80 per cent of base salary for all members of the GMC, with a maximum cash award of 160 per cent of base salary for exceptional performance against all scorecard measures.
The value of any cash STI award is matched by an equivalent face value of Deferred Shares (or an approximately equivalent fair value in Options, or a combination of the two, at the election of the participant). Deferred Shares are not ordinary shares and do not carry entitlements to ordinary dividends or other shareholder rights. Dividends are not received by the executives during the vesting period. A Dividend Equivalent Payment (DEP) is provided when the vesting period is over and the Deferred Shares are exercised. More information on the terms of these deferred STI awards is provided in section 6.8.1.
The following table shows the amount ofat risk remuneration providedawarded by the BoardCommittee as STI in cash (in September 2010) and in Deferred Shares and/or Options (to be allocated in December 2010) as a result of Group, business and individual performance against the above scorecard objectives during FY2010for the FY2012 performance year (with FY2009 comparative dataprior year data).
The Deferred Share and/or Option awards shown in the currency in which each STI was determined).
As described above, the amount shown below in Deferred Shares and/or Options hastable have not yet provideddelivered any realised value to the serving executives, as they can generally do not vest and cannot be exercised for at least two years from the end of the relevant financialperformance year, (i.e.i.e. the FY2010FY2012 awards are expected to vest in August 2012). The number and value of Deferred Shares and/or Options whichvested with2014. Different vesting rules may apply for executives during FY2010 is shownwho leave the Group under specific circumstances as described later in section 6.4.3.this section.
Average STI rewards for GMC members over the last five years are graphed against the Group’s earnings in section 6.2.4.
Non-statutory table: Cash STI rewardsawards shown below are the same as those reported in section 6.4.2,6.7.2, but this table shows the market value of the Deferred Shares and/or Options at the time of allocation. STI rewards are shown in the currency in which they were determined, which is in US dollars unless otherwise notedallocation (rather than amortising the US dollar accountingIFRS fair value of each award over the relevant performance and service periods as per accounting standards).
Name | FY 2009 Cash | FY 2009 Deferred Shares and Options(1) | FY 2009 Total | % of max FY 2009 | FY 2010 Cash | FY 2010 Deferred Shares and Options(1) | FY 2010 Total | % of max FY 2010 | |||||||||||||||||||||||||||||||||||||||||||
US dollars | FY2011 Cash STI | FY2011 Deferred Shares and Options (1) | FY2011 Total | % of max FY2011 | FY2012 Cash STI | FY2012 Deferred Shares and Options (1) | FY2012 Total | % of max FY2012 | |||||||||||||||||||||||||||||||||||||||||||
Marius Kloppers | 1,732,726 | 1,732,726 | 3,465,452 | 53.1 | 2,330,527 | 2,330,527 | 4,661,054 | 71.4 | 2,351,448 | 2,351,448 | 4,702,896 | 69.0 | 0 | 0 | 0 | 0.0 | |||||||||||||||||||||||||||||||||||
Alberto Calderon | 1,014,338 | 1,014,338 | 2,028,676 | 60.0 | 1,129,066 | 1,129,066 | 2,258,132 | 66.8 | 1,179,200 | 1,179,200 | 2,358,400 | 67.0 | 603,444 | 603,444 | 1,206,888 | 33.0 | |||||||||||||||||||||||||||||||||||
Andrew Mackenzie(2) | £ | 310,750 | £ | 310,750 | £ | 621,500 | 56.5 | 1,120,620 | 1,120,620 | 2,241,240 | 66.3 | ||||||||||||||||||||||||||||||||||||||||
Mike Henry (3) | – | – | – | – | 473,600 | 473,600 | 947,200 | 50.0 | |||||||||||||||||||||||||||||||||||||||||||
Graham Kerr (3) | – | – | – | – | 473,600 | 473,600 | 947,200 | 50.0 | |||||||||||||||||||||||||||||||||||||||||||
Andrew Mackenzie | 1,188,000 | 1,188,000 | 2,376,000 | 67.5 | 629,755 | 629,755 | 1,259,510 | 32.8 | |||||||||||||||||||||||||||||||||||||||||||
Marcus Randolph | 927,277 | 927,277 | 1,854,554 | 49.0 | 1,309,945 | 1,309,945 | 2,619,890 | 69.2 | 1,338,240 | 1,338,240 | 2,676,480 | 68.0 | 892,693 | 892,693 | 1,785,386 | 43.6 | |||||||||||||||||||||||||||||||||||
Alex Vanselow | A$ | 1,123,500 | A$ | 1,123,500 | A$ | 2,247,000 | 52.5 | 1,120,610 | 1,120,610 | 2,241,220 | 66.3 | ||||||||||||||||||||||||||||||||||||||||
Karen Wood | A$ | 959,790 | A$ | 959,790 | A$ | 1,919,580 | 57.5 | 985,967 | 985,967 | 1,971,934 | 66.3 | 1,037,160 | 1,037,160 | 2,074,320 | 67.0 | 561,475 | 561,475 | 1,122,950 | 34.9 | ||||||||||||||||||||||||||||||||
J Michael Yeager | 1,102,607 | 1,102,607 | 2,205,214 | 60.0 | 1,336,407 | 1,336,407 | 2,672,814 | 70.2 | |||||||||||||||||||||||||||||||||||||||||||
J Michael Yeager (2) | 1,372,928 | 1,372,928 | 2,745,856 | 69.2 | 0 | 0 | 0 | 0.0 | |||||||||||||||||||||||||||||||||||||||||||
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Total | n/a | 18,666,284 | 16,933,952 | 7,269,134 | |||||||||||||||||||||||||||||||||||||||||||||||
Average(3) | 55.5 | 68.1 | |||||||||||||||||||||||||||||||||||||||||||||||||
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Average (4) | 67.9 | 30.5 | |||||||||||||||||||||||||||||||||||||||||||||||||
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Notes
(1) | The Deferred Shares and/or Options |
(2) | As a result of the impairment against the carrying value of Fayetteville shale gas assets acquired from Chesapeake Energy in |
(3) | The STI maximums and outcomes shown for Mike Henry and Graham Kerr are pro-rated based on the portion of the year from 28 November 2011 when they were members of the GMC. Mr Henry and Mr Kerr have also received pro-rated cash and equity-based STI awards for the preceding period of the FY2012 performance year, under the management Group Short-Term Incentive Plan (GSTIP). |
(4) | This simple (unweighted) average percentage of maximum is graphed against Group earnings later in |
Details
Time frame for delivery of FY2012 STI awards for the GMC
Cash awards are paid in September following the release of the Group’s annual results.
Deferred Shares and Options are expected to be allocated in December after the AGMs. Allocations to the CEO are subject to shareholder approval. As described above, employees will generally not have access to the value of these equity awards until August 2014, as shown in the diagram below.
Sections 6.8.1 and 6.8.3 provide details of the interests held in BHP Billiton by members of the GMC as a result of previous participation in STI plans (including both the GIS and the management GSTIP), including the number and value of the Deferred Shares and/or Options that vested during FY2012.
Awards provided for GMC members leaving the Group
The rules of the GIS outline the circumstances in which participants may be entitled to a cash award for the financial year in which they cease employment. Such circumstances depend on the reason for leaving. The only circumstance in which the Committee has considered using its discretion to allow members of the GMC to receive a cash award in the event of departure is for those individuals who have retired or are providedretiring.
The Committee considers it an important principle that Deferred Shares and Options will be forfeited by the individual in specific circumstances, including if they resign from the Group or their employment is terminated for cause within the two-year vesting period.
Alex Vanselow retired from the Group effective 28 February 2012. The treatment of his STI for the FY2012 performance year and his unvested deferred STI awards relating to prior years is detailed in section 6.4.3.6.7.2.
6.3.5Relationship between STI rewards and Group performance
The following graphs are included as part of satisfying an Australian disclosure requirement to show the relationship between KMP remuneration and performance, including earnings.
As described earlier in this section, STI rewards for members of the GMC are based on a balanced scorecard of key performance measures. A substantial component of each scorecard is based on measures that will drive the long-term success and sustainability of the Group, but which may not have a direct correlation to annual profitability.
Only a proportion of STI outcomes are directly related to financial measures, and that proportion varies for different members of the GMC. The profit measure used for calculating scorecard outcomes (as defined earlier in this section) is not the same as the disclosed profit attributable to shareholders used in the graph below.
As a result of the impairment against the carrying value of Fayetteville shale gas assets acquired from Chesapeake Energy in March 2011, both Marius Kloppers and Mike Yeager advised the Remuneration
Committee that they did not wish to be considered for a STI award for FY2012. The Committee and the Board respected and agreed with that decision.
Due to the factors described above, some correlation between STI outcomes and the measures used in the graphs below is evident over the last five years, but there is no guarantee that this will be the case in the future. Further details of the Group’s attributable profit and basic earnings per share over the past five years can be found in section 1.4.1 of this Annual Report.
6.6.4 Long-term incentives (LTI)
An allocation of Performance SharesLTI award is determined within Total Remuneration and provided tofor each member of the GMC as part of their Total Remuneration relative to market, and considering the appropriate remuneration mix (as described in section 6.5 and section 6.6.1). These awards are provided as Performance Shares under the Group’s Long Term Incentive Plan (LTIP). The Remuneration Committee determines LTIP awards by assessing the quantum required to provide market competitive Total Remuneration once base salaryLTIP.
Purpose and STI targets have been determined. The number of Performance Shares provided is then based on the Expected Value of a Performance Share (being a multipleterms of the share price).LTIP
The purpose of the LTIP is to focus management’s efforts on the achievement of sustainable long-term growthvalue creation and success of the Group (including appropriate management of business risks) and to align senior executive rewards with sustained shareholder wealth creation through the relative TSR performance hurdle.condition. The relative TSR performance condition must be achieved over a five-year period.
TSR has been chosen as the most appropriate measure as it allows for an objective external assessment over a sustained period on a basis that is definedfamiliar to shareholders. As BHP Billiton’s TSR performance relative to its peers tends to be counter-cyclical, the hurdle used since December 2010 includes both a sector-based comparison (67 per cent) and a comparison to a broad stock market index (the MSCI World) (33 per cent) for assessing the Group’s TSR performance in the table below.
Each Performance Share isorder to provide a conditional right to acquire one ordinary BHP Billiton share upon satisfactionfairer and more balanced measure of performance. This weighting ensures a majority of the vesting conditions. It will therefore not provide any value tooutcome is driven by our performance against that of resource industry peers.
Full details on the holder for at least five years from the end of the financial year. The Remuneration Committee regards it as an important principle that Performance Shares will be forfeited by the individual in specific circumstances, including if they resign from the Group without the committee’s consent (or are terminated for cause) within the five-year vesting period. Performance Shares are not ordinary shares,structure and do not carry entitlements to ordinary dividends or other shareholder rights. Dividends are not received by the executives during the vesting period. A Dividend Equivalent Payment (as described in section 6.4.2) will be provided when the vesting period is over and the executive exercises their Performance Shares. This payment is not made in relation to any securities that are forfeited during the vesting period.
Upon vesting, Performance Shares become exercisable (at no cost to the participant) in accordance with the terms of grant and BHP Billiton’s Securities Dealing Procedure (as described in section 6.5). The terms of the LTIP prohibit participants from entering into hedge arrangements in respectperformance condition, including a description of unvested Performance Shares. The following table provides detailsTSR, the relative weightings of the comparator groups, and the vesting schedule are included in a table of terms for LTI awards granted in FY2010,section 6.8.5. That section also includes a listing of the sector group companies and those proposed for FY2011 under a revised LTIP, which is subject to shareholder approval at the 2010 Annual General Meetings.
Current and Proposed LTIP Terms
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Detailsdetails of the interests held in BHP Billiton by members of the GMC as a result of previous participation in the LTIP are providedLTIP.
Determining the number of Performance Shares allocated
When the Remuneration Committee is determining the number of LTI awards to be allocated to GMC members, it uses the fair value calculated by Kepler Associates (as defined in section 6.4.3.6.2.2). This takes into account the
impact of the performance condition, along with other factors as described in the terms table in section 6.8.5. The fair value for the current plan design is 41 per cent of the face value of an award.
FY 2010FY2012 LTI granted in December 20092011
The following table shows the LTI awards determined by the Remuneration Committeeprovided as part of Total Remuneration for FY2010FY2012, and provided as an award of Performance Sharesallocated in December 2009 to drive long-term performance2011 following approval of the Group over a five-year period (with comparative data showing December 2008 LTI awards).
FY2011 awards are yet to be determined. Approval for an allocation of Performance Shares for the CEO will be sought fromCEO’s award by shareholders at the 2010 Annual General Meetings and all FY2011 LTIP awards for members ofAGMs (with comparative prior year data).
Whether the GMC will be notified to shareholders when provided in December 2010.
The Expected Value of the LTI awards as calculated by Kepler Associates, takes the performance hurdle into account along with other factors as described in the table above. The Expected Value is used to represent the forecast remuneration outcomes from the LTIP for the GMC members. The number and value of Performance Shares which vested with executives during FY2010 is shown in section 6.4.3.
The December 2009 LTI grants will not providedeliver any value to executives will not be determined until the executives until at least August 2014.end of the performance period. In order for any benefit to be obtained by the executives from the Performance Shares, the relative five-year TSR performance hurdle must be achieved over the period from 1 July 20092011 to 30 June 2014,2016, and the individual must remain employed by the Group (unless they leave the Group in specific circumstances as described in the table above)of terms in section 6.8.5).
Non-statutory table: LTI awards shown below are included in the table in section 6.4.2,6.7.2, but this table shows the Expected Valuefair value of the awards as described above in the currency in which they were determined, which is in US dollars unless otherwise noted (rather than amortising the US dollar accountingIFRS fair value of each award over the relevant performance and service periods as per accounting standards).
Name | Number of Performance Shares allocated in December 2008 | December 2008 Expected Value(1) | % of max December 2008(3) | Number of Performance Shares allocated in December 2009 | December 2009 Expected Value(2) | % of max December 2009(3) | |||||||
Marius Kloppers | 500,000 | 2,756,985 | 67.6 | 250,000 | 2,864,636 | 70.3 | |||||||
Alberto Calderon | 225,000 | 1,090,165 | 51.6 | 120,000 | 1,150,279 | 54.4 | |||||||
Andrew Mackenzie(4) | 225,000 | £ | 739,350 | 67.2 | 120,000 | 1,150,279 | 54.4 | ||||||
Marcus Randolph | 225,000 | 1,240,643 | 52.4 | 120,000 | 1,375,025 | 58.1 | |||||||
Alex Vanselow | 225,000 | A$ | 1,918,125 | 71.7 | 120,000 | 1,375,025 | 65.0 | ||||||
Karen Wood | 175,000 | A$ | 1,491,875 | 71.5 | 90,000 | 1,031,269 | 55.4 | ||||||
J Michael Yeager | 225,000 | 1,240,643 | 54.0 | 120,000 | 1,375,025 | 57.8 | |||||||
Total | 1,800,000 | n/a | 940,000 | 10,321,538 | |||||||||
Average | 62.3 | 59.4 |
Notes
Name | Number of Performance Shares allocated in December 2010 | December 2010 fair value (1) | % of max December 2010(3) | Number of Performance Shares allocated in December 2011 | December 2011 fair value (2) | % of max December 2011(3) | ||||||||||||||||||
Marius Kloppers | 200,000 | 3,309,793 | 77.7 | 226,721 | 3,441,000 | 77.7 | ||||||||||||||||||
Alberto Calderon | 120,000 | 1,699,241 | 77.2 | 146,510 | 1,804,166 | 78.9 | ||||||||||||||||||
Mike Henry(4) | – | – | – | – | – | – | ||||||||||||||||||
Graham Kerr(4) | – | – | – | – | – | – | ||||||||||||||||||
Andrew Mackenzie | 120,000 | 1,699,241 | 77.2 | 146,510 | 1,804,166 | 75.2 | ||||||||||||||||||
Marcus Randolph(5) | 105,000 | 1,737,641 | 70.6 | 119,603 | 1,815,239 | 71.0 | ||||||||||||||||||
Karen Wood | 75,000 | 1,241,172 | 64.1 | 85,027 | 1,290,485 | 64.1 | ||||||||||||||||||
J Michael Yeager(5) | 105,000 | 1,737,641 | 70.1 | 119,603 | 1,815,239 | 70.4 | ||||||||||||||||||
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Total | 725,000 | 11,424,729 | 843,974 | 11,970,295 | ||||||||||||||||||||
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Average | 72.8 | 72.9 | ||||||||||||||||||||||
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(1) | December |
(2) | December |
(3) | The maximum award under the LTIP is |
(4) | During FY2012, and before their appointment as members of the GMC, Mike Henry and Graham Kerr received awards under the management MAP as shown in section 6.8.3. Their first awards under the LTIP |
will be determined by the Committee and allocated in December 2012, along with FY2013 awards for the other members of the GMC. |
(5) | Refer to footnote (7) of the table in section 6.8.4 for further information on December 2011 LTIP awards for Marcus Randolph and Mike Yeager. |
6.3.6 Share ownership guidelinesProposed allocation of FY2013 LTI for the CEO
On the advice of the Committee, the Board has approved an award of FY2013 Performance Shares for the CEO with a fair value of US$3,441,000, the same as in FY2012. The CEO is requiredsame performance and service conditions will be used for the FY2013 LTI award as was used for the FY2012 LTI award. The list of peer companies will be reviewed by the Committee prior to hold 300 per centthe LTI award being allocated.
If approved by shareholders, these FY2013 Performance Shares will be granted following the AGMs (i.e. in or around December 2012). The number of (i.e. 3 times) one year’s after-tax base salary in BHP Billiton securities underPerformance Shares allocated will be notified to shareholders, when provided, along with the Group’s Minimum Shareholding Requirements policy. Fornumber of Performance Shares that will be granted to the other members of the GMC on the minimum requirement is 200same date in respect of FY2013 LTI.
The actual number of Performance Shares to be granted will depend on the share price and exchange rate over the three months up to the date of grant. As at 31 August 2012, this value for the CEO was equal to approximately 257,106 Performance Shares (compared with 226,721 in December 2011). This fair value was determined with the input of independent advisers and takes into account the appropriate level of Total Remuneration for the CEO, as assessed by reference to a number of factors (as described in section 6.5).
The Committee has determined that, starting from the LTI to be allocated in December 2013, the actual number of Performance Shares to be granted will be determined with reference to the share price and exchange rate over the 12 months up to the date of grant. This change has been deferred until next year to avoid any perception that it has been changed to accommodate prevailing conditions.
LTI vesting outcomes and the delivery of LTI award
The performance hurdle for the 2006 and 2007 LTI awards requires BHP Billiton’s TSR to exceed the weighted average TSR of a group of peer companies by 5.5 per cent per annum (on average over the five years), which is 30.7 per cent over five years.
Upon the introduction of the LTIP in 2004, the Committee, with advice from its independent adviser, Kepler Associates, determined that a common-currency approach using the US$ would be employed for TSR comparisons. The US$ is the Group’s functional and reporting currency, and a common-currency approach helps mitigate the effects of currency movements. In addition, all GMC members, including those domiciled in Australia and the UK, receive their annual salary and cash STI denominated in US$.
TSR is determined for BHP Billiton and each company in the comparator group in US$. The index US$ TSR of the comparator group as a whole is then determined (i.e. 2 times) after-tax base salary.the weighted average of the comparators) and BHP Billiton’s TSR performance against that index TSR is tested. Details of the comparator group companies are set out in section 6.8.5.
2006 allocations under the LTIP – tested to the end of FY2011 and vested in FY2012
As detailed in last year’s Remuneration Report, the performance period for the 2006 LTIP ended on 30 June 2011 and the 2006 LTIP vested in August 2011. The number and value of vested Performance Shares for each GMC member are provided in section 6.8.4. Over the securitiesperformance period, BHP Billiton’s US$ TSR was 138.3 per cent. In contrast, the weighted average US$ TSR for the purposespeer group against which the Group’s
performance was measured was 66.8 per cent. The impact of this 71.5 per cent outperformance was to add US$87.7 billion of shareholder value from 1 July 2006 to 30 June 2011 over and above performance in line with the weighted average of the policy iscomparators.
2007 allocations under the face valueLTIP – tested to the end of FY2012 and will vest in FY2013
The five-year performance period for the underlying shares. All of2007 LTIP ended on 30 June 2012 and the Performance Shares that were allocated to members of the GMC currently hold sufficient securitiesin December 2007 will vest. Over the five-year performance period, BHP Billiton’s US$ TSR was 41.6 per cent. In contrast, the weighted average US$ TSR for the peer group against which the Group’s performance was measured was -4.0 per cent. Of the 15 peer companies, only two companies recorded US$ TSR outcomes in excess of BHP Billiton’s 41.6 per cent US$ TSR performance (one at 45.6 per cent and one at 41.9 per cent), and eight peer companies recorded negative US$ TSR performance over the five-year performance period. The impact of this 45.6 per cent US$ TSR outperformance by BHP Billiton over the weighted average was to meetadd US$75.4 billion of shareholder value from 1 July 2007 to 30 June 2012 over and above performance in line with the requirements.weighted average of the comparators (as shown in the graphs below).
Under
In order to derive TSR outcomes, BHP Billiton’s US$ TSR performance is compared against US$ TSR performance of the policy, employeesLTIP comparator group over the five year performance period. The following factors comprise the US$ TSR calculation:
movements in shares prices in US$ of BHP Billiton and companies in the LTIP comparator group during the five-year performance period, based on the three-month average US$ share price to the start of the five-year performance period (three months up to and including 30 June 2007) compared to the three-month average US$ share price to the end of the five-year performance period (three months up to and including 30 June 2012). The averaging period is used to avoid the consequences of short-term share price and exchange rate fluctuations;
dividends paid in US$ by BHP Billiton and companies in the LTIP comparator group during the five-year performance period, assuming that dividends paid are not requiredreinvested in the relevant company on the date the dividends were paid.
The table below shows the share prices for BHP Billiton Limited and BHP Billiton Plc in US$ for the three months up to meetand including 30 June 2007 and 30 June 2012 and the holding requirement before awards are allocateddividends paid over the five-year performance period. The three-month average US$ share prices have been determined with reference to them, but if they are not holdingthree-month average share prices quoted on the required number of sharesLondon Stock Exchange in £ and the Australian Stock Exchange in A$, converted to US$ at the timerelevant three-month average exchange rates.
Share price growth and dividend yield
Three-month average share price to 30 June 2007 | Three-month average share price to 30 June 2012 | Growth in share price over the five-year performance period | Dividends paid over the five years from 1 July 2007 to 30 June 2012 | Indicative dividend yield over the performance period (1) | ||||||||||||||||
BHP Billiton Limited | US$26.30 | US$33.62 | 27.8 | % | US$4.22 | 16.0 | % | |||||||||||||
BHP Billiton Plc | US$24.39 | US$29.04 | 19.1 | % | US$4.22 | 17.3 | % |
(1) | The table shows the dividends paid over the five-year period divided by the three-month average share price to 30 June 2007. The actual calculation of TSR for the LTIP performance hurdle assumes that the dividends paid are reinvested in the relevant company on the date that the dividends are paid. The contribution of dividends to TSR performance will therefore vary from the indicative numbers shown in the table above. |
The graph below highlights BHP Billiton’s strong comparative performance against the ASX 100, FTSE 100 and the MSCI World index.
A five-year history of exercise of an award, then they will be prohibited from selling all of the underlying shares on exercise. GMC members are also not allowed to hedge or otherwise protect the value of unvested securities and must receive consent from BHP Billiton to hedge any vested securities (as set out in more detailshare prices and dividends is provided in section 6.5).
During FY2010,In accordance with its overarching discretion, the Remuneration Committee has considered the US$ TSR outcome in the context of the Group’s financial performance over the five-year performance period and determined that the recorded US$ TSR outperformance is a change togenuine reflection of BHP Billiton’s underlying financial outperformance during the policyfive-year performance period. In reaching this conclusion, the Committee has considered the overall performance of the Group, including the impairment against the carrying value of Fayetteville shale gas assets acquired from Chesapeake Energy in March 2011 and the impact of this on STI outcomes for GMC membersmembers. This qualitative judgement, which is applied before final vesting is confirmed, is an important risk management aspect to strengthen their alignment with shareholders interests. Effective from 1 July 2010, the holding requirements will instead be calculated on the basis of pre-tax (gross) salary.ensure that vesting is not simply driven by a formula that may give unexpected or unintended remuneration outcomes.
6.4 Executive6.7 Statutory remuneration disclosures for the GMC
This section provides full details of service contract terms, totaldisclosed remuneration and equity holdings for members of the GMC.
6.4.16.7.1 Senior management in FY2010FY2012
Key Management Personnel (KMP)
The Australian Corporations Act 2001, Australian Accounting Standards and International Financial Reporting Standards require BHP Billiton to make certain disclosures for Key Management Personnel (KMP). KMP, is defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly.
For the purposes of this Remuneration Report, it has been determined that the KMP are the Directors and the members of the GMC who served during FY2010. In addition, theAustralian Corporations Act 2001 requires BHP Billiton to make certain disclosures in respect of the top five highest-paid executives below Board level. In FY2010, the five highest paid executives below Board level were all membersFY2012.
Members of the GMC and are, therefore, already included as KMP.their service contracts
Details of the members of the GMC during FY2010 are set out below. Each individual was a member of the GMC for the whole of FY2010. Dates of appointment of all current GMC members appear in section 4.2 of this Annual Report and the dates of their current service contracts appear below.in the table below:
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Mike Henry and Graham Kerr were appointed to the GMC effective from 28 November 2011.
Alex Vanselow retired from the GMC and from BHP Billiton effective from 28 February 2012.
All other members of the GMC were members for the whole of FY2012.
The service contracts for all members of the GMC have no fixed term. They typically outline the components of remuneration paid to the individual, but do not prescribe how remuneration levels are to be modified from year to year. The contracts are all capable of termination by BHP Billiton on 12 months’ notice. The GMC member must give six months’ notice. In addition, the Group retains the right to terminate a contract immediately by making a payment equal to 12 months’ base salary plus retirement benefits for that period.
6.4.2 Total remuneration: statutory disclosures
Name | Title | Date of Contract | ||
Marius Kloppers | Chief Executive Officer and Executive Director | 12 February 2008 | ||
Alberto Calderon | Group Executive and Chief Commercial Officer to 12 December 2011 Group Executive and Chief Executive Aluminium, Nickel & Corporate Development from 13 December 2011 | 16 January 2008 | ||
Mike Henry | Group Executive and Chief Marketing Officer from 28 November 2011 | 28 November 2011 | ||
Graham Kerr | Group Executive and member of the GMC from 28 November 2011 Group Executive and Chief Financial Officer from 1 January 2012 | 28 November 2011 | ||
Andrew Mackenzie | Group Executive and Chief Executive – Non-Ferrous | 14 November 2007 | ||
Marcus Randolph | Group Executive and Chief Executive – Ferrous & Coal | 13 December 2005 | ||
Alex Vanselow | Group Executive and Chief Financial Officer to 31 December 2011 Group Executive and member of the GMC from 1 January 2012 to 28 February 2012 (retired from BHP Billiton effective 28 February 2012) | 14 June 2006 | ||
Karen Wood | Group Executive and Chief People & Public Affairs Officer | 21 February 2006 | ||
J Michael Yeager | Group Executive and Chief Executive – Petroleum | 21 March 2006 |
6.7.2 | Statutory disclosures |
The table overleafbelow has been prepared in accordance with the requirements of the UK Companies Act 2006 (and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 made thereunder) and theAustralian Corporations Act 2001 and relevant accounting standards.
Explanation An explanation of the share-based paymentpayments terms used in the table is provided following the table and associated footnotes.
The figures provided in the shaded columns of the statutory table below for share-based payments were not actually provided to the KMP during FY2012. These amounts are calculated in accordance with accounting standards and are the amortised IFRS fair values of equity and equity-related instruments that have been granted to the executives, either in relation to FY2012 performance or that of prior financial years. Please refer to sections 6.6.3, 6.6.4 and 6.8 for information on awards allocated during FY2011 and FY2012.
Short-term benefits | Subtotal: UK requirements | Post- employment benefits | Share-based payments | Total: Australian requirements | ||||||||||||||||||||||||||||||||||||
US dollars | Base Salary(1) | Annual cash incentive (2) | Non- monetary benefits (3) | Other benefits (4) | Retirement benefits(5) | Value of STI and Shareplus awards(6) | Value of LTI awards (7) | |||||||||||||||||||||||||||||||||
Executive Director | ||||||||||||||||||||||||||||||||||||||||
Marius Kloppers | 2012 | 2,201,000 | 0 | 109,344 | – | 2,310,344 | 880,400 | 1,475,603 | 5,155,004 | 9,821,351 | ||||||||||||||||||||||||||||||
2011 | 2,114,814 | 2,351,448 | 85,708 | – | 4,551,970 | 845,926 | 2,002,603 | 4,233,635 | 11,634,134 | |||||||||||||||||||||||||||||||
Other GMC members | ||||||||||||||||||||||||||||||||||||||||
Alberto Calderon | 2012 | 1,136,667 | 603,444 | 56,307 | 175,000 | 1,971,418 | 397,833 | 963,590 | 2,442,451 | 5,775,292 | ||||||||||||||||||||||||||||||
2011 | 1,092,833 | 1,179,200 | 20,489 | 177,009 | 2,469,531 | 382,492 | 1,082,048 | 1,878,134 | 5,812,205 | |||||||||||||||||||||||||||||||
Mike Henry(8) | 2012 | 591,667 | 473,600 | 14,308 | 87,500 | 1,167,075 | 147,917 | 298,640 | 421,524 | 2,035,156 | ||||||||||||||||||||||||||||||
Graham Kerr(8) | 2012 | 591,667 | 473,600 | 41,794 | 161,276 | 1,268,337 | 147,917 | 283,850 | 527,461 | 2,227,565 | ||||||||||||||||||||||||||||||
Andrew Mackenzie | 2012 | 1,183,333 | 629,755 | 13,504 | – | 1,826,592 | 426,000 | 972,088 | 1,782,752 | 5,007,432 | ||||||||||||||||||||||||||||||
2011 | 1,092,833 | 1,188,000 | 3,112 | – | 2,283,945 | 393,420 | 917,887 | 5,806,514 | 9,401,766 | |||||||||||||||||||||||||||||||
Marcus Randolph | 2012 | 1,271,000 | 892,693 | 57,832 | – | 2,221,525 | 432,140 | 1,114,335 | 2,607,232 | 6,375,232 | ||||||||||||||||||||||||||||||
2011 | 1,222,125 | 1,338,240 | 78,520 | 2,839 | 2,641,724 | 415,523 | 1,121,021 | 2,231,715 | 6,409,983 | |||||||||||||||||||||||||||||||
Alex Vanselow(9) | 2012 | 755,333 | 610,133 | 54,206 | 528,719 | 1,948,391 | 287,027 | 1,098,083 | 1,297,909 | 4,631,410 | ||||||||||||||||||||||||||||||
2011 | 1,092,833 | 1,179,200 | 80,356 | 800 | 2,353,189 | 415,277 | 985,468 | 2,313,101 | 6,067,035 | |||||||||||||||||||||||||||||||
Karen Wood | 2012 | 999,750 | 561,475 | 14,446 | – | 1,575,671 | 343,914 | 815,095 | 1,951,013 | 4,685,693 | ||||||||||||||||||||||||||||||
2011 | 961,250 | 1,037,160 | 11,761 | – | 2,010,171 | 330,670 | 861,644 | 1,766,402 | 4,968,887 | |||||||||||||||||||||||||||||||
J Michael Yeager | 2012 | 1,281,333 | 0 | 19,807 | 104,162 | 1,405,302 | 458,717 | 855,409 | 2,583,273 | 5,302,701 | ||||||||||||||||||||||||||||||
2011 | 1,231,667 | 1,372,928 | 17,057 | 66,767 | 2,688,419 | 440,937 | 1,192,946 | 2,289,142 | 6,611,444 |
(1) | Base salaries are generally reviewed on 1 September each year. Amounts shown in this table reflect the amounts paid over the 12-month period from 1 July to 30 June each year. All GMC base salaries are expressed in US dollars. More detail on base salaries is provided in section 6.6.2. |
(2) | Annual cash incentive is the cash portion of STI reward earned in respect of performance during each financial year as described in section 6.6.3, that section shows the STI award earned as a percentage of the maximum award, where the maximum possible award is 100 per cent. The remaining portion of the 100 per cent maximum has not been earned (i.e. it has been ‘forfeited’). The minimum possible value awarded is nil. As a result of the impairment against the carrying value of Fayetteville shale gas assets acquired from Chesapeake Energy in March 2011, both Marius Kloppers and Mike Yeager advised the Remuneration Committee that they did not wish to be considered for a STI award for FY2012. The Committee and the Board respected and agreed with that decision. Actual payments are made in September, once performance has been assessed, e.g. in September 2012 for FY2012 awards. The equity portion of STI rewards is described in footnote (6) below. |
(3) | Non-monetary benefits are non-pensionable and include such items as health and other insurances and fees for tax return preparation (sometimes in multiple jurisdictions and to a capped amount). |
(4) | Other benefits are non-pensionable and include relocation allowances and assistance and the payment of US$104,162 in lieu for leave accrued but not taken by Mr Yeager in FY2012, as US-based Group executives are not allowed to roll forward annual leave entitlements from one financial year to the next. The amount shown in this column for Alex Vanselow is described in footnote (9) below. |
(5) | Retirement benefits are calculated as a percentage of base salary for each GMC member, as set out in the table in section 6.6.2. |
(6) | The amounts shown in this column are described below these footnotes. Section 6.6.3 shows the STI reward earned as a percentage of the maximum award, where the maximum possible award is 100 per cent. The remaining portion of the 100 per cent maximum has not been earned (i.e. it has been ‘forfeited’). These share-based payments may also be forfeited after allocation in specific circumstances as described in sections 6.6.3 and 6.8.1 and therefore, the minimum possible value of the awards is nil. The maximum possible value cannot be determined as it depends on future share price movements, but is estimated by the IFRS fair value used for accounting purposes in this table. At the date of this Annual Report, GMC members had not made their elections for Deferred Shares and/or Options in regard to FY2012 STI rewards. No GMC members elected to receive Options in respect of FY2011 awards. The actual number of Deferred Shares allocated in respect of FY2011 awards is shown in section 6.8.1. Section 6.8.2 also describes the Shareplus program and the contributions made during FY2011 and FY2012 by members of the GMC in relation to the rights to acquire Matching Shares, which are included as share-based remuneration in the table. |
(7) | The amounts shown in this column are described below these footnotes. Section 6.6.4 shows the LTI provided as a percentage of the maximum award, where the maximum possible award is 100 per cent. The remaining portion of the 100 per cent maximum has not been earned (i.e. it has been ‘forfeited’). These share-based payments may also be forfeited after allocation in specific circumstances as described in sections 6.6.3 and 6.8.5 and therefore the minimum possible value of the awards is nil. The maximum possible value cannot be determined as it depends on future share price movements, but is estimated by the IFRS fair value used for accounting purposes in this table. Details of individual awards are set out in the table in section 6.8.4. This column also includes the amount allocated to remuneration for each year in respect of awards received by Andrew Mackenzie on commencement of employment with BHP Billiton. These awards, are in the form of Performance Shares allocated on 4 December 2008 as shown in the table in section 6.8.4 and conditional rights to receive cash sums under two phantom awards, which are treated as cash-settled share-based payments and are included in this column for the purposes of remuneration. The awards were approved by the Committee for the purposes of compensating Mr Mackenzie for awards forgone by him as a result of leaving his former employer. The value and nature of the awards were determined by the Committee as being an equivalent fair value as that forgone by Mr Mackenzie under the at risk remuneration arrangements operated by his former employer. In valuing the awards, the Committee sought the advice of its independent adviser, Kepler Associates. Full details of the awards were disclosed in the FY2009 Annual Report. |
(8) | All remuneration details for Mike Henry and Graham Kerr are for the part of the year relating to their service as members of the GMC, i.e. from 28 November 2011 to 30 June 2012. This includes the amount of base salary and retirement benefits provided for the part of the year that they were members of the GMC, and the relevant portions of non-monetary benefits and of annual relocation allowances which were paid in relation to international moves prior to their appointment as members of the GMC. The amount shown as annual cash incentive is the amount of cash STI paid for their performance for the period from 28 November 2011 to 30 June 2012. The amounts included in share-based payments include the amortised IFRS fair value of awards provided under the LTIP, MAP and GSTIP equity plans prior to their appointment as members of the GMC and Shareplus Matched Shares allocated in April 2012 to Mr Henry as shown in the tables in section 6.8. |
(9) | All remuneration details for Alex Vanselow are for the part of the year from 1 July 2011 until his retirement from the Group on 28 February 2012. This includes the amount of base salary, retirement benefits and non-monetary benefits provided to 28 February 2012. The amount shown as annual cash incentive is the amount of cash STI paid for Mr Vanselow’s performance under the GIS STI plan for the period from 1 July 2011 to 28 February 2012, assessed at the relevant time on the basis of on-target individual and Group performance. The amount shown as other benefits is the value of statutory annual leave and long service leave entitlements paid to Mr Vanselow at the time of his retirement. The amount included in share-based payments includes the amortisation of share-based payments for the period from 1 July 2011 to 28 February 2012, plus US$608,949, being predominantly the remainder of the IFRS fair value not recognised in previous financial years in respect of the Deferred Shares granted to him under the GIS for FY2012 and FY2011, which transferred to him in full on leaving, in accordance with the GIS rules and shareholder approval obtained at the 2011 AGMs. The table in section 6.8.1 shows Mr Vanselow’s GIS holdings. Additionally, he was entitled to receive his accumulated benefits under the pension plans of which he was a member. |
Explanation of share-based payments terms used in the table above
ValueThe value of accrued Dividend Equivalent Payment:STI and Shareplus awards shown in the table includes:
the estimated IFRS fair value of Deferred Shares and Options provided under the GIS as described in section 6.6.3 and shown in section 6.8.1, subsequent to meeting KPIs. The IFRS fair value of the Deferred Shares and Options is estimated at grant date by discounting the total value of the shares that will be issued in the future using the risk-free interest rate for the period to the date of award. From FY2011, there was a change in accounting policy to account for the DEP from cash-settled to equity-settled. Participants who arewere provided with awards under the GIS and the LTIPin previous years are entitled to a DEP payment (upon exercise) in lieu of the dividends that would have been payable on ordinary BHP Billiton shares over the period from the allocation date to the time they exercise their awards. ThisDeferred Shares and Options are equity-settled share-based payments. The actual Deferred Shares and Options will be awarded to participants following the 2012 AGMs (awards to the CEO are subject to shareholder approval). Once awarded, the only vesting condition is called the Dividend Equivalent Payment. No Dividend Equivalent Payment is payablefor participants to remain in respect of awards that are not exercised (whether because they do not vest, oremployment for any other reason). More information on the Dividend Equivalent Payment and on awards under the GIS and LTIP is provided in sections 6.3.4 and 6.3.5.
The Dividend Equivalent Payment is treated as a cash-settled share-based payment, and the value is therefore included in remuneration over the financial periods prior to awards being exercised. The value included in each period will depend ontwo further years. Accordingly, the number of awards unexercised (including those still unvested), BHP Billiton’s declared dividends,securities (if any) that will ultimately vest cannot be determined until the service period has been completed. The estimated IFRS fair value of the Deferred Shares and Options forms part of the STI at risk remuneration appearing throughout this Remuneration Report. The IFRS fair value of Deferred Shares and Options is apportioned to annual remuneration based on the expected future service period, which is normally three years. The vesting of Deferred Shares and Options may be accelerated in the event of leaving the Group, in which case of LTIP awards, on the estimated probability of the TSR performance hurdles being met (as described in section 6.3.5). The latter factor may vary considerably from one reportingexpected future service period to the next depending on BHP Billiton’s relative TSR performance, and this may significantly impact the remuneration value ascribed to the Dividend Equivalent Payment from year to year. The payment of the Dividend Equivalent Payment will never eventuate in the case of equity that fails to vest and be exercised for any reason.is amended;
Value of STI and Shareplus awards: The amounts shown in the table include:
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the estimated IFRS fair value of rights to Matching Shares acquired during each share purchase period under the Shareplus program, as described in section 6.3.3.6.8.2. These rights are acquired on each of the quarterly share-purchaseshare purchase dates under the program (grant dates), and the IFRS fair value is apportioned to annual remuneration based on the future service period required for the Matching Shares to be allocated (i.e. the vesting date of the rights). Where entitlements to the Matching Shares are accelerated on leaving the Group, the expected future service period is amended.
ValueThe value of LTI awards:awards shown in the table includes:
Performance Shares allocated under the LTIP as described in section 6.3.56.6.4 and shown in section 6.8.4 are defined as equity-settled share-based payments. The amount included in this column in respect of each LTI award is the estimated IFRS fair value of the Performance Shares as determined by Kepler Associates using a Monte Carlo simulation methodology taking account of the performance hurdle, the term of the award, the share price at grant date, the expected price volatility of the underlying share, and the risk-free interest rate for the term of the award and the value of the DEP that will be received on exercise of the award. The IFRS fair value of each award is apportioned to annual remuneration in equal amounts to each of the years in the expected future service period, which is normally five years. Where entitlements to Performance Shares are preserved on leaving the Group, the expected future service period is amended.
The figures provided in the shaded columns of the statutory table below for share-based payments were not actually provided to the KMP during FY2010. These amounts are calculated in accordance with accounting standards and are the amortised accounting fair values of equity and equity-related instruments that have been granted to the executives, either in relation to FY2010 performance, or that of prior financial years. Please refer to sections 6.3 and 6.4.3 for information on awards allocated during FY2010.
US dollars | Short-term benefits | Subtotal: UK requirements | Post- employment benefits | Share-based payments | Total: Australian requirements | ||||||||||||||||||
Base Salary(1) | Annual cash bonus (2) | Non-monetary benefits (3) | Other benefits (4) | Retirement benefits(5) | Value of accrued Dividend Equivalent Payment | Value of STI and Shareplus awards(6) | Value of LTI awards(7) | ||||||||||||||||
Executive Director | |||||||||||||||||||||||
Marius Kloppers | 2010 | 2,038,885 | 2,330,527 | 67,067 | — | 4,436,479 | 815,554 | 1,154,015 | 1,735,143 | 3,187,539 | 11,328,730 | ||||||||||||
2009 | 2,002,455 | 1,732,726 | 40,598 | — | 3,775,779 | 800,982 | 1,396,914 | 1,455,869 | 2,970,045 | 10,399,589 | |||||||||||||
Other GMC members | |||||||||||||||||||||||
Alberto Calderon(8) | 2010 | 1,056,934 | 1,129,066 | 13,776 | 175,000 | 2,374,776 | 369,927 | 573,610 | 930,157 | 1,358,139 | 5,606,609 | ||||||||||||
2009 | 1,015,615 | 1,014,338 | 11,361 | — | 2,041,314 | 355,465 | 529,135 | 795,372 | 1,158,393 | 4,879,679 | |||||||||||||
Andrew Mackenzie(9) | 2010 | 1,025,603 | 1,120,620 | 3,067 | — | 2,149,290 | 369,217 | 222,821 | 498,054 | 3,119,035 | 6,358,417 | ||||||||||||
2009 | 549,106 | 496,392 | 10,529 | 1,597,400 | 2,653,427 | 197,678 | 145,579 | 153,378 | 1,814,547 | 4,964,609 | (9) | ||||||||||||
Marcus Randolph | 2010 | 1,182,751 | 1,309,945 | 46,561 | — | 2,539,257 | 402,135 | 650,745 | 1,013,818 | 1,682,863 | 6,288,818 | ||||||||||||
2009 | 1,141,543 | 927,277 | 47,377 | — | 2,116,197 | 388,124 | 755,775 | 963,869 | 1,584,583 | 5,808,548 | |||||||||||||
Alex Vanselow(8) | 2010 | 1,077,468 | 1,120,610 | 34,908 | — | 2,232,986 | 409,438 | 785,651 | 889,649 | 1,747,163 | 6,064,887 | ||||||||||||
2009 | 990,071 | 840,827 | 31,321 | — | 1,862,219 | 376,227 | 923,294 | 909,399 | 1,648,883 | 5,720,022 | |||||||||||||
Karen Wood | 2010 | 928,375 | 985,967 | 4,852 | — | 1,919,194 | 319,361 | 535,302 | 747,454 | 1,349,237 | 4,870,548 | ||||||||||||
2009 | 772,255 | 718,307 | — | — | 1,490,562 | 265,656 | 644,972 | 731,190 | 1,272,589 | 4,404,969 | |||||||||||||
J Michael Yeager | 2010 | 1,183,092 | 1,336,407 | 20,119 | — | 2,539,618 | 423,547 | 907,256 | 1,037,957 | 1,891,982 | 6,800,360 | ||||||||||||
2009 | 1,130,752 | 1,102,607 | 18,727 | 44,174 | 2,296,260 | 404,809 | 983,457 | 1,029,097 | 1,664,342 | 6,377,965 |
Notes
A relocation allowance of US$175,000 for Alberto Calderon in FY2010 in relation to a change in his place of employment from London to Melbourne.
A payment of £1,000,000 (US$1,597,400) to Andrew Mackenzie in FY2009 on commencement of employment as compensation for part of the value forgone of his awards under plans operated by his previous employer in addition to share-based payments described in Note 7 below.
Payment of US$44,174 in lieu for leave accrued but not taken by J Michael Yeager in FY2009, as Group policy does not allow GMC members to roll forward annual leave entitlements from one financial year to the next.
The following tablessections set out the interests held by members of the GMC in the Group’s equity schemes. Each vested security can be exercised for one ordinary share in BHP Billiton Limited or in BHP Billiton Plc. The value of securities over BHP Billiton Limited shares is shown in Australian dollars and of securities over BHP Billiton Plc shares in Sterling.
6.8.1 STI awards under the GIS
Each Deferred Share and each Option is a conditional right to acquire one ordinary BHP Billiton share upon satisfaction of the vesting conditions. They will not deliver any value to the holder for at least two years from the end of the financial year (unless the executive’s employment with the Group ends earlier in specific circumstances such as on death, serious injury, disability or illness, retirement and redundancy/retrenchment).
Deferred Shares are not ordinary shares and do not carry entitlements to ordinary dividends or other shareholder rights. Dividends are not received by the executives during the vesting period. However, a DEP as described in section 6.7.2 is made to cover the period between grant and exercise, but only on Deferred Shares and/or Options that have vested. This payment is not made in relation to any securities that are forfeited during the vesting period. Deferred Shares that vest may be exercised at no cost to the participant.
Options have an exercise price that reflects the market price of BHP Billiton shares at the time of allocation, and a greater number of Options are therefore allocated if an executive chooses this alternative. The Securities Dealing GLD governs and restricts dealing arrangements and the vesting and exercise, or delivery, of Deferred Shares and Options.
Awards of Options under the GIS
Each employee may nominate to receive GIS awards in the form of Options (as shown in this table) or in the form of Deferred Shares (as shown in the following table) or a combination thereof.
Name | Date of grant | Exercise price payable (1) | At 1 July 2011 | Granted | Vested | Lapsed | Exercised | At 30 June 2012 | Date award may vest and becomes exercisable (2) | Market price on date of grant | Market price on date of vesting | Market price on date of exercise | Aggregate gain of shares exercised | |||||||||||||||||||||||||||||||||||||||
Andrew Mackenzie | 6 Dec 2010 | £23.71 | 30,389 | – | – | – | – | 30,389 | Aug 2012 | £24.40 | – | – | – | |||||||||||||||||||||||||||||||||||||||
14 Dec 2009 | £18.68 | 16,119 | – | 16,119 | – | – | 16,119 | 25 Aug 2011 | £19.06 | £19.60 | – | – | ||||||||||||||||||||||||||||||||||||||||
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Total | 46,508 | – | 16,119 | – | – | 46,508 | ||||||||||||||||||||||||||||||||||||||||||||||
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(1) | The exercise price is determined by the weighted average price at which BHP Billiton shares were traded over the one week up to and including the date of grant. This is the amount payable by the individual to exercise each Option and to receive one ordinary BHP Billiton share for each Option exercised. |
(2) | The holding period for each award ends on 30 June in the year the award ‘may vest and become exercisable’ if the conditions for vesting are met (including the relevant service conditions). Under the GIS rules, awards will vest and become exercisable on, or as soon as practicable after, the first non-prohibited period date occurring after 30 June. The expiry date of awards is the day prior to the third anniversary of that vesting date. |
Awards of Deferred Shares under the GIS
Each employee may nominate to receive GIS awards in the form of Deferred Shares (as shown in this table) or in the form of Options (as shown in the previous table) or a combination thereof.
Name | Date of grant | At 1 July 2011 | Granted | Vested | Lapsed | Exercised | At 30 June 2012 | Date award may vest and becomes exercisable (1) | Market price on date of grant(2) | Market price on date of vesting (3) | Market price on date of exercise (4) | Aggregate gain of shares exercised(4) | ||||||||||||||||||||||||||||||||||||
Executive Director |
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Marius Kloppers | 5 Dec 2011 | – | 64,705 | – | – | – | 64,705 | Aug 2013 | A$37.26 | – | – | – | ||||||||||||||||||||||||||||||||||||
6 Dec 2010 | 54,831 | – | – | – | – | 54,831 | Aug 2012 | A$44.53 | – | – | – | |||||||||||||||||||||||||||||||||||||
14 Dec 2009 | 46,951 | – | 46,951 | – | 46,951 | – | 25 Aug 2011 | A$40.65 | A$38.61 | A$38.61 | A$1,812,778 | |||||||||||||||||||||||||||||||||||||
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Total | 101,782 | 64,705 | 46,951 | – | 46,951 | 119,536 | ||||||||||||||||||||||||||||||||||||||||||
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Other members of the GMC |
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Alberto Calderon | 5 Dec 2011 | – | 38,939 | – | – | – | 38,939 | Aug 2013 | £20.12 | – | – | – | ||||||||||||||||||||||||||||||||||||
6 Dec 2010 | 30,495 | – | – | – | – | 30,495 | Aug 2012 | £24.40 | – | – | – | |||||||||||||||||||||||||||||||||||||
14 Dec 2009 | 33,343 | – | 33,343 | – | 33,343 | – | 25 Aug 2011 | £19.06 | £19.60 | £19.60 | £653,523 | |||||||||||||||||||||||||||||||||||||
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Total | 63,838 | 38,939 | 33,343 | – | 33,343 | 69,434 | ||||||||||||||||||||||||||||||||||||||||||
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Andrew Mackenzie | 5 Dec 2011 | – | 39,230 | – | – | – | 39,230 | Aug 2013 | £20.12 | – | – | – | ||||||||||||||||||||||||||||||||||||
6 Dec 2010 | 22,700 | – | – | – | – | 22,700 | Aug 2012 | £24.40 | – | – | – | |||||||||||||||||||||||||||||||||||||
14 Dec 2009 | 12,476 | – | 12,476 | – | 12,476 | – | 25 Aug 2011 | £19.06 | £19.60 | £19.60 | £244,530 | |||||||||||||||||||||||||||||||||||||
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Total | 35,176 | 39,230 | 12,476 | – | 12,476 | 61,930 | ||||||||||||||||||||||||||||||||||||||||||
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Marcus Randolph | 5 Dec 2011 | – | 36,824 | – | – | – | 36,824 | Aug 2013 | A$37.26 | – | – | – | ||||||||||||||||||||||||||||||||||||
6 Dec 2010 | 30,819 | – | – | – | – | 30,819 | Aug 2012 | A$44.53 | – | – | – | |||||||||||||||||||||||||||||||||||||
14 Dec 2009 | 25,126 | – | 25,126 | – | 25,126 | – | 25 Aug 2011 | A$40.65 | A$38.61 | A$38.61 | A$970,115 | |||||||||||||||||||||||||||||||||||||
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Total | 55,945 | 36,824 | 25,126 | – | 25,126 | 67,643 | ||||||||||||||||||||||||||||||||||||||||||
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Alex Vanselow(5) | 5 Dec 2011 | – | 32,448 | 32,448 | – | 32,448 | – | 29 Feb 2012 | A$37.26 | A$36.10 | A$36.10 | A$1,171,373 | ||||||||||||||||||||||||||||||||||||
6 Dec 2010 | 26,365 | – | 26,365 | – | 26,365 | – | 29 Feb 2012 | A$44.53 | A$36.10 | A$36.10 | A$951,776 | |||||||||||||||||||||||||||||||||||||
14 Dec 2009 | 27,727 | – | 27,727 | – | 27,727 | – | 25 Aug 2011 | A$40.65 | A$38.61 | A$38.61 | A$1,070,539 | |||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
Total | 54,092 | 32,448 | 86,540 | – | 86,540 | – | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Karen Wood | 5 Dec 2011 | – | 28,539 | – | – | – | 28,539 | Aug 2013 | A$37.26 | – | – | – | ||||||||||||||||||||||||||||||||||||
6 Dec 2010 | 23,197 | – | – | – | – | 23,197 | Aug 2012 | A$44.53 | – | – | – | |||||||||||||||||||||||||||||||||||||
14 Dec 2009 | 23,686 | – | 23,686 | – | 23,686 | – | 25 Aug 2011 | A$40.65 | A$38.61 | A$38.61 | A$914,516 | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | 46,883 | 28,539 | 23,686 | – | 23,686 | 51,736 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
J Michael Yeager | 5 Dec 2011 | – | 37,779 | – | – | – | 37,779 | Aug 2013 | A$37.26 | – | – | – | ||||||||||||||||||||||||||||||||||||
6 Dec 2010 | 31,442 | – | – | – | – | 31,442 | Aug 2012 | A$44.53 | – | – | – | |||||||||||||||||||||||||||||||||||||
14 Dec 2009 | 29,877 | – | 29,877 | – | 29,877 | – | 25 Aug 2011 | A$40.65 | A$38.61 | A$38.61 | A$1,153,551 | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | 61,319 | 37,779 | 29,877 | – | 29,877 | 69,221 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | The holding period for each award ends on 30 June in the year the award ‘may vest and become exercisable’ if the conditions for vesting are met (including the relevant service conditions). Under the GIS rules, awards will vest and become exercisable on, or as soon as practicable after, the first non-prohibited period date occurring after 30 June. The expiry date of awards is the day prior to the third anniversary of that vesting date. |
(2) | The market price shown for the December 2011 grant is the closing price of BHP Billiton shares on 5 December 2011. No price is payable by the individual for acquiring the Deferred Shares at the time of grant. The grant date IFRS fair values of the awards are estimated as at the start of the vesting period, being 1 July 2011 and were A$43.77 and £24.60. |
(3) | All (100 per cent) of the Deferred Shares granted under the GIS in December 2009 became fully vested on 25 August 2011 as the service conditions were met as described in section 6.6.4 and above. The price shown is the closing price of BHP Billiton shares on that date. |
(4) | The market price shown (and used for calculating the aggregate gain) is the closing price of BHP Billiton shares on the date that the individual exercised their Deferred Shares. No price is payable by the individual for exercising the Deferred Shares. One ordinary BHP Billiton share is acquired for each Deferred Share exercised. The amounts shown in this column do not include the value of the DEP paid on exercise of the awards as described in section 6.7.2. The DEP is included within the value of share-based payment remuneration in that section. |
(5) | As per the rules of the GIS, the awards of 2010 and 2011 Deferred Shares vested when Alex Vanselow retired. |
6.8.2 Awards of Matched Shares under the Shareplus all-employee share purchase plan
Like all permanent employees, members of the GMC are eligible to participate in Shareplus, an all-employee share purchase plan. Participants in Shareplus contribute from their post-tax base salary (capped at US$5,000 per year) to acquire shares in BHP Billiton. Each of the GMC members chose to contribute the maximum allowable amount to the plan from their post-tax salary in FY2012. Provided the participant remains employed by BHP Billiton on the third anniversary of the shares being acquired, the plan provides for a grant of matching shares on a 1:1 basis. The IFRS fair value of the rights acquired is included in remuneration over the share purchase period in the table in section 6.7.2. Further details regarding Shareplus are set out in note 32 ‘Employee share ownership plans’ to the financial statements.
Matched shares were allocated under the plan on 2 April 2012 in relation to contributions made from base salary during the 2009 Shareplus Plan Year (i.e. during the period from June 2009 to May 2010). Differences in exchange rates in relation to the base salaries of the GMC members in previous financial years and the currencies of each securities exchange result in minor differences in the numbers of shares allocated. GMC interests in BHP Billiton as a result of the plan are shown below.
Name | Allocation Date | At 1 July 2011 | Number of shares granted (1) | Transferred from trust or sold (2) | At 30 June 2012 (2) | Market price on date of allocation/vesting (3) | ||||||||||||||||||
Marius Kloppers | 2 Apr 2012 | – | 194 | 194 | – | A$35.12 | ||||||||||||||||||
1 Apr 2011 | 132 | – | 132 | – | A$46.68 | |||||||||||||||||||
1 Apr 2010 | 160 | – | 160 | – | A$43.95 | |||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 292 | 194 | 486 | – | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Alberto Calderon | 2 Apr 2012 | – | 193 | 193 | – | £19.65 | ||||||||||||||||||
1 Apr 2011 | 165 | – | 165 | – | £25.12 | |||||||||||||||||||
1 Apr 2010 | 156 | – | 156 | – | £23.01 | |||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 321 | 193 | 514 | – | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Mike Henry | 2 Apr 2012 | – | 174 | 174 | – | £19.65 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | – | 174 | 174 | – | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Andrew Mackenzie | 2 Apr 2012 | – | 175 | 175 | – | £19.65 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | – | 175 | 175 | – | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Marcus Randolph | 2 Apr 2012 | – | 190 | 190 | – | A$35.12 | ||||||||||||||||||
1 Apr 2011 | 172 | – | 172 | – | A$46.68 | |||||||||||||||||||
1 Apr 2010 | 157 | – | 157 | – | A$43.95 | |||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 329 | 190 | 519 | – | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Alex Vanselow(4) | 29 Feb 2012 | – | 396 | 396 | – | A$36.10 | ||||||||||||||||||
1 Apr 2011 | 168 | – | 168 | – | A$46.68 | |||||||||||||||||||
1 Apr 2010 | 157 | – | 157 | – | A$43.95 | |||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 325 | 396 | 721 | – | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Karen Wood | 2 Apr 2012 | – | 193 | 193 | – | A$35.12 | ||||||||||||||||||
1 Apr 2011 | 168 | – | 168 | – | A$46.68 | |||||||||||||||||||
1 Apr 2010 | 157 | – | 157 | – | A$43.95 | |||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 325 | 193 | 518 | – | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
J Michael Yeager(5) | 2 Apr 2012 | – | 138 | 138 | – | US$36.92 | ||||||||||||||||||
1 Apr 2011 | 146 | – | 146 | – | US$48.42 | |||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 146 | 138 | 284 | – | ||||||||||||||||||||
|
|
|
|
|
|
|
|
(1) | Matched Shares allocated upon the vesting of rights to these shares (acquired during the 2009 Shareplus Plan Year). |
(2) | During FY2012, all Shareplus holdings for GMC members were transferred from the Shareplus trust account into the holder’s own name on the ordinary share register. Closing balances in the Shareplus trust are therefore nil for all GMC participants. |
(3) | The market price shown is the closing price of BHP Billiton shares on the relevant date. |
(4) | As per the Shareplus terms and conditions, Matched Shares in respect of Alex Vanselow’s participation in Shareplus during the 2009, 2010 and 2011 Shareplus Plan Years were allocated upon his retirement. |
(5) | Mike Yeager was allocated 69 American Depositary Receipts (ADRs) (listed on the New York Stock Exchange) in April 2012, which are each equivalent to two ordinary BHP Billiton Limited shares. |
6.8.3 Previous STI and LTI awards for the new GMC members
Awards of Deferred Shares under the GSTIP
Prior to their appointment as members of the GMC on 28 November 2011, Mike Henry and Graham Kerr received STI awards under the GSTIP, which applies for the non-GMC management of BHP Billiton. The terms and conditions of the awards are similar to those of Deferred Shares provided under the GIS as described in section 6.8.1. The table below shows awards that were held by the executives and unvested at the time that they were appointed to the GMC. These awards form part of their pro-rated remuneration for FY2012 as shown in the table in section 6.7.2, as they will vest in FY2013 or in subsequent financial years.
Due to changes in the GSTIP in FY2012, which applied to all participants in that plan, no DEP is payable on the GSTIP Deferred Shares that were allocated in 2011. These awards also deliver shares to the holder upon the vesting conditions being met, without the awards requiring to be exercised by the holder.
Name | Date of grant | At 1 July 2011 | Granted | Vested | Lapsed | Exercised | At 30 June 2012 | Date award may vest and becomes exercisable (1) | Market price on date of grant(2) | Market price on date of vesting | Market price on date of exercise | Aggregate gain of shares exercised | ||||||||||||||||||||||||||||||||||
Mike Henry | 31 Oct 2011 | – | 16,566 | – | – | – | 16,566 | Aug 2013 | £19.68 | – | – | – | ||||||||||||||||||||||||||||||||||
29 Oct 2010 | 8,259 | – | – | – | – | 8,259 | Aug 2012 | £22.14 | – | – | – | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Total | 8,259 | 16,566 | – | – | – | 24,825 | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Graham Kerr | 31 Oct 2011 | – | 11,963 | – | – | – | 11,963 | Aug 2013 | A$37.80 | – | – | – | ||||||||||||||||||||||||||||||||||
29 Oct 2010 | 10,160 | – | – | – | – | 10,160 | Aug 2012 | A$41.92 | – | – | – | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Total | 10,160 | 11,963 | – | – | – | 22,123 | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | The holding period for each award ends on 30 June in the year the award ‘may vest and become exercisable’ if the conditions for vesting are met (including the relevant service conditions). Under the GSTIP rules, awards will vest and become exercisable on, or as soon as practicable after, the first non-prohibited period date occurring after 30 June. The expiry date of awards is the day prior to the third anniversary of that vesting date. |
(2) | The market price shown for the October 2011 grant is the closing price of BHP Billiton shares on 31 October 2011. No price is payable by the individual for acquiring the Deferred Shares at the time of grant. The grant date fair values of the awards are estimated as at the start of the vesting period, being 1 July 2011 and were A$43.77 and £24.60. No exercise requirement or expiry date applies to these awards (as described above the table). |
Awards of Restricted Shares under the MAP
Prior to their appointment as members of the GMC on 28 November 2011, Mr Henry and Mr Kerr received LTI awards in the form of Restricted Shares under the MAP, which applies for the non-GMC management of BHP Billiton. The vesting of MAP awards is subject to a service condition of continued employment with the Group through to the vesting date as shown in the table below. Where a participant resigns or is terminated for cause prior to the vesting date, their MAP awards are forfeited. If a participant’s employment ends due to death, illness or injury, a pro rata number of unvested Restricted Shares will vest based on the portion of the relevant performance period served.
During FY2012, two MAP awards were allocated to Mr Henry and Mr Kerr. An initial grant of Restricted Shares was provided on 31 October 2011 at the same time and on the same basis as allocations for all other non-GMC management. Additional awards were provided on 25 November 2011 in recognition of their increased responsibilities as members of the GMC over the remainder of FY2012. Mr Henry and Mr Kerr will receive their first LTIP awards as members of the GMC in December 2012.
The table below shows awards that were held by the executives and unvested at the time that they were appointed to the GMC. These awards form part of their pro-rated remuneration for FY2012 as shown in the table in section 6.7.2, as they will vest in FY2013 or in subsequent financial years.
Due to changes in the MAP in FY2012, which applied to all participants in that plan, no DEP is payable on the Restricted Shares that were allocated to Mr Henry and Mr Kerr in 2011, and those awards also deliver shares to the holder upon the vesting conditions being met, without the awards requiring to be exercised by the holder.
Name | Date of grant | At 1 July 2011 | Granted | Vested | Lapsed | Exercised | At 30 June 2012 | Date award may vest and becomes exercisable(1) | Market price on date of grant(2) | Market price on date of vesting | Market price on date of exercise | Aggregate gain of shares exercised | ||||||||||||||||||||||||||||||||||||
Mike Henry | 25 Nov 2011 | – | 5,900 | – | – | – | 5,900 | Aug 2014 | £17.60 | – | – | – | ||||||||||||||||||||||||||||||||||||
31 Oct 2011 | – | 29,500 | – | – | – | 29,500 | Aug 2014 | £19.68 | – | – | – | |||||||||||||||||||||||||||||||||||||
29 Oct 2010 | 19,500 | – | – | – | – | 19,500 | Aug 2013 | £22.14 | – | – | – | |||||||||||||||||||||||||||||||||||||
30 Oct 2009 | 12,000 | – | – | – | – | 12,000 | Aug 2012 | £16.44 | – | – | – | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | 31,500 | 35,400 | – | – | – | 66,900 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Graham Kerr | 25 Nov 2011 | – | 9,750 | – | – | – | 9,750 | Aug 2014 | A$34.05 | – | – | – | ||||||||||||||||||||||||||||||||||||
31 Oct 2011 | – | 20,250 | – | – | – | 20,250 | Aug 2014 | A$37.80 | – | – | – | |||||||||||||||||||||||||||||||||||||
29 Oct 2010 | 19,500 | – | – | – | – | 19,500 | Aug 2013 | A$41.92 | – | – | – | |||||||||||||||||||||||||||||||||||||
30 Oct 2009 | 21,000 | – | – | – | – | 21,000 | Aug 2012 | A$37.45 | – | – | – | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | 40,500 | 30,000 | – | – | – | 70,500 | – | – | – | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | The holding period for each award ends on 30 June in the year the award ‘may vest and become exercisable’ if the conditions for vesting are met (including the relevant service conditions). Under the MAP rules, awards will vest and become exercisable on, or as soon as practicable after, the first non-prohibited period date occurring after 30 June. The expiry date of awards is the day prior to the third anniversary of that vesting date. |
(2) | The market prices shown for the October 2011 and November 2011 grants are the closing prices of BHP Billiton shares on 31 October 2011 and 25 November 2011 respectively. No price is payable by the individual for acquiring the Restricted Shares at the time of grant. The grant date IFRS fair values of the awards are estimated as at the start of the vesting period, being 1 July 2011 and were A$43.77 and £24.60. No exercise requirement or expiry date applies to these awards (as described above the table). |
6.8.4 Awards of Performance Shares under the LTIP
Each Performance Share is a conditional right to acquire one ordinary BHP Billiton share upon satisfaction of the vesting conditions. It will therefore not deliver any value to the holder for at least five years. The LTIP terms and peer group companies are provided in section 6.8.5.
Name | Date of grant | At 1 July 2009 | Granted | Vested | Lapsed | Exercised | At 30 June 2010 | Date award | Market price on date of grant (2) | Market price on date of vesting (3) | Market price on date of exercise (4) | Aggregate gain of shares exercised (4) | Date of grant | At 1 July 2011 | Granted | Vested | Lapsed | Exercised | At 30 June 2012 | Date award may vest and become exercisable (1) | Market price on date of grant(2) | Market price on date of vesting(3) | Market price on date of exercise (4) | Aggregate gain of shares exercised(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Director | Executive Director |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marius Kloppers | 14 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 5 Dec 2005 3 Dec 2004 | — 500,000 333,327 225,000 225,000 225,000 | 250,000 — — — — — | — — — — — 225,000 | — — — — — — | — — — — — 225,000 | 250,000 500,000 333,327 225,000 225,000 — | Aug 2014 Aug 2013 Aug 2012 Aug 2011 Aug 2010 12 Aug 2009 | A$ A$ A$ £ £ £ | 40.65 27.50 42.05 9.72 8.90 5.91 |
£ | — — — — — 15.55 |
£ | — — — — — 15.55 |
£ | — — — — — 3,498,750 | 5 Dec 2011 | – | 226,721 | – | – | – | 226,721 | Aug 2016 | A$37.26 | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||
6 Dec 2010 | 200,000 | – | – | – | – | 200,000 | Aug 2015 | A$44.53 | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
14 Dec 2009 | 250,000 | – | – | – | – | 250,000 | Aug 2014 | A$40.65 | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 Dec 2008 | 500,000 | – | – | – | – | 500,000 | Aug 2013 | A$27.50 | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
14 Dec 2007 | 333,327 | – | – | – | – | 333,327 | Aug 2012 | A$42.05 | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 Dec 2006 | 225,000 | – | 225,000 | – | 225,000 | – | 25 Aug 2011 | £9.72 | £19.60 | £19.60 | £4,410,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 1,508,327 | 250,000 | 225,000 | — | 225,000 | 1,533,327 | 1,508,327 | 226,721 | 225,000 | – | 225,000 | 1,510,048 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other members of the GMC | Other members of the GMC |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alberto Calderon | 14 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 5 Dec 2005 | — 225,000 211,993 80,000 40,000 | 120,000 — — — — | — — — — — | — — — — — | — — — — — | 120,000 225,000 211,993 80,000 40,000 | Aug 2014 Aug 2013 Aug 2012 Aug 2011 Aug 2010 | £ £ £ £ £ | 19.06 10.60 15.45 9.72 8.90 |
| — — — — — |
| — — — — — |
| — — — — — | 5 Dec 2011 | – | 146,510 | – | – | – | 146,510 | Aug 2016 | £20.12 | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||
6 Dec 2010 | 120,000 | – | – | – | – | 120,000 | Aug 2015 | £24.40 | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 556,993 | 120,000 | — | — | — | 676,993 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
14 Dec 2009 | 120,000 | – | – | – | – | 120,000 | Aug 2014 | £19.06 | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Andrew Mackenzie (5) | 14 Dec 2009 4 Dec 2008 | — 325,839 | 120,000 — | — — | — — | — — | 120,000 325,839 | Aug 2014 Aug 2013 | £ £ | 19.06 10.60 |
| — — |
| — — |
| — — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 Dec 2008 | 225,000 | – | – | – | – | 225,000 | Aug 2013 | £10.60 | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
14 Dec 2007 | 211,993 | – | – | – | – | 211,993 | Aug 2012 | £15.45 | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 Dec 2006 | 80,000 | – | 80,000 | – | 80,000 | – | 25 Aug 2011 | £9.72 | £19.60 | £19.60 | £1,568,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 325,839 | 120,000 | — | — | 445,839 | 756,993 | 146,510 | 80,000 | – | 80,000 | 823,503 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marcus Randolph | 14 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 5 Dec 2005 3 Dec 2004 | — 225,000 197,676 175,000 110,000 110,000 | 120,000 — — — — — | — — — — — 110,000 | — — — — — — | — — — — — 110,000 | 120,000 225,000 197,676 175,000 110,000 — | Aug 2014 Aug 2013 Aug 2012 Aug 2011 Aug 2010 12 Aug 2009 | A$ A$ A$ A$ A$ A$ | 40.65 27.50 42.05 26.40 22.03 15.28 |
A$ | — — — — — 37.99 |
A$ | — — — — — 38.26 |
A$ | — — — — — 4,208,600 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mike Henry (5) | 14 Dec 2007 | 20,000 | – | – | – | – | 20,000 | Aug 2012 | £15.45 | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 817,676 | 120,000 | 110,000 | — | 110,000 | 827,676 | 20,000 | – | – | – | – | 20,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alex Vanselow | 14 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 5 Dec 2005 3 Dec 2004 | — 225,000 197,676 225,000 110,000 110,000 | 120,000 — — — — — | — — — — — 110,000 | — — — — — — | — — — — — 110,000 | 120,000 225,000 197,676 225,000 110,000 — | Aug 2014 Aug 2013 Aug 2012 Aug 2011 Aug 2010 12 Aug 2009 | A$ A$ A$ A$ A$ A$ | 40.65 27.50 42.05 26.40 22.03 15.28 |
A$ | — — — — — 37.99 |
A$ | — — — — — 38.26 |
A$ | — — — — — 4,208,600 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 867,676 | 120,000 | 110,000 | — | 110,000 | 877,676 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Karen Wood | 1 Feb 2010 4 Dec 2008 14 Dec 2007 7 Dec 2006 5 Dec 2005 3 Dec 2004 | — 175,000 154,187 175,000 80,000 80,000 | 90,000 — — — — — | — — — — — 80,000 | — — — — — — | — — — — — 80,000 | 90,000 175,000 154,187 175,000 80,000 — | Aug 2014 Aug 2013 Aug 2012 Aug 2011 Aug 2010 12 Aug 2009 | A$ A$ A$ A$ A$ A$ | 40.65 27.50 42.05 26.40 22.03 15.28 |
A$ | — — — — — 37.99 |
A$ | — — — — — 38.26 |
A$ | — — — — — 3,060,800 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 664,187 | 90,000 | 80,000 | — | 80,000 | 674,187 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J Michael Yeager | 14 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 26 Apr 2006 | — 225,000 187,702 225,000 325,000 | 120,000 — — — — | — — — — — | — — — — — | — — — — — | 120,000 225,000 187,702 225,000 325,000 | Aug 2014 Aug 2013 Aug 2012 Aug 2011 Aug 2010 | A$ A$ A$ A$ A$ | 40.65 27.50 42.05 26.40 31.06 |
| — — — — — |
| — — — — — |
| — — — — — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 962,702 | 120,000 | — | — | — | 1,082,702 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name Graham Kerr (5) Total Andrew Mackenzie (6) Total Marcus Randolph (7) Total Alex Vanselow(8) Total Karen Wood Total J Michael Yeager (7) Total Date of grant At
1 July
2011 Granted Vested Lapsed Exercised At
30 June
2012 Date award
may vest and
become
exercisable (1) Market
price on
date of
grant(2) Market price
on date of
vesting(3) Market
price on
date of
exercise (4) Aggregate
gain of shares
exercised(4) 14 Dec 2007 40,000 – – – – 40,000 Aug 2012 A$42.05 – – – 40,000 – – – – 40,000 5 Dec 2011 – 146,510 – – – 146,510 Aug 2016 £20.12 – – – 6 Dec 2010 120,000 – – – – 120,000 Aug 2015 £24.40 – – – 14 Dec 2009 120,000 – – – – 120,000 Aug 2014 £19.06 – – – 4 Dec 2008 325,839 – – – – 325,839 Aug 2013 £10.60 – – – 565,839 146,510 – – – 712,349 5 Dec 2011 – 119,603 – – – 119,603 Aug 2016 A$37.26 – – – 6 Dec 2010 105,000 – – – – 105,000 Aug 2015 A$44.53 – – – 14 Dec 2009 120,000 – – – – 120,000 Aug 2014 A$40.65 – – – 4 Dec 2008 225,000 – – – – 225,000 Aug 2013 A$27.50 – – – 14 Dec 2007 197,676 – – – – 197,676 Aug 2012 A$42.05 – – – 7 Dec 2006 175,000 – 175,000 – 175,000 – 25 Aug 2011 A$26.40 A$38.61 A$38.61 A$6,756,750 822,676 119,603 175,000 – 175,000 767,279 6 Dec 2010 105,000 – – 70,000 – 35,000 Aug 2015 A$44.53 – – – 14 Dec 2009 120,000 – – 56,000 – 64,000 Aug 2014 A$40.65 – – – 4 Dec 2008 225,000 – – 60,000 – 165,000 Aug 2013 A$27.50 – – – 14 Dec 2007 197,676 – – 13,178 – 184,498 Aug 2012 A$42.05 – – – 7 Dec 2006 225,000 – 225,000 – 225,000 – 25 Aug 2011 A$26.40 A$38.61 A$38.61 A$8,687,250 872,676 – 225,000 199,178 225,000 448,498 5 Dec 2011 – 85,027 – – – 85,027 Aug 2016 A$37.26 – – – 6 Dec 2010 75,000 – – – – 75,000 Aug 2015 A$44.53 – – – 1 Feb 2010 90,000 – – – – 90,000 Aug 2014 A$40.65 – – – 4 Dec 2008 175,000 – – – – 175,000 Aug 2013 A$27.50 – – – 14 Dec 2007 154,187 – – – – 154,187 Aug 2012 A$42.05 – – – 7 Dec 2006 175,000 – 175,000 – 175,000 – 25 Aug 2011 A$26.40 A$38.61 A$38.61 A$6,756,750 669,187 85,027 175,000 – 175,000 579,214 5 Dec 2011 – 119,603 – – – 119,603 Aug 2016 A$37.26 – – – 6 Dec 2010 105,000 – – – – 105,000 Aug 2015 A$44.53 – – – 14 Dec 2009 120,000 – – – – 120,000 Aug 2014 A$40.65 – – – 4 Dec 2008 225,000 – – – – 225,000 Aug 2013 A$27.50 – – – 14 Dec 2007 187,702 – – – – 187,702 Aug 2012 A$42.05 – – – 7 Dec 2006 225,000 – 225,000 – 225,000 – 25 Aug 2011 A$26.40 A$38.61 A$38.61 A$8,687,250 862,702 119,603 225,000 – 225,000 757,305
Notes
(1) | The performance period for each award ends on 30 June in the year the award ‘may vest and become exercisable’ if the conditions for vesting are met (including if the relevant performance hurdle is achieved). Under the LTIP rules, awards will vest and become exercisable on, or as soon as practicable after, the first non-prohibited period date occurring after 30 June. The expiry date of awards is the day prior to the fifth anniversary of that vesting date. |
(2) | The market price shown for the December |
(3) | All (100 per cent) of the Performance Shares granted under the LTIP in December |
(4) | The market price shown (and used for calculating the aggregate gain) is the closing price of BHP Billiton shares on the date that the individual exercised their Performance Shares. No price is payable by the individual for exercising the Performance Shares. One ordinary BHP Billiton share is acquired for each Performance Share exercised. The amounts shown in this column do not include the value of DEP paid on exercise of the awards as described in section 6.7.2. The DEP is included within the value of the share-based payment remuneration in that section. The DEP in relation to the vested 225,000 Performance Shares for Marius Kloppers was US$788,625 (UK disclosure requirement). |
(5) | The awards shown for Mike Henry and Graham Kerr are those allocated in December 2007, which form a proportion of the share-based payment remuneration as KMP as shown in the table in section 6.7.2. Mr Henry and Mr Kerr received awards under the management MAP from 2008 to 2011 (as shown in section 6.8.3), but will receive LTI Performance Shares again from December 2012 as members of the GMC. |
(6) | The awards allocated to Andrew Mackenzie on 4 December 2008 included 225,000 Performance Shares allocated to him as part of FY2009 Total Remuneration and a further 100,839 Performance Shares allocated to him on commencement with BHP Billiton, in relation toat risk rewards forfeited when he left his former employer. More information on Mr Mackenzie’s commencement arrangements is included in |
(7) | The number of December 2011 awards shown for Marcus Randolph and Mike Yeager reflects the fair value approved by the Remuneration Committee in 2011. These numbers are each 65 Performance Shares fewer than the number allocated (due to an administrative error) and notified to relevant stock exchanges in December 2011. The additional awards allocated in error will be voided. |
(8) | In accordance with the rules of the LTIP, a proportion of the original LTI grant lapsed when Alex Vanselow retired from the Group. Awards are prorated to reflect the period of service from the start of each performance period to the date of retirement. |
Awards6.8.5 Description of Deferred Shares under the GISLTIP
Each employee may nominateTerms and performance hurdle of LTIP Performance Shares
Upon vesting, Performance Shares become exercisable (at no cost to receive GIS awardsthe participant) in accordance with the formterms of Deferred Shares (as shown in this table) or ingrant and BHP Billiton’s Securities Dealing GLD. All terms and details of the form of Options (as shown in the next table) or a combination thereof.
Name | Date of grant | At 1 July 2009 | Granted | Vested | Lapsed | Exercised | At 30 June 2010 | Date award | Market price on date of grant(2) | Market price on date of vesting (3) | Market price on date of exercise (4) | Aggregate gain of shares exercised (4) | ||||||||||||||||
Executive Director | ||||||||||||||||||||||||||||
Marius Kloppers | 14 Dec 2009 4 Dec 2008 14 Dec 2007 | — 95,847 27,582 | 46,951 — — | — — 27,582 | — — — | — — 27,582 | 46,951 95,847 — | Aug 2011 Aug 2010 12 Aug 2009 | A$ A$ A$ | 40.65 27.50 42.05 |
A$ | — — 37.99 |
A$ | — — 38.26 |
A$ | — — 1,055,287 | ||||||||||||
Total | 123,429 | 46,951 | 27,582 | — | 27,582 | 142,798 | ||||||||||||||||||||||
Other members of the GMC | ||||||||||||||||||||||||||||
Alberto Calderon | 14 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 | — — 17,207 11,926 | 33,343 — — — | — — 17,207 — | — — — — | — — 17,207 11,926 | 33,343 — — | Aug 2011 — 12 Aug 2009 27 Nov 2008 | £
£ £ | 19.06 — 15.45 9.72 |
£ £ | — — 15.55 11.81 |
£ £ | — — 15.55 15.55 |
£ £ | — — 267,569 185,449 | ||||||||||||
Total | 29,133 | 33,343 | 17,207 | — | 29,133 | 33,343 | ||||||||||||||||||||||
Andrew Mackenzie | 14 Dec 2009 | — | 12,476 | — | — | — | 12,476 | Aug 2011 | £ | 19.06 | — | — | — | |||||||||||||||
Total | — | 12,476 | — | — | — | 12,476 | ||||||||||||||||||||||
Marcus Randolph | 14 Dec 2009 4 Dec 2008 14 Dec 2007 | — 45,027 23,648 | 25,126 — — | — — 23,648 | — — — | — — 23,648 | 25,126 45,027 — | Aug 2011 Aug 2010 12 Aug 2009 | A$ A$ A$ | 40.65 27.50 42.05 |
A$ | — — 37.99 |
A$ | — — 38.26 |
A$ | — — 904,772 | ||||||||||||
Total | 68,675 | 25,126 | 23,648 | — | 23,648 | 70,153 | ||||||||||||||||||||||
Alex Vanselow | 14 Dec 2009 4 Dec 2008 14 Dec 2007 | — — 24,847 | 27,727 — — | — — 24,847 | — — — | — — 24,847 | 27,727 — — | Aug 2011 Aug 2010 12 Aug 2009 | A$
A$ | 40.65 — 42.05 |
A$ | — — 37.99 |
A$ | — — 38.26 |
A$ | — — 950,646 | ||||||||||||
Total | 24,847 | 27,727 | 24,847 | — | 24,847 | 27,727 | ||||||||||||||||||||||
Karen Wood | 14 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 5 Dec 2005 | — 30,778 19,643 18,267 20,462 | 23,686 — — — — | — — 19,643 — — | — — — — — | — — 19,643 18,267 20,462 | 23,686 30,778 — — — | Aug 2011 Aug 2010 12 Aug 2009 27 Nov 2008 Vested prior to Nov 2008 | A$ A$ A$ A$ A$ | 40.65 27.50 42.05 26.40 22.03 |
A$ A$ A$ | — — 37.99 28.80 35.40 |
A$ A$ A$ | — — 38.26 38.26 38.26 |
A$ A$ A$ | — — 751,541 698,895 782,876 | ||||||||||||
Total | 89,150 | 23,686 | 19,643 | — | 58,372 | 54,464 | ||||||||||||||||||||||
J Michael Yeager | 14 Dec 2009 4 Dec 2008 14 Dec 2007 | — 56,373 26,460 | 29,877 — — | — — 26,460 | — — — | — — 26,460 | 29,877 56,373 — | Aug 2011 Aug 2010 12 Aug 2009 | A$ A$ A$ | 40.65 27.50 42.05 |
A$ | — — 37.99 |
A$ | — — 38.26 |
A$ | — — 1,012,360 | ||||||||||||
Total | 82,833 | 29,877 | 26,460 | — | 26,460 | 86,250 | ||||||||||||||||||||||
Notesperformance hurdle are outlined below.
Terms | ||||||||
Duration of performance period | • Five years. | |||||||
Dividends | • Dividends are not received by the executive during the vesting period. • A DEP (as described in section 6.7.2) will be provided when the vesting period is over and the executive exercises their Performance Shares. This payment is not made in relation to any securities that are forfeited during the vesting period. | |||||||
Performance condition | • BHP Billiton’s TSR relative to TSR of comparator companies. TSR measures the return delivered to shareholders over a certain period through the change in share price and any dividends paid (which are notionally reinvested for the purposes of the calculation). TSR has been chosen as the most appropriate measure as it allows for an objective external assessment over a sustained period on a basis that is familiar to shareholders. | |||||||
LTI granted December 2010 and prior | LTI granted December 2011 | |||||||
Average period for measuring TSR performance | • TSR for BHP Billiton and for each | • The averaging period has been doubled to six months as added security against short-term price fluctuations. | ||||||
LTI granted December 2009 and prior | LTI granted December 2010 and December 2011 | |||||||
Comparator companies (Index) | • Sector peer group. | • Sector peer group (determines vesting of 67% of the Performance Shares). • Broad stock market group (determines vesting of 33% of the Performance Shares), being the MSCI World index – a market capitalisation index that captures the performance of 1,500 stocks from around the world.(1) | ||||||
Sector peer group composition | • Weighted 75% to mining and 25% to oil and gas. | • No change to weightings. Current oil and gas component expanded to include major companies, with a cap and collar mechanism to reduce sensitivity to any single constituent company. | ||||||
Vesting scale | • No Performance Shares vest if BHP Billiton’s TSR is at or below the Index TSR. | • No Performance Shares vest if BHP Billiton’s TSR is below the Index TSR. • 25% of the Performance Shares vest if BHP Billiton’s TSR is at the Index TSR. |
• For all Performance Shares to vest, BHP Billiton’s TSR must exceed the Index TSR by an average of 5.5% per annum, which equates to exceeding the average TSR over the five-year performance period by 30.7%. Vesting occurs on a sliding scale between the Index TSR and the point of full vesting. | ||||
Other vesting conditions | • In the event that the Remuneration Committee does not consider the level of vesting that would otherwise apply based on the Group’s achievement of the TSR hurdle to be a true reflection of the long-term financial performance of the Group, it retains the discretion to lapse some or all of participants’ Performance Shares. This is an important mitigator against the risk of unintended vesting outcomes. • For the LTI awards allocated December 2009 and following, the Committee also has the capacity to determine that vesting not be applied for any particular participant(s), should they consider that individual performance or other circumstances makes this an appropriate outcome. It is anticipated that this power would only be exercised in exceptional circumstances. | |||
Retesting if performance hurdle not met | • Not permitted. | |||
Maximum award | • An award not exceeding 200% of base salary at fair value. The Board determines an appropriate allocation for each individual each year. • The fair value is the outcome weighted by probability, and • Fair value has been used because it enables the Committee to determine LTI awards within target Total Remuneration, ensuring that awards are externally competitive. | |||
LTI granted December 2009 and prior | LTI granted December 2010 and December 2011 | |||
Fair value | • The fair value of each Performance Share (as calculated by Kepler Associates) was 31% of the market value of one ordinary BHP Billiton Limited or BHP Billiton Plc share at the allocation date. | • The fair value of each Performance Share (as calculated by Kepler Associates) was 41% of the market value of one ordinary BHP Billiton Limited or BHP Billiton Plc share at the allocation date. | ||
Exercise period and Expiry Date | • Vested Performance Shares are able to be exercised for five years following the date that vesting is determined, with an Expiry Date at a date prior to the fifth anniversary of vesting. | |||
Treatment on departure | • The Committee regards it as an important principle that where a participant resigns without the Committee’s consent or their employment is terminated for cause, they forfeit the entitlement to their unvested Performance Shares. • The rules of the LTIP provide that should a participant cease employment in specific circumstances, such as retirement, with the consent of the Committee that participant may retain entitlements to a portion of the Performance Shares that have been granted, but that are |
• If a participant’s employment ends due to death or disability, the Committee may choose to allow retention and immediate vesting of all of the participant’s Performance Shares. |
(1) | As BHP Billiton’s TSR performance relative to its peers tends to be counter-cyclical, the sector-based comparison used in isolation prior to 2010 resulted in less perceived value for |
AwardsComparator group for LTIP awards
A description of Options under the GIS
Each employee may nominateperformance conditions applying to receive GIS awardsthe LTI Performance Shares is set out in the formprevious table. The index of Options (aspeer group companies for the LTIP since its implementation in 2004 is shown in this table) or inbelow. The list of peer group companies is reviewed by the form of Deferred Shares (as shown in the table above) or a combination thereof.
Name | Date of grant | Exercise price payable (1) | At 1 July 2009 | Granted | Vested | Lapsed | Exercised | At 30 June 2010 | Date award may vest and becomes exercisable (2) | Market price on date of grant(3) | Market price on date of vesting | Market price on date of exercise | Aggregate gain of shares exercised | |||||||||||||||
Alberto Calderon | 4 Dec 2008 | £ | 10.89 | 143,227 | — | — | — | — | 143,227 | Aug 2010 | £ | 10.60 | — | — | — | |||||||||||||
Andrew Mackenzie | 14 Dec 2009 | £ | 18.68 | — | 16,119 | — | — | — | 16,119 | Aug 2011 | £ | 19.06 | — | — | — | |||||||||||||
Alex Vanselow | 4 Dec 2008 | A$ | 29.15 | 153,768 | — | — | — | — | 153,768 | Aug 2010 | A$ | 27.50 | — | — | — |
NotesRemuneration Committee prior to each LTI award being allocated.
December 2004 to 2006 | December 2007 to 2009 | December 2010 and | ||||
Oil and Gas (25%) | ||||||
Apache | X | X | ||||
BG Group | X | X | X | |||
BP | X | X | ||||
ConocoPhillips | X | |||||
Devon Energy | X | X | ||||
Exxon Mobil | X | X | ||||
Marathon Oil | X | |||||
Shell | X | X | ||||
Total | X | |||||
Woodside Petroleum | X | X | X | |||
December 2004 to | December 2007 to 2009 | December 2010 and |
Resources (75%) |
Alcan | X | |||||
Alcoa | X | X | X | |||
Alumina | X | |||||
Anglo American | X | X | X | |||
Cameco | X | X | ||||
Falconbridge | X | |||||
Freeport McMoran | X | X | X | |||
Impala | X | |||||
Inco | X | |||||
Newmont Mining | X | |||||
Norilsk | X | X | X | |||
Peabody Energy | X | X | ||||
Phelps Dodge | X | |||||
Rio Tinto | X | X | X | |||
Southern Copper | X | X | ||||
Teck Cominco | X | X | ||||
Vale | X | X | X | |||
Xstrata | X | X | X |
Awards of Performance Rights under the Performance Share Plan
Awards are no longer made under the Performance Share Plan. Further details of the Performance Share Plan are set out in note 32 of this Annual Report.
Name | Date of grant | At 1 July 2009 | Granted | Vested | Lapsed | Exercised | At 30 June 2010 | Date award | Market price on date of exercise (2) | Aggregate gain of shares exercised(2) | ||||||||||||
Karen Wood | 8 Nov 2001 | 25,846 | — | — | — | 25,846 | — | Vested prior to 1 July 2008 | A$ | 38.26 | A$ | 988,868 |
Notes
Awards of Matched Shares under the Shareplus all-employee share plan
Each member of the GMC may choose to participate in the Shareplus all-employee share plan on the same basis as other employees. Matched shares were allocated under the plan for the first time on 1 April 2010 in relation to contributions made from base salary during the 2007 Plan Year. Differences in exchange rates in relation to the base salaries of the GMC members and the currencies of each securities exchange result in minor differences in the numbers of shares allocated. GMC interests in BHP Billiton as a result of the plan are shown below. Further detail on Shareplus is provided in section 6.3.3.
Name | Allocation Date | At 1 July 2009 | Number of shares (1) | Transferred from trust or sold | At 30 June 2010 | Market price on date of allocation/ vesting (2) | |||||||
Marius Kloppers | 1 Apr 2010 | — | 160 | — | 160 | A$ | 43.95 | ||||||
Alberto Calderon | 1 Apr 2010 | — | 156 | — | 156 | £ | 23.01 | ||||||
Marcus Randolph | 1 Apr 2010 | — | 157 | — | 157 | A$ | 43.95 | ||||||
Alex Vanselow | 1 Apr 2010 | — | 157 | — | 157 | A$ | 43.95 | ||||||
Karen Wood | 1 Apr 2010 | — | 157 | — | 157 | A$ | 43.95 | ||||||
J Michael Yeager(3) | 1 Apr 2010 | — | 134 | 134 | — | US$ | 45.46 |
Note
6.8.6 Estimated value range of equity awards
The current face value of STI and LTI awards allocated during FY2010FY2012 and yet to vest (to be disclosed under theAustralian Corporations Act 2001) is the number of awards as set out in the previous tables multiplied by the current share price of BHP Billiton Limited or BHP Billiton Plc as applicable.
The actual value that may be received by participants in the future can notcannot be determined as it is dependent on, and therefore fluctuates with, the share prices of BHP Billiton Limited and BHP Billiton Plc at the date that any particular award is exercised. The table below provides FY2010five-year share price detailshistory for BHP Billiton Limited and BHP Billiton Plc.Plc, and history of dividends paid.
Five-year share price and dividend history
| FY2011 | FY2012 (1) | ||||||||||||||||||||
BHP Billiton Limited | Share price at beginning of year | A$35.38 | A$44.45 | A$33.96 | A$36.94 | A$43.97 | ||||||||||||||||
Share price at end of year | A$43.70 | A$34.72 | A$37.65 |
| A$
| |||||||||||||||||
|
|
|
Comparator group for LTIP awards
The index of peer group companies for the LTIP since its implementation in 2004 is shown below:
A$31.45 | ||||||||||||||||||||||
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| A$0.66 | |||||||||||||||||||||
| A$0.95 | A$0.95 | A$1.03 | |||||||||||||||||||
| Share price at beginning of year | £13.76 | £18.97 | £13.75 | £17.28 | £24.39 | ||||||||||||||||
| £19.20 | |||||||||||||||||||||
| £13.64 | £17.54 | £24.47 | £18.06 | ||||||||||||||||||
| £0.28 | |||||||||||||||||||||
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A description of the performance hurdle applying to the LTIP Performance Shares is set out in section 6.3.5.
Board oversight
The Board is responsible for ensuring that the Group’s remuneration structures are equitable and aligned with the long-term interests of BHP Billiton and its shareholders. In performing this function, it is critical that the Board is independent of management when making decisions affecting employee remuneration.
Accordingly, the Board has established a Remuneration Committee to assist it in making decisions affecting employee remuneration. The Remuneration Committee is comprised solely of non-executive Directors, all of whom are independent. In order to ensure that it is fully informed when making remuneration decisions, the committee receives regular reports and updates from members of management (who the committee invites to attend meetings as and when appropriate) and can draw on services from a range of external sources, including remuneration consultants.
Remuneration Committee
The activities of the Remuneration Committee are governed by Terms of Reference (approved by the Board in March 2008), which are available on our website. The committee focuses on:
remuneration policy and its specific application to the CEO and other members of the GMC, as well as the general application to all employees;
the determination of levels of reward to the CEO and other members of the GMC;
providing guidance to the Chairman on evaluating the performance of the CEO;
effective communication with shareholders on the remuneration policy and the Remuneration Committee’s work on behalf of the Board.
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Note:
Use of remuneration consultants
The Board seeks and considers advice from independent remuneration consultants where appropriate. Remuneration consultants are engaged by and report directly to the Remuneration Committee. Potential conflicts of interest are taken into account when remuneration consultants are selected and their terms of engagement regulate their level of access to, and require their independence from, BHP Billiton’s management. The advice and recommendations of external consultants are used as a guide, but do not serve as a substitute for thorough consideration of the issues by each director.
Kepler Associates, who were appointed by the Remuneration Committee to act as independent remuneration advisers, provide specialist remuneration advice and do not provide other services to the Group. During the year, Kepler Associates provided advice and assistance to the Remuneration Committee on a wide range of matters, including:
benchmarking of pay of senior executives against comparable roles at a range of relevant comparator groups, including sector and size peers;
provision of information and commentary on global trends in executive remuneration;
performance analysis for LTI awards;
review of and commentary on management proposals;
analysis and support in the review of LTI arrangements;
other ad hoc support and advice as requested by the Committee.
An up-to-date list of all consultants, together with the type of services supplied and whether services are provided elsewhere in the Group, is available on our website.
Hedging of BHP Billiton shares and equity instruments
Specified employees (including the GMC) are not allowed to protect the value of any unvested equity instruments allocated to them under employee programs or the value of shares and equity instruments held as part of meeting BHP Billiton’s minimum shareholding requirements (as described in section 6.3.6). Any securities that have vested and are no longer subject to restrictions or performance conditions may be subject to hedging arrangements, provided that consent is obtained from BHP Billiton in advance of the employee entering into the arrangement. Such arrangements need to be reported in the Remuneration Report, and no such arrangements were in place during FY2010 or at the date of this Annual Report.
BHP Billiton treats compliance with this policy as a serious issue, and takes appropriate measures to ensure that the policy is adhered to.
In addition, the Group has a policy that prohibits non-executive Directors and senior executives from using BHP Billiton securities as collateral in any financial transaction, including margin loan arrangements.
6.66.9 Aggregate Directors’ remuneration
This table sets out the aggregate remuneration of executiveExecutive Directors and non-executiveNon-executive Directors in accordance with the requirements of the UK Companies Act 2006 (and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 made thereunder).
US dollars million | 2010 | 2009 | 2011 | 2012 | ||||||||
Emoluments | 8 | 7 | 8.0 | 6.5 | ||||||||
Termination payments | — | — | – | – | ||||||||
Awards vesting under LTI plans | 7 | 2 | 10.4 | 9.1 | ||||||||
Gains on exercise of Options | — | — | – | – | ||||||||
Pension contributions | 3 | 1 | 0.9 | 0.9 | ||||||||
|
| |||||||||||
Total | 18 | 10 | 19.3 | 16.5 | ||||||||
|
|
(1) | For the purposes of this UK requirement, ‘LTI plans’ includes both the STI and LTI awards for the CEO. The value shown for 2012 is the US$ equivalent of the Aggregate gain of the GIS Deferred Shares exercised as shown in section 6.8.1 and of the LTI Performance Shares exercised as shown in section 6.8.4. |
6.76.10 Non-executive Director arrangements
This section explains the remuneration policy, structurearrangements and outcomes for non-executiveNon-executive Directors as listed below.
6.7.16.10.1 Non-executive Directors in FY2010FY2012
Details of the non-executiveNon-executive Directors who held office during FY2010FY2012 are set out below. Except where otherwise indicated, the Directors held office for the whole of FY2010.FY2012. Dates of appointment of all Directors appear in section 4.1 of this Annual Report.
Name | Title | Details if changed position | ||
Malcolm Broomhead | Non-executive Director | |||
John Buchanan | ||||
Carlos Cordeiro | Non-executive Director | |||
David Crawford | Non-executive Director | |||
Pat Davies | Non-executive Director | Appointed | ||
Carolyn Hewson | Non-executive Director | |||
Lindsay Maxsted | Non-executive Director | |||
Wayne Murdy | Non-executive Director | |||
Jac Nasser | Chairman | |||
Keith Rumble | Non-executive Director | |||
John Schubert | Non-executive Director | |||
Shriti Vadera | Non-executive Director | |||
| ||||
6.7.26.10.2 Remuneration structurearrangements
Our non-executiveNon-executive Directors are paid in compliance with the UK Corporate Governance Code (formerly known as the Combined Code) (2008)(2010) and the ASX Corporate Governance CouncilCouncil’s Principles of Good Corporate Governance (2007)and Recommendations (2nd Edition).
The Board is conscious that, just as it must set remuneration levels to attract and retain talented executives, it must also ensure that remuneration rates for non-executiveNon-executive Directors are set at a level that will attract and retain the calibre of Director necessary to contribute effectively to a high-performing Board.
The remuneration rateslevels reflect the size and complexity of the Group, the multi-jurisdictional environment arising from the Dual Listed CompaniesCompany structure, the multiple stock exchange listings, the extent of the geographic regions in which the Group operates and the enhanced responsibilities associated with membership of Board Committees. They also reflect the considerable travel burden imposed on members of the Board. In setting the remuneration of the Directors, the Committee takes into account the economic environment and the financial performance of the Group is taken into account, along with pay and employment conditions of employees elsewhere in the Group.
Fees for the Non-executive Directors are determined by the Chairman and the CEO. The Non-executive Directors do not take part in these discussions. Fees for the Chairman are determined by the Board on the recommendation of the Remuneration Committee. Fees for the Non-executive Directors and Chairman were reviewed in March 2010 when Jacques Nasser commenced as Chairman. Fees for the non-executive Directors were reviewed in July/August 2010June 2012 and benchmarked against peer companies with the assistance of external advisers.externally provided benchmark data. As a result of the review, a decision was taken to make no change to the fee levels of the Non-executive Directors or the Chairman for FY2013. The table below sets out the fees before and after the 2010 review.
that have been effective since 1 July 2008. The aggregate sum available to remunerate non-executiveNon-executive Directors was approved by shareholders at the 2008 Annual General MeetingsAGMs at US$3.8 million.
Levels of fees and travel Base annual fee Plus additional fees for: Committee Chair: Risk and Audit Finance(1) Remuneration Sustainability Nomination Committee membership: Risk and Audit Finance(1) Remuneration Sustainability Nomination Travel allowance(2): Greater than 3 but less than 10 hours 10 hours or more Chairman’s remuneration
allowances for
Non-executive Directors
(in US dollars) From 1 July
2008 From 1 July
2009 From 1 July
2010 From 1 July
2011 From 1 July
2012 140,000 140,000 154,000 170,000 170,000 Senior Independent Director of BHP Billiton Plc 30,000 30,000 35,000 48,000 48,000 50,000 50,000 55,000 60,000 60,000 – – – – 60,000 35,000 35,000 40,000 45,000 45,000 35,000 35,000 40,000 45,000 45,000 No additional fees No additional fees No additional fees No additional fees No additional fees 25,000 25,000 30,000 32,500 32,500 – – – – 32,500 20,000 20,000 25,000 27,500 27,500 20,000 20,000 25,000 27,500 27,500 No additional fees No additional fees No additional fees No additional fees No additional fees 7,000 7,000 7,000 7,000 7,000 15,000 15,000 15,000 15,000 15,000 1,000,000 1,000,000 1,000,000 1,100,000 1,100,000
Levels of fees and travel allowances for non-executive Directors (in US dollars) | From 1 July 2008 to 30 June 2010 | From 1 July 2010 | ||
Base annual fee | 140,000 | 154,000 | ||
Plus additional fees for: | ||||
Senior Independent Director of BHP Billiton Plc | 30,000 | 35,000 | ||
Committee Chair: Risk and Audit Remuneration Sustainability Nomination | 50,000 35,000 35,000 No additional fees | 55,000 40,000 40,000 No additional fees | ||
Committee membership: Risk and Audit Remuneration Sustainability Nomination | 25,000 20,000 20,000 No additional fees | 30,000 25,000 25,000 No additional fees | ||
Travel allowance: Greater than 3 but less than 12 hours Greater than 12 hours | 7,000 15,000 | 7,000 15,000 | ||
Chairman’s remuneration | 1,000,000 | 1,000,000 |
(1) | The Finance Committee was created on 23 April 2012 and the fees shown are annualised and commenced from that date. |
(2) | Travel allowance for each return flight. Until 30 June 2011, the time frames were ‘Greater than 3 but less than 12 hours’ and ‘12 hours or more’, for each return flight. |
Non-executive Directors are not eligible to participate in any of our incentive arrangements. A standard letter of appointment has been developed for non-executiveNon-executive Directors and is available on our website. Each non-executiveNon-executive Director is appointed subject to periodic re-election by shareholders (section 5(see section 5.12 of this Annual Report includesfor an explanation of the process). There are no provisions in any of the non-executiveNon-executive Directors’ appointment arrangements for compensation payable on early termination of their directorship.
6.7.36.10.3 Retirement benefits
The following table sets out the accrued retirement benefits under the now-closed Retirement Plan of BHP Billiton Limited. The Retirement Plan was closed on 24 October 2003 and entitlements that had accumulated in respect of each of the participants were frozen. These will be paid on retirement. An earnings rate equal to the October 2003 five-year Australian Government Bond Rate is being applied to the frozen entitlements from that date.
US dollars | Completed service at 30 June 20010 (years) | Increase in lump sum entitlement during the year(1) | Lump sum entitlement at (2) | Completed service at 30 June 2012 (years) | Change in lump sum entitlement during the year(1) | Lump sum entitlement at | ||||||||||||||||||
30 June 2010 | 30 June 2009 | 30 June 2012 | 30 June 2011 | |||||||||||||||||||||
Don Argus(3) | 12.75 | 257,635 | — | 1,525,605 | ||||||||||||||||||||
David Crawford | 16 | 41,907 | 437,846 | 395,939 | 18 | (5,966 | ) | 576,606 | 582,572 | |||||||||||||||
David Jenkins(4) | 9.4 | 48,359 | — | 274,742 | ||||||||||||||||||||
John Schubert | 10 | 20,940 | 218,783 | 197,843 | 12 | (2,981 | ) | 288,119 | 291,100 |
Notes
(1) | Since the closure of the Retirement Plan, no further entitlements have accrued. The movement reflects the application of the earnings rate and foreign exchange rate (the translation from Australian dollars to US dollars for the Remuneration Report) to the lump sum entitlement at the date of closure. |
6.7.4 Total remuneration: statutory6.10.4 Statutory disclosures
The table below has been prepared in accordance with the requirements of the UK Companies Act 2006 (and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 made thereunder) and theAustralian Corporations Act 2001,, and relevant accounting standards.
US dollars | Short-term benefits | Subtotal: UK Requirements | Post-employment benefits(2) | Total: Australian requirements | ||||||||||||||||
Fees | Committee Chair fees | Committee membership fees | Travel allowances | Other benefits (non-monetary) (1) | Superannuation benefits | Retirement benefits | ||||||||||||||
Paul Anderson(3) | 2010 | 81,667 | — | 11,667 | 37,000 | 19,907 | 150,241 | — | — | 150,241 | ||||||||||
2009 | 140,000 | — | 20,000 | 86,000 | 1,517 | 247,517 | — | — | 247,517 | |||||||||||
Don Argus(3) | 2010 | 748,441 | — | — | 45,000 | 35,215 | 828,656 | 39,060 | 1,783,240 | 2,650,956 | ||||||||||
2009 | 1,000,000 | — | — | 70,000 | 15,796 | 1,085,796 | 53,636 | — | 1,139,432 | |||||||||||
Alan Boeckmann(4) | 2010 | 140,000 | — | 20,000 | 66,000 | 8,296 | 234,296 | — | — | 234,296 | ||||||||||
2009 | 116,667 | — | 8,496 | 51,000 | — | 176,163 | — | — | 176,163 | |||||||||||
Malcolm Broomhead(3) | 2010 | 35,376 | — | 5,054 | — | — | 40,430 | 2,131 | — | 42,561 | ||||||||||
2009 | — | — | — | — | — | — | — | — | — | |||||||||||
John Buchanan | 2010 | 170,000 | 35,000 | — | 68,000 | 1,327 | 274,327 | — | — | 274,327 | ||||||||||
2009 | 170,000 | 35,000 | — | 51,000 | — | 256,000 | — | — | 256,000 | |||||||||||
Carlos Cordeiro | 2010 | 140,000 | — | 20,000 | 89,000 | — | 249,000 | — | — | 249,000 | ||||||||||
2009 | 140,000 | — | 20,000 | 86,000 | 4,473 | 250,473 | — | — | 250,473 | |||||||||||
David Crawford | 2010 | 140,000 | 50,000 | — | 45,000 | 22,410 | 257,410 | 9,952 | — | 267,362 | ||||||||||
2009 | 140,000 | 50,000 | — | 70,000 | 1,406 | 261,406 | 10,183 | — | 271,589 | |||||||||||
E Gail de Planque(3) | 2010 | 81,667 | — | 23,333 | 59,000 | — | 164,000 | — | — | 164,000 | ||||||||||
2009 | 140,000 | — | 40,000 | 86,000 | 2,891 | 268,891 | — | — | 268,891 | |||||||||||
Carolyn Hewson(3) | 2010 | 35,376 | — | 6,317 | — | — | 41,693 | 2,198 | — | 43,891 | ||||||||||
2009 | — | — | — | — | — | — | — | — | — | |||||||||||
David Jenkins(3) | 2010 | 57,641 | — | 18,250 | 22,000 | 714 | 98,605 | — | 323,101 | 421,706 | ||||||||||
2009 | 140,000 | — | 45,000 | 73,000 | — | 258,000 | — | — | 258,000 | |||||||||||
David Morgan(3) | 2010 | 58,333 | — | 10,417 | 30,000 | 1,856 | 100,606 | 3,639 | — | 104,245 | ||||||||||
2009 | 140,000 | — | 25,000 | 70,000 | 1,406 | 236,406 | 8,841 | — | 245,247 | |||||||||||
Wayne Murdy(4) | 2010 | 140,000 | — | 25,000 | 81,000 | 24,932 | 270,932 | — | — | 270,932 | ||||||||||
2009 | 5,056 | — | 555 | — | — | 5,611 | — | — | 5,611 | |||||||||||
Jacques Nasser(5) | 2010 | 357,312 | — | 18,683 | 88,000 | 1,856 | 465,851 | — | — | 465,851 | ||||||||||
2009 | 140,000 | — | 25,000 | 101,000 | 1,406 | 267,406 | — | — | 267,406 | |||||||||||
Keith Rumble(4) | 2010 | 140,000 | — | 20,000 | 81,000 | 17,879 | 258,879 | — | — | 258,879 | ||||||||||
2009 | 116,667 | — | 8,496 | 96,000 | — | 221,163 | — | — | 221,163 | |||||||||||
John Schubert | 2010 | 140,000 | 35,000 | 5,430 | 45,000 | — | 225,430 | 9,430 | — | 234,860 | ||||||||||
2009 | 140,000 | 35,000 | — | 70,000 | — | 245,000 | 9,381 | — | 254,381 |
Notes
US dollars | Short-term benefits | Subtotal: UK Requirements | Post-employment benefits (2) | Total: Australian requirements | ||||||||||||||||||||||||||||||||||||
Fees | Committee Chair fees | Committee membership fees | Travel allowances | Other benefits (non- monetary) (1) | Superannuation benefits | Retirement benefits | ||||||||||||||||||||||||||||||||||
Malcolm Broomhead | 2012 | 170,000 | – | 33,690 | 45,000 | – | 248,690 | 10,900 | – | 259,590 | ||||||||||||||||||||||||||||||
2011 | 154,000 | – | 25,000 | 52,000 | – | 231,000 | 9,541 | – | 240,541 | |||||||||||||||||||||||||||||||
John Buchanan | 2012 | 218,000 | 45,000 | – | 60,000 | 6,482 | 329,482 | – | – | 329,482 | ||||||||||||||||||||||||||||||
2011 | 189,000 | 40,000 | – | 60,000 | 1,664 | 290,664 | – | – | 290,664 | |||||||||||||||||||||||||||||||
Carlos Cordeiro | 2012 | 170,000 | – | 27,500 | 105,000 | – | 302,500 | – | – | 302,500 | ||||||||||||||||||||||||||||||
2011 | 154,000 | – | 25,000 | 59,000 | 1,664 | 239,664 | – | – | 239,664 | |||||||||||||||||||||||||||||||
David Crawford | 2012 | 170,000 | 22,415 | – | 60,000 | 19,494 | 271,909 | 10,231 | – | 282,140 | ||||||||||||||||||||||||||||||
2011 | 154,000 | 55,000 | – | 52,000 | – | 261,000 | 11,162 | – | 272,162 | |||||||||||||||||||||||||||||||
Pat Davies (3) | 2012 | 14,167 | – | 2,292 | – | – | 16,459 | – | – | 16,459 | ||||||||||||||||||||||||||||||
Carolyn Hewson | 2012 | 170,000 | – | 32,500 | 75,000 | – | 277,500 | 10,887 | – | 288,387 | ||||||||||||||||||||||||||||||
2011 | 154,000 | – | 30,000 | 37,000 | – | 221,000 | 9,808 | – | 230,808 | |||||||||||||||||||||||||||||||
Lindsay Maxsted (4) | 2012 | 170,000 | 48,945 | 12,141 | 45,000 | – | 276,086 | 12,439 | – | 288,525 | ||||||||||||||||||||||||||||||
2011 | 42,226 | – | – | 15,000 | – | 57,226 | 2,113 | – | 59,339 | |||||||||||||||||||||||||||||||
Wayne Murdy | 2012 | 170,000 | – | 38,690 | 119,000 | 20,378 | 348,068 | – | – | 348,068 | ||||||||||||||||||||||||||||||
2011 | 154,000 | – | 30,000 | 88,000 | 1,664 | 273,664 | – | – | 273,664 | |||||||||||||||||||||||||||||||
Jac Nasser | 2012 | 1,100,000 | – | – | 89,000 | 1,825 | 1,190,825 | – | – | 1,190,825 | ||||||||||||||||||||||||||||||
2011 | 1,000,000 | – | – | 97,000 | 1,889 | 1,098,889 | – | – | 1,098,889 | |||||||||||||||||||||||||||||||
Keith Rumble | 2012 | 170,000 | – | 27,500 | 127,000 | 15,894 | 340,394 | – | – | 340,394 | ||||||||||||||||||||||||||||||
2011 | 154,000 | – | 25,000 | 89,000 | 1,664 | 269,664 | – | – | 269,664 | |||||||||||||||||||||||||||||||
John Schubert | 2012 | 170,000 | 45,000 | 27,500 | 67,000 | 23,435 | 332,935 | 20,154 | – | 353,089 | ||||||||||||||||||||||||||||||
2011 | 154,000 | 40,000 | 25,000 | 52,000 | – | 271,000 | 14,037 | – | 285,037 | |||||||||||||||||||||||||||||||
Shriti Vadera (4) | 2012 | 170,000 | – | 28,508 | 60,000 | 1,517 | 260,025 | – | – | 260,025 | ||||||||||||||||||||||||||||||
2011 | 77,000 | – | – | 30,000 | – | 107,000 | – | – | 107,000 |
(1) | Other benefits include professional fees for Directors and also reimbursements of the cost of travel, accommodation and subsistence for |
(2) | In respect of superannuation benefits, BHP Billiton |
(3) | FY2012 remuneration for |
(4) | FY2011 remuneration for |
6.8 Bonus amount for petroleum executives
Oil and gas reserve targets are one of the specific performance measures by which the BHP Billiton Petroleum executive bonus awards are determined. The addition of reserves is a key indicator of the future success of the Petroleum business. However, executives are not impacted directlyThis Report was approved by the reserve target. This measure is one of several in the areas of HSEC, Production, Finance, GrowthBoard on 12 September 2012 and Corporate Citizenship that are taken into account to determine the discretionary bonus pool available for Petroleum executives. The bonus pool is then allocated to executives based upon relative overall performance.
Our Petroleum Reserves Manager has ultimate responsibility for the calculation of recorded reserves, and reports to our Chief Financial Officersigned on all matters to do with oil and gas reserves. His specific performance measures for the purpose of bonus awards do not include any component relating to recorded reserves.its behalf by:
Reserve Target setting for fiscal 2011John Buchanan
Target reserve levels are based on expected production for the year in millions of barrels of oil equivalent. Gas volumes are converted to equivalent liquid volumes. All reserves revisions are included, whether positive or negative, but sales or purchases of properties are excluded.Chairman, Remuneration Committee
12 September 2012
The information presented by the Directors in this Directors’ Report relates to BHP Billiton Limited and BHP Billiton Plc and their subsidiaries. The Chairman’s Review in section 1.2, Chief Executive Officer’s Report in section 1.3 and section 1 Key information, section 2 Information on the Company, section 3 Operating and financial review and prospects, section 5 Corporate Governance Statement, section 6 Remuneration Report, section 9 Financial Statements and section 11 Shareholder information of this Annual Report are each incorporated by reference into, and form part of, this Directors’ Report.
7.1 Principal activities, state of affairs and business review
The UK Companies Act 2006 requires this Directors’ Report to include a fair review of the business of the Group during FY2010FY2012 and of the position of the Group at the end of the financial year and a description of the principal risks and uncertainties facing the Group (known as the ‘business review’). In addition to the information set out below, the information that fulfils the requirements of the business review can be found in the following sections of this Annual Report (which are each incorporated by reference into this Directors’ Report):
Section | Reference | |||
Key performance indicators | 1.4 and 3.3 | |||
Risk factors | 1.5 and 5.14 | |||
Business overview | 2.2 | |||
Sustainable development | 2.8 | |||
Employees | 2.9 | |||
Financial review | 3 |
A review of the operations of the Group during FY2010,FY2012, the results of those operations during FY2012 and the expected results of those operations in future financial years, isare set out in sections 1.2, 1.3, 2.2 and 3 and other material in this Annual Report. Information on the development of the Group and likely developments in future years also appear in those sections of this Annual Report. The Directors believe that to include further information on those matters and on the strategies and expected results of the operations of the Group in this Annual Report would be likely to result in unreasonable prejudice to the Group.
Our principal activities during FY2010FY2012 were minerals exploration, development, production and processing (in respect of bauxite, alumina, aluminium, copper, silver, lead, zinc, molybdenum, gold, iron ore, metallurgical coal, energy coal, nickel, manganese ore, manganese metal and alloys, diamonds, titanium minerals, potash and uranium), and oil and gas exploration, development and production. During FY2012, we announced a review of our diamonds business and the exercise of an option to sell our 37.8 per cent non-operated interest in Richards Bay Minerals. Further information in relation to these announcements is provided below. Other than these developments, no significant changes in the nature of any of the Group’s principal activities occurred during FY2012.
Significant changes in the state of affairs of the Group that occurred during FY2010FY2012 and significant post-balance date events are set out below and in sections 2.2 and 3 of this Annual Report.
There were changes to the composition of the Board during FY2010, including the appointment of a new Chairman. Jacques Nasser assumed the Chairmanship on 31 March 2010 upon the retirement of Don Argus as Chairman and non-executive Director. David Morgan and David Jenkins retired from the Board on 24 November 2009 and 26 November 2009 respectively and Paul Anderson and E Gail de Planque both retired from the Board on 31 January 2010. Malcolm Broomhead and Carolyn Hewson were eachPat Davies was appointed to the Board and the Remuneration Committee with effect from 31 March 20101 June 2012. In accordance with the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc, Mr Davies will seek election to the Board at the 20102012 Annual General Meetings. Mr
The Board established the Finance Committee in April 2012. David Crawford was appointed as Chairman and Malcolm Broomhead, is a memberLindsay Maxsted and Wayne Murdy were appointed as members of the Sustainability Committee and Ms Hewson is a member of the Risk and AuditFinance Committee.
On 7 December 2009,21 August 2011, we announced the successful completion of the cash tender offer to acquire Petrohawk Energy Corporation in the US for US$38.75 per share.
On 30 September 2011, we completed the acquisition of HWE Mining subsidiaries from Leighton Holdings. This followed the announcement on 9 August 2011 of the Heads of Agreement with Leighton Holdings to acquire the HWE Mining subsidiaries that provide contract mining services to our Western Australia Iron Ore (WAIO) operations.
On 12 October 2011, we announced approval for US$1.2 billion in pre-commitment capital for the first phase of the Olympic Dam Project to develop an open-pit mine in South Australia. On 22 August 2012, we announced that Rio Tinto Limitedwe will investigate an alternative, less capital-intensive design of the Olympic Dam open-pit expansion, involving new technologies, to substantially improve the economics of the Project. As a result, we will not be ready to approve an expansion of Olympic Dam before the Indenture agreement deadline of 15 December 2012. As a result of this change, we recognised impairment and Rio Tinto plc (together ‘Rio Tinto’)other charges of US$346 million before tax (US$242 million after tax) in respect of the Olympic Dam Project in FY2012.
On 1 November 2011, we announced approval of an investment of US$4.2 billion (BHP Billiton share US$2.1 billion) for the development of the Caval Ridge mine project and BHPexpansion of the Peak Downs mine in the northern Bowen Basin in Central Queensland, Australia. The new Caval Ridge mine will have the capacity to produce 5.5 million tonnes per annum (mtpa). On 22 August 2012, we announced we will delay indefinitely the expansion of Peak Downs.
On 10 November 2011, we announced an agreement with the Western Australian Government to increase the royalty rate payable to the state for our iron ore Fines product from 5.625 per cent of sales revenue to 6.5 per cent from 1 July 2012, and then to 7.5 per cent from 1 July 2013.
On 16 November 2011, we announced approval for US$822 million (BHP Billiton signed binding agreementsshare US$698 million) investment for the development of our Orebody 24 mine. Orebody 24 is a sustaining mine to maintain iron ore production output from the Newman Joint Venture operations. The new Orebody 24 mine is expected to have capacity of 17 mtpa (100 per cent basis) and will include the construction of an ore crushing plant, train loadout facility, rail spur and other associated support facilities.
On 29 November 2011, we announced a review of our diamonds business, comprising our interests in the EKATI Diamond Mine and the Chidliak exploration project in Canada. The review will examine whether a continued presence in the diamond industry is consistent with our strategy and evaluate the potential sale of all or part of the diamonds business. On 20 December 2011, we agreed to sell our 51 per cent interest in the Chidliak project to Peregrine Diamonds Limited. Our review in relation to the production joint venture covering the entirety of both companies’ Western Australian iron ore assets. The establishment of the joint venture remains subject to regulatory and shareholder approvals. The Framework Agreement and the binding agreements will terminate if the conditions precedent are not satisfied by 31 December 2010 unless extended by agreement of Rio Tinto and BHP Billiton. Earlier in FY2010 (15 October 2009), we announced that BHP Billiton and Rio Tinto would not proceed with any joint venture marketing activity, whichEKATI Diamond Mine is the only material change to the non-binding core principles agreement signed by the parties on 5 June 2009.ongoing.
On 9 December 2009,1 February 2012, we announced the exercise of an option to sell our 37.8 per cent non-operated interest in Richards Bay Minerals to Rio Tinto, following which we will exit the titanium minerals industry. Richards Bay Minerals is a South African mineral sands mining and smelting operation and the leading producer of chloride titanium feedstock. On 7 September 2012, we announced the sale of the Ravensthorpe Nickel Operation for US$340 million following the decision in FY2009 to ramp-down and indefinitely suspend operations at Ravensthorpe.
On 5 January 2010, we announced approval of expenditurewas complete, with a sale price of US$434.7 million (BHP Billiton’s share) to expand mining and processing capacity at the Antamina copper and zinc mine in northern Peru. The expansion project will increase the site’s ore processing capacity by 38 per cent to 130,000 tonnes per day with first production from the expansion anticipated in late 2011. Higher mineral ore reserves previously reported in combination with the expanded processing capacity will result in a mine life extension of six years from 2023 until 2029. Antamina is a joint venture between BHP Billiton (33.75 per cent), Xstrata (33.75 per cent), Teck Resources (22.5 per cent) and Mitsubishi Corporation (10 per cent).
|
On 29 January 2010, we announced Board approval for US$1.931.9 billion (BHP Billiton share US$1.73 billion) of capital expenditure to underpin the further accelerated growth of BHP Billiton’s Western Australia Iron Ore business. This investment represents early expenditure for Rapid Growth Project 6 (‘RGP6’). RGP6 is expected to increase installed capacity at BHP Billiton’s Western Australia Iron Ore assets to 240 million tonnes per annum during calendar year 2013. The funding will allow early procurement of long lead time items and detailed engineering to continue the expansion of the inner harbour at Port Hedland, progress rail track duplication works and expansion of the Jimblebar mining operation. Under the binding production joint venture agreements between BHP Billiton and Rio Tinto, Rio Tinto will have the option to participate in RGP6 by paying its share of invested capital, with this decision being made after the joint venture transaction is completed.
On 30 March 2010, we announced that we had reached agreement with a significant number of customers throughout Asia to move existing iron ore contracts that were previously priced annually onto a shorter-term landed price equivalent basis. The agreements reached represent the majority of BHP Billiton’s iron ore sales volume. The structural change that these settlements represent is consistent with BHP Billiton achieving market clearing prices.
On 30 June 2010, we welcomed the Australian Competition Tribunal’s decision to reject the application for declaration of our Mt Newman rail line while expressing our disappointment at the Tribunal’s decision to grant declaration of BHP Billiton’s Goldsworthy rail line under Part IIIA of the Trade Practices Act. Neither of the determinations in relation to Mt Newman or Goldsworthy has been appealed. Following the Tribunal’s decision, access seekers may now negotiate with BHP Billiton for access to the Goldsworthy railway.before adjustments.
On 2 July 2010,February 2012, we announced approval of US$917 million (BHP Billiton share US$779 million) pre-commitment funding for the construction of a 100 mtpa Outer Harbour facility associated with our WAIO operations. On 24 August 2012, we announced that BHP Billiton is encouraged byWAIO has been granted the Australian Government’s decision to replace the proposed Resource Super Profits Tax with a proposed Minerals Resource Rent Tax on mined iron ore and coal from 1 July 2012, following constructive discussions with the mining industry. The Minerals Resource Rent Tax isright, subject to passing by the Australian Parliament and may differ (wholly orState approvals processes, to develop two additional berths in part) in its final form. BHP Billiton will continuethe Inner Harbour. We also announced that work on the Outer Harbour has been slowed while focus has shifted to work constructively withmaximising the Australian Government to ensurepotential capacity from the detailed design of minerals taxation maintains the international competitiveness of the Australian resources industry into the future.Inner Harbour.
On 18 August 2010,14 February 2012, we announced approval of total investment of US$2.6 billion in two projects that will underpin higher production at Escondida over the next decade. Organic Growth Project 1, which will replace the Los Colorados concentrator with a new 152,000 tonne per day plant and allow access to higher-grade ore located underneath the existing facilities, is expected to cost US$3.8 billion (BHP Billiton share US$2.2 billion). Oxide Leach Area Project, which will create a new dynamic leaching pad and mineral handling system that will include several overland conveyers, is expected to cost US$721 million (BHP Billiton share US$414 million).
On 11 April 2012, we announced approval for US$708 million (BHP Billiton share) in pre-commitment funding for the Mad Dog Phase 2 project in the deepwater Gulf of Mexico.
On 22 June 2012, we announced approval for US$845 million investment to sustain operations at Illawarra Coal, in southern New South Wales, Australia by establishing a replacement mining area at the Appin Mine.
On 3 August 2012, we announced the completion of our all-cash offer,full-year assessment of our United States shale and on 20 August 2010 we formally commencedAustralian nickel assets. Low US gas prices due to a short-term oversupply of gas have resulted in an impairment of US$2.84 billion (before tax) against the offer, to acquire allcarrying value of the issued and outstanding common sharesFayetteville shale gas assets acquired from Chesapeake Energy in 2011. We also recognised a US$449 million (before tax) charge against the carrying value of Potash Corporationour Nickel West assets as a result of Saskatchewan Inc. (‘PotashCorp’) at a pricemargin deterioration.
During the year, we announced the pricing of US$130 in cash per PotashCorp common share. The offer values8.25 billion Global Bonds (eight tranches) under the total equity of PotashCorp at approximately US$40 billion on a fully diluted basis. The acquisition will accelerate BHP Billiton’s entry into the fertiliser industry and is consistentBilliton debt shelf registration statement previously filed with the company’s strategy of becoming a leading global miner of potash. PotashCorp’s potash mining operations are a natural fit with BHP Billiton’s greenfield land holdings in Saskatchewan, Canada.United States Securities and Exchange Commission, and €2 billion Euro Bond (two tranches) under our Euro Medium Term Note Program.
No other matter or circumstance has arisen since the end of FY2010FY2012 that has significantly affected or is expected to significantly affect the operations, the results of operations or state of affairs of the Group in future years.
7.2 Share capital and buy-back programs
The BHP Billiton Limited on-market share buy-back program and the BHP Billiton Plc on-market share buy-back program were each suspended in FY2008. The Directors do not presently intend to reactivate these buy-back programs.
At the Annual General Meetings held during 2009,in 2011, shareholders authorised BHP Billiton Plc to make on-market purchases of up to 223,112,120213,618,545 of its ordinary shares, representing approximately 10 per cent of BHP Billiton Plc’s issued share capital at that time. Shareholders will be asked at the 20102012 Annual General Meetings to renew this authority. The Directors have no present intention to exercise this authority, if granted.
During FY2010,FY2012, we did not make any on-market or off-market purchases of BHP Billiton Limited shares or BHP Billiton Plc shares under any share buy-back program. The BHP Billiton share buy-back program was completed on 29 June 2011 through a combination of on-market and off-market buy-backs. As at 30 June 2011, there were 2,181,737 BHP Billiton Plc shares, with a nominal value of US$0.50 per share, purchased on-market under the Group.FY2011 buy-back program, which were cancelled during FY2012.
Some of our executives are entitled toreceive options over BHP Billiton shares as part of their remuneration arrangements. We can satisfy these entitlements eitherEntitlements may be satisfied by the acquisitiontransfer of existing shares, which are acquired on-market, and,or in respect of some entitlements, by the issue of new shares.
The shares in column ‘A’ below were purchased to satisfy awards made under the various BHP Billiton Limited and BHP Billiton Plc employee share schemes during FY2010.FY2012.
Period | A Total number of shares purchased | B Average price paid per share (a) | C Total number of shares purchased as part of publicly announced plans or programs | D Maximum number of shares that may yet be purchased under the plans or program | ||||||||
BHP Billiton Limited | BHP Billiton Plc (b) | |||||||||||
1 July 2009 to 31 July 2009 | 264,395 | 27.47 | — | — | (c) | 223,112,120 | (d) | |||||
1 Aug 2009 to 31 Aug 2009 | 3,543,461 | 29.86 | — | — | (c) | 223,112,120 | (d) | |||||
1 Sep 2009 to 30 Sep 2009 | 607,773 | 31.59 | — | — | (c) | 223,112,120 | (d) | |||||
1 Oct 2009 to 31 Oct 2009 | 569,599 | 31.20 | — | — | (c) | 223,112,120 | (d) | |||||
1 Nov 2009 to 30 Nov 2009 | 396,545 | 33.10 | — | — | (c) | 223,112,120 | (d) | |||||
1 Dec 2009 to 31 Dec 2009 | 418,657 | 37.38 | — | — | (c) | 223,112,120 | (d) | |||||
1 Jan 2010 to 31 Jan 2010 | 144,677 | 38.41 | �� | — | — | (c) | 223,112,120 | (d) | ||||
1 Feb 2010 to 28 Feb 2010 | 247,606 | 32.85 | — | — | (c) | 223,112,120 | (d) | |||||
1 Mar 2010 to 31 Mar 2010 | 1,165,596 | 39.57 | — | — | (c) | 223,112,120 | (d) | |||||
1 Apr 2010 to 30 Apr 2010 | 269,010 | 42.85 | — | — | (c) | 223,112,120 | (d) | |||||
1 May 2010 to 31 May 2010 | 311,048 | 27.42 | — | — | (c) | 223,112,120 | (d) | |||||
1 June 2010 to 30 June 2010 | 447,932 | 32.84 | — | — | (c) | 223,112,120 | (d) | |||||
Total | 8,386,299 | 32.60 | — | — | — | |||||||
Period | A Total number of shares purchased | B Average price paid per share (a) US$ | C Total number of shares purchased as part of publicly announced plans or programs | D Maximum number of shares that may yet be purchased under the plans or programs | ||||||||||||||||
BHP Billiton Limited (b) | BHP Billiton Plc (c) | |||||||||||||||||||
1 July 2011 to 31 July 2011 | 132,012 | 45.83 | – | – | 128,176,372 | (d) | ||||||||||||||
1 Aug 2011 to 31 Aug 2011 | 3,040,558 | 39.83 | – | – | 128,176,372 | (d) | ||||||||||||||
1 Sep 2011 to 30 Sep 2011 | 3,417,023 | 40.82 | – | – | 128,176,372 | (d) | ||||||||||||||
1 Oct 2011 to 31 Oct 2011 | 1,196,821 | 31.67 | – | – | 128,176,372 | (d) | ||||||||||||||
1 Nov 2011 to 30 Nov 2011 | 171,133 | 38.22 | – | – | 213,618,545 | (e) | ||||||||||||||
1 Dec 2011 to 31 Dec 2011 | 301,155 | 36.33 | – | – | 213,618,545 | (e) | ||||||||||||||
1 Jan 2012 to 31 Jan 2012 | 95,819 | 31.97 | – | – | 213,618,545 | (e) | ||||||||||||||
1 Feb 2012 to 29 Feb 2012 | 99,249 | 39.38 | – | – | 213,618,545 | (e) | ||||||||||||||
1 Mar 2012 to 31 Mar 2012 | 270,706 | 38.08 | – | – | 213,618,545 | (e) | ||||||||||||||
1 Apr 2012 to 30 Apr 2012 | 1,728,881 | 35.68 | – | – | 213,618,545 | (e) | ||||||||||||||
1 May 2012 to 31 May 2012 | 393,053 | 35.28 | – | – | 213,618,545 | (e) | ||||||||||||||
1 June 2012 to 30 June 2012 | 286,267 | 31.63 | – | – | 213,618,545 | (e) | ||||||||||||||
Total | 11,132,677 | 38.08 | – | – | 213,618,545 | (e) |
(a) | The shares were purchased in the currency of the stock exchange on which the purchase took place, and the sale price has been converted into US dollars at the exchange rate |
(b) |
BHP Billiton Limited is able to buy-back and cancel BHP Billiton Limited shares within the ‘10/12 limit’ without shareholder approval in accordance with section 257B of the Australian Corporations Act |
The share buy-back program was completed on 29 June 2011. |
(d) | At the Annual General Meetings held during |
(e) | At the Annual General Meetings held during 2011, shareholders authorised BHP Billiton Plc to make on-market purchases of up to 213,618,545 of its ordinary shares, representing approximately 10 per cent of BHP Billiton Plc’s issued capital at the time. |
7.3 Results, financial instruments and going concern
Information about our financial position and financial results is included in the financial statements in this Annual Report. The income statement shows profit attributable to BHP Billiton members of US$12,722 million15.4 billion compared with US$5,877 million23.6 billion in 2009.FY2011.
The Group’s business activities, together with the factors likely to affect its future development, performance and position are discussed in section 3 of this Annual Report. In addition, section 5.6sections 1.5 and 5.14, and note 28 ‘Financial risk management’ to the financial statements detail the Group’s capital management objectives, its approach to financial risk management and exposure to financial risks, liquidity and borrowing facilities. Each of these sections is incorporated into, and forms part of, this Directors’ Report.
The Directors, having made appropriate enquiries, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore they continue to adopt the going-concern basis of accounting in preparing the annual financial statements.
The Directors who served at any time during or since the end of the financial year were Don Argus,Jac Nasser, Marius Kloppers, Paul Anderson, Alan Boeckmann, Malcolm Broomhead, John Buchanan, Carlos Cordeiro, David Crawford, E Gail de Planque,Pat Davies, Carolyn Hewson, David Jenkins, David Morgan,Lindsay Maxsted, Wayne Murdy, Jacques Nasser, Keith Rumble, John Schubert and John Schubert.Shriti Vadera. Further details of the Directors of BHP Billiton Limited and BHP Billiton Plc are set out in section 4.1 of this Annual Report. These details include the period for which each Director held office up to the date of this Directors’ Report, their qualifications, experience and particular responsibilities, the directorships held in other listed companies since 1 July 2007,2009, and the period for which each directorship has been held.
David Morgan retired as a Director of BHP Billiton Limited and BHP Billiton Plc with effect from 24 November 2009, having been a Director since January 2008.
David Jenkins retired as a Director of BHP Billiton Limited and BHP Billiton Plc with effect from 26 November 2009, having been a Director since March 2000.
Paul Anderson retired as a Director of BHP Billiton Limited and BHP Billiton Plc with effect from 31 January 2010, having been a Director since June 2006.
E Gail de Planque retired as a Director of BHP Billiton Limited and BHP Billiton Plc with effect from 31 January 2010, having been a Director since October 2005.
Don Argus retired as Chairman and a Director of BHP Billiton Limited and BHP Billiton Plc with effect from 30 March 2010, having been a Director of BHP Limited since November 1996, Chairman of BHP Limited since March 1999 and a Director and Chairman of BHP Billiton Limited and BHP Billiton Plc since June 2001. Jacques Nasser assumed the Chairmanship of BHP Billiton Limited and BHP Billiton Plc on 31 March 2010.
Malcolm Broomhead and Carolyn Hewson were eachMr Davies was appointed as a Director of BHP Billiton Limited and BHP Billiton Plc with effect from 31 March 2010.1 June 2012, and in accordance with the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc, Mr Davies will seek election at the 2012 Annual General Meetings.
The number of meetings of the Board and its Committees held during the year and each Director’s attendance at those meetings are set out in sections 5.3.12 and 5.4.1section 5.11 of this Annual Report.
7.5 Remuneration and share interests
7.5.1 Remuneration
The policy for determining the nature and amount of emoluments of members of the Group Management Committee (GMC) (including the executiveExecutive Director) and the non-executiveNon-executive Directors and information about the relationship between that policy and our performance are set out in sections 6.2, 6.36.4 to 6.8 and 6.76.10 of this Annual Report.
The remuneration tables contained in sections 6.4 and 6.7 to 6.10 of this Annual Report set out the remuneration of members of the GMC (including the executiveExecutive Director) and the non-executiveNon-executive Directors.
7.5.2 Directors
The tablestable contained in section 7.20 of this Directors’ Report setsets out the relevant interests in shares in BHP Billiton Limited and BHP Billiton Plc of the Directors who held office during FY2010,FY2012, at the beginning and end of FY2010,FY2012, and in relation to all Directors in office as at the date of this Directors’ Report, their relevant interests in shares in BHP Billiton Limited and BHP Billiton Plc as at the date of this Directors’ Report. No rights or options over shares in BHP Billiton Limited and BHP Billiton Plc are held by any of the non-executiveNon-executive Directors. Interests held by the executiveExecutive Director under share and option plans as at 30 June 2012 are set out in the tables showing interests in incentive plans contained in section 6.4.3 of this Annual Report. Further details of all options6.8 and rights held as at the date of this Directors’ Report (including those issued during or since the end of FY2010), and of shares issued during or since the end of FY2010 upon exercise of options and rights, are set out in note 30 ‘Key Management Personnel’ into the financial statements of this Annual Report. Except as disclosed in these tables, there have been no other changes in the Directors’ interests over shares or options in BHP Billiton Limited and BHP Billiton Plc between 30 June 2010 and the date of this Directors’ Report.
We have not made available to any Director any interest in a registered scheme.
The former Directors of BHP Limited participated in a retirement plan under which they were entitled to receive a payment on retirement calculated by reference to years of service. This plan was closed on 24 October 2003, and benefits accrued to that date are held by BHP Billiton Limited and will be paid on retirement. Further information about this plan and its closure are set out in section 6.7.36.10.3 of this Annual Report.
7.5.3 GMC members
The table contained in section 7.21 of this Directors’ Report sets out the relevant interests held by members of the GMC (other than Directors)the Executive Director) in shares of BHP Billiton Limited and BHP Billiton Plc at the beginning and end of FY2010,FY2012, and at the date of this Directors’ Report. Interests held by members of the GMC under share and option plans as at 30 June 2012 are set out in the tables showing interests in incentive plans contained in section 6.4.3 of this Annual Report. Further details of all options6.8 and rights held as at the date of this Directors’ Report (including those issued during or since the end of FY2010), and of shares issued during or since the end of FY2010 upon exercise of options and rights, are set out in note 30 ‘Key Management Personnel’ into the financial statements of this Annual Report.
Jane McAloon is the Group Company Secretary. Details of her qualifications and experience are set out in section 4.1 of this Annual Report. The following people also act as the Company Secretaries of either BHP Billiton Limited or BHP Billiton Plc: Fiona Smith, BSc LLB, FCIS,Nicola Evans, BBus, Deputy Company Secretary, BHP Billiton Limited, Elizabeth Hobley, BA (Hons), ACIS, Deputy Company Secretary BHP Billiton Plc and Geof Stapledon, BEc, LLB (Hons), DPhil, FCIS, Deputy Company Secretary, BHP Billiton Plc and Elizabeth Hobley, BA (Hons), ACIS, Deputy Company Secretary, BHP Billiton Plc. Each such individual has experience in a company secretariat role or other relevant fields arising from time spent in such roles within BHP Billiton, large listed companies or other relevant entities.
Rule 146 of the BHP Billiton Limited Constitution and Article 146 of the BHP Billiton Plc Articles of Association require each Company to indemnify to the extent permitted by law, each Director, Secretary or executive officerExecutive Officer of BHP Billiton Limited and BHP Billiton Plc respectively against liability incurred in, or arising out of, the conduct of the business of the Company or the discharge of the duties of the Director, Secretary or executive officer.and Executive Officer. The Directors named in section 4.1 of this Annual Report, the executive officersExecutive Officers and the Company Secretaries of BHP Billiton Limited and BHP Billiton Plc have the benefit of this requirement, as do individuals who formerly held one of those positions.
In accordance with this requirement, BHP Billiton Limited and BHP Billiton Plc have entered into Deeds of Indemnity, Access and Insurance (Deeds of Indemnity) with each of their respective Directors. The Deeds of Indemnity are qualifying third party indemnity provisions for the purposes of the UK Companies Act 2006.
We have a policy that we will, as a general rule, support and hold harmless an employee, including an employee appointed as a directorDirector of a subsidiary who, while acting in good faith, incurs personal liability to others as a result of working for us.
From time to time, we engage our External Auditor, KPMG, to conduct non-statutory audit work and provide other services in accordance with our policy on the provision of other services by the External Auditor. The terms of engagement typically include an indemnity in favour of KPMG:
against all losses, claims, costs, expenses, actions, demands, damages, liabilities or any proceedings (liabilities) incurred by KPMG in respect of third party claims arising from a breach by the Group under the engagement terms;
for all liabilities KPMG has to the Group or any third party as a result of reliance on information provided by the Group that is false, misleading or incomplete.
We have insured against amounts that we may be liable to pay to Directors, Company Secretaries or certain employees pursuant to Rule 146 of the Constitution of BHP Billiton Limited and Article 146 of the Articles of Association of BHP Billiton Plc or that we otherwise agree to pay by way of indemnity. The insurance policy also insures Directors, Company Secretaries and some employees against certain liabilities (including legal costs) they may incur in carrying out their duties for us.
We have paid premiums for this ‘Directors and Officers’ insurance of US$2,594,9902,334,750 net during FY2010. SomeFY2012. Directors, Company Secretaries and employees insured under the policy contribute to the premium for this insurance.
No indemnity in favour of a current or former officer of BHP Billiton Limited or BHP Billiton Plc, or in favour of the External Auditor, has been called on during FY2012.
7.8 Employee policies and involvement
We are committed to open, honest and productive relationships with our employees. At BHP Billiton, we recognise the most important ingredient for success is our talented and motivated workforce, whose members demonstrate behaviours that are aligned to ourOur BHP Billiton Charter values.
We have an integrated people strategy to effectively attract, retain and develop talented people. Our approach is outlined in our Human Resources Policy, theBHP Billiton Code of Business Conduct and the Human Resources Standards and ProceduresGroup Level Documents (GLDs) that prescribe what we will do and how we will do it. All of these documents are published and accessible to employees.
Effective communication and employee engagement is critical for maintaining open and productive relationships between leaders and employees. All employeesEmployees receive communication on BHP Billiton goals and performance, as well as on important issues such as health and safety and the environment and theBHP Billiton Code of Business Conduct. OurCode of Business Conduct. Our Code is founded on ourOur Charter values, which make an unqualified commitment to working with integrity. Communication is undertaken through a variety of channels, including the internet, intranet, email, newsletters and other means designed to cater for the local environment. These tools are also used to facilitate employee feedback, as are a variety of consultative processes. Dispute and grievance handling processes are also in place to assist in equitably addressing workplace issues in all businesses. A Business Conduct Advisory Service operates worldwide to allow concerns to be raised about conduct that is out of step with ourOur Charter values, our policies and procedures or the law.
Our all-employee share purchase plan, Shareplus, is available to all permanent full-time and part-time employees, and those on fixed-term contracts, except where local regulations limit operation of the scheme. In these instances, alternative arrangements are in place. As at 30 June 2010,2012, 22,864 employees, or approximately 3746.5 per cent of employeesthose eligible for the April 2012 offer, were participants in Shareplus. The Shareplus employee plan is described in section 6.3.36.8.2 of this Annual Report. Short-term and long-term incentive schemes also operate across the Group. Rewards for individuals are predicated on the need to meet targets relating to our Company’s performance in areas such as health, safety and achievement of financial measures and on the personal performance of each employee.
All employeesOur performance management process aligns individual performance to our strategic and operational priorities as well as ensuring that individual and team performance is recognised. Our leaders are entitled to balancedaccountable for providing constructive feedback and realistic feedback coupled with the identification ofidentifying development and training needs to help our employees maximise their performance and realise their full potential. In FY2010, 63FY2012, 75 per cent of employees participated in a formal performance review process. Due to industrial agreements, not all employees are able to participate in individual performance reviews. The importance we place on employee development and training is demonstrated by the significant amount of training our employees undertake. In FY2010, the average hours spent on training per annum per employee was 120 hours for full-time employees and 32 hours for part-time employees.
BHP Billiton is committed to developingbuilding and maintaining a diverse workforce and providing a work environment in which every employee is treated fairly and with respect. We work actively to avoid discrimination on any basis, including disability. Where an employee suffers some disability while they are employed, we work to identify roles that meet their skill, experience and capability, and in some cases offer retraining. We also work hard to offer flexible work practices, where this is possible, taking into account the needs of the employee and those of the particular workplace. Our remuneration policy and employment packages, which must comply with local regulations, are based on merit, aligned to our business requirements and sufficiently attractive to recruit and retain the best people.
Our employees can access our Annual Reports either via the intranetinternet or hard copy.
Particulars in relation to environmental performance are referred to in sections 2.8 3.3 and 7.22 of this Annual Report and in the Sustainability Report, and the Sustainability Supplementary Information, available atwww.bhpbilliton.comwww.bhpbilliton.com..
The UK Financial Services Authority’s Disclosure and Transparency Rules (DTR 7.2) require that certain information be included in a corporate governance statement set out in the Directors’ Report. BHP Billiton has an existing practice of issuing a separate corporate governance statement as part of its Annual Report. The information required by the Disclosure and Transparency Rules and the UK Financial Services Authority’s Listing Rules (LR 9.8.6) is located in section 5 of this Annual Report, with the exception of the information referred to in DTR 7.2.6, which is located in section 7.23 of this Annual Report.
A final dividend of 45.057 US cents per share will be paid on 3028 September 2010.2012. Details of the dividends paid and the dividend policy are set out in sections 3.7.6 and 11.3 of this Annual Report.
A resolution to reappoint KPMG Audit Plc as the auditor of BHP Billiton Plc will be proposed at the 20102012 Annual General Meetings in accordance with section 489 of the UK Companies Act 2006.
No person whoMr Maxsted was anthe only officer of BHP Billiton during FY2010FY2012 who was a director or partner of the Group’s External Auditor at a time when the Group’s External Auditor conducted an audit of the Group. Mr Maxsted’s prior relationship with KPMG is set out in section 5.9 of this Annual Report. Mr Maxsted was not part of the KPMG audit practice after 1980 and, while at KPMG, was not in any way involved in, or able to influence, any audit activity associated with BHP Billiton.
Each person who held the office of Director at the date the Board resolved to approve this Directors’ Report makes the following statements:
so far as the Director is aware, there is no relevant audit information of which the Group’s External Auditor is unaware;
the Director has taken all steps that he or she ought to have taken as a Director to make him or herself aware of any relevant audit information and to establish that the Group’s External Auditor is aware of that information.
Details of the non-audit services undertaken by our External Auditor, including the amounts paid for non-audit services, are set out in note 34 ‘Auditor’s remuneration’ into the financial statements of this Annual Report. Based on advice provided by the Risk and Audit Committee, the Directors have formed the view that the provision of non-audit services is compatible with the general standard of independence for auditors, and that the nature of non-audit services means that auditor independence was not compromised. Further information about our policy in relation to the provision of non-audit services by the auditor is set out in section 5.5.15.13.1 of this Annual Report.
Much of our interest in land consists of leases and other rights that permit the working of suchexploration and production on that land, andincluding the erection of buildings and equipment thereon for the purpose of extracting and treatingprocessing minerals. Such landLand is mainly carried in the accounts at cost and it is not possible to estimate the market value as this dependsit is not readily discernible from the estimated value of each operation situated on product prices over the long term, which will vary with market conditions.land.
7.15 Political and charitable donations
No political contributions or contributions/donations for political purposes were made to any political party, politician, elected official or candidate for public office during FY2010. WeFY2012.
In FY2012, we made charitable donations for the purposes of funding community programs in the United Kingdom of US$250,94671,000 (cash) (2009:(2011: US$220,685)193,000) and worldwide, including cash, in-kind support and administrative costcosts totalling US$200,452,251 (2009:214,143,000 (2011: US$197,838,573)195,544,000).
The total amount of charitable donations made worldwide in FY2010FY2012 includes US$8065 million contributed to a trustBHP Billiton Sustainable Communities (registered with the UK Charities Commission) established for the purposes of funding community investment globally.
7.16 Exploration, research and development
Companies within the Group carry out exploration and research and development necessary to support their activities. Further details are provided in sections 2.2, 2.5 and 2.6 of this Annual Report.
When we enter into a new contract with a supplier, payment terms will be agreed whencommunicated with the supplier in the negotiation phase of the contract begins and confirmed upon both parties signing and executing the supplieragreement. Our approach to payment terms is outlined in our GLD that prescribes what we will be made aware of these terms.do and how we will do it. We do not have a specific policy towards our suppliers and do not follow any code or standard practice. However, we settle terms of payment with suppliers when agreeing overall terms of business, and seek to abide by the terms of the contracts to which we are bound. As at 30 June 2010,2012, BHP Billiton Plc (the unconsolidated parent entity) had US$101,000227,574 of trade creditors outstanding which represents 10six days of purchases outstanding in respect of costs, based on the total invoiced by suppliers during FY2010.FY2012.
BHP Billiton Limited is a company of a kind referred to in Australian Securities and Investments Commission Class Order No. 98/100, dated 10 July 1998. Amounts in this Directors’ Report and the financial statements, except estimates of future expenditure or where otherwise indicated, have been rounded to the nearest million dollars in accordance with that Class Order.
7.19 Proceedings on behalf of BHP Billiton Limited
No proceedings have been brought on behalf of BHP Billiton Limited, nor any application made under section 237 of the Australian Corporations Act 2001.
The tables below set out information pertaining to the shares held directly, indirectly or beneficially, by Directors in BHP Billiton Limited and BHP Billiton Plc.Billiton.
BHP Billiton Limited shares | As at date of Directors’ Report | As at 30 June 2010 | As at 30 June 2009 | |||
Paul Anderson(1) (2) | Not applicable | 106,000 | 106,000 | |||
Don Argus(2) (3) | Not applicable | 329,190 | 321,890 | |||
Alan Boeckmann(4) | 3,150 | 3,150 | — | |||
Malcolm Broomhead(3) (5) | 9,000 | 9,000 | — | |||
John Buchanan | —�� | — | — |
BHP Billiton Limited shares Carlos Cordeiro(4) David Crawford(3) E Gail de Planque(2) (3) (4) Carolyn Hewson(5) David Jenkins(2) Marius Kloppers(3) David Morgan(2) (3) Wayne Murdy(3) (4) Jacques Nasser(3) (4) Keith Rumble John Schubert BHP Billiton Plc shares Paul Anderson(1) (2) Don Argus(2) (3) Alan Boeckmann(4) Malcolm Broomhead John Buchanan Carlos Cordeiro David Crawford(3) E Gail de Planque Carolyn Hewson David Jenkins(2) (3) Marius Kloppers(3) David Morgan Wayne Murdy(3) (4) Jacques Nasser Keith Rumble(3) John Schubert BHP Billiton entity Malcolm Broomhead(1) John Buchanan Carlos Cordeiro(2) David Crawford(1) Pat Davies(1)(3) Carolyn Hewson (1) Marius Kloppers (1)(4) Lindsay Maxsted (1) Wayne Murdy (1)(2) BHP Billiton entity Jac Nasser(1)(2) Keith Rumble(1) John Schubert Shriti Vadera(1) As at date of Directors’ Report As at 30 June 2010 As at 30 June 2009 6,550 6,550 6,550 33,127 33,127 33,127 Not applicable 5,180 5,180 2,000 2,000 — Not applicable 2,066 2,066 28,264 28,264 328 Not applicable 156,758 156,758 4,030 4,030 4,030 5,600 5,600 5,600 — — — 23,675 23,675 23,675 Not applicable 4,000 4,000 Not applicable 21,740 — 3,680 3,680 — — — — 20,000 20,000 20,000 — — — 6,000 6,000 — Not applicable — — — — — Not applicable 10,000 10,000 548,678 548,678 443,520 Not applicable — — 3,512 3,512 — — — — 12,200 12,200 12,200 — — — As at date of
Directors’ Report As at 30 June 2012 As at 30 June 2011 BHP Billiton Limited 9,000 9,000 9,000 BHP Billiton Plc – – – BHP Billiton Limited – – – BHP Billiton Plc 20,000 20,000 20,000 BHP Billiton Limited 6,550 6,550 6,550 BHP Billiton Plc – – – BHP Billiton Limited 33,127 33,127 33,127 BHP Billiton Plc 6,000 6,000 6,000 BHP Billiton Limited – – Not Applicable BHP Billiton Plc 4,170 4,170 Not Applicable BHP Billiton Limited 7,000 7,000 3,500 BHP Billiton Plc – – – BHP Billiton Limited 171,668 171,668 124,374 BHP Billiton Plc 688,895 688,895 608,591 BHP Billiton Limited 3,000 3,000 – BHP Billiton Plc – – – BHP Billiton Limited 8,000 8,000 4,030 BHP Billiton Plc 14,000 14,000 3,512 As at date of
Directors’ Report As at 30 June 2012 As at 30 June 2011 BHP Billiton Limited 10,400 10,400 5,600 BHP Billiton Plc 81,200 81,200 40,000 BHP Billiton Limited – – – BHP Billiton Plc 14,500 14,500 12,200 BHP Billiton Limited 23,675 23,675 23,675 BHP Billiton Plc – – – BHP Billiton Limited – – – BHP Billiton Plc 9,000 9,000 5,000
(1) |
Includes shares held in the name of spouse, superannuation fund, nominee and/or other controlled entities. |
All BHP Billiton Limited shares and BHP Billiton Plc shares are held in the form of American Depositary Shares: |
Director appointed to the Board |
(4) | In addition to the shares specified above, Marius Kloppers held 1,629,864 options and rights over BHP Billiton Limited shares as at 30 June 2012 and as at the date of this Directors’ Report. |
7.21 GMC members’ shareholdings (other than Directors)
The following tables setsbelow set out information pertaining to the shares in BHP Billiton Limited and BHP Billiton Plc held directly, indirectly or beneficially, by those senior executives who were members of the GMC during FY2010FY2012 (other than the executiveExecutive Director).
BHP Billiton Limited shares | As at date of Directors’ Report | As at 30 June 2010 | As at 30 June 2009 | |||
Alberto Calderon | — | — | — | |||
Andrew Mackenzie | — | — | — | |||
Marcus Randolph(1) | 191,415 | 191,415 | 117,420 | |||
Alex Vanselow(1) | 174,263 | 174,263 | 99,888 | |||
Karen Wood(1) | 109,133 | 109,133 | 71,959 | |||
J Michael Yeager(1) (2) | 23,980 | 23,980 | 6,958 |
BHP Billiton entity | As at date of Directors’ Report | As at 30 June 2012 | As at 30 June 2011 | |||||||||||
Alberto Calderon | BHP Billiton Limited BHP Billiton Plc | – 175,973 | – 175,973 | – 90,015 | ||||||||||
Mike Henry(1) | BHP Billiton Limited BHP Billiton Plc | 18,696 44,254 | 18,696 44,254 | Not Applicable Not Applicable | ||||||||||
Graham Kerr(1) | BHP Billiton Limited BHP Billiton Plc | 5,422 – | 5,422 – | Not Applicable Not Applicable | ||||||||||
Andrew Mackenzie | BHP Billiton Limited BHP Billiton Plc | – 61,560 | – 61,560 | – 55,311 | ||||||||||
Marcus Randolph | BHP Billiton Limited BHP Billiton Plc | 322,212 – | 322,212 – | 191,746 – | ||||||||||
Alex Vanselow(2) | BHP Billiton Limited BHP Billiton Plc | Not Applicable Not Applicable | 441,957 – | 270,925 – | ||||||||||
Karen Wood | BHP Billiton Limited BHP Billiton Plc | 269,645 – | 269,645 – | 164,914 – | ||||||||||
J Michael Yeager(3) | BHP Billiton Limited BHP Billiton Plc | 427,059 – | 427,059 – | 264,506 – |
(1) | New members appointed to the |
(2) | Alex Vanselow retired from BHP Billiton on 28 February 2012. The disclosed holdings as at 30 June 2012 reflect his holdings as at the date of his retirement. |
(3) | 1,156 BHP Billiton Limited shares are held in the form of |
BHP Billiton Plc shares Alberto Calderon(1) Andrew Mackenzie(1) Marcus Randolph Alex Vanselow Karen Wood J Michael Yeager As at date of Directors’ Report As at 30 June 2010 As at 30 June 2009 17,827 17,827 344 55,175 55,175 55,000 — — — — — — — — — — — —
7.22 Performance in relation to environmental regulation
A significant environmental incident is one with a severity rating of four or above based on our internal severity rating scale (tiered from one to fiveseven by increasing severity). OneThere were no significant incident occurred during FY2010 at our Pinto Valley Operations (US) involving a tailings release. The majority of the eroded tailings and cover material were recovered. Metal concentrationsincidents reported in surface water and sediments appear to be well below levels that could present a hazard.FY2012.
Fines and prosecutions
In FY2010,FY2012, BHP Billiton received threetwo fines with a total value of US$35,057.27,200.
In particular, we received a fine of US$34,67224,000, levied in March 2010 for an archaeological incidentGabon in Chile that occurred in calendar year 2008. Monitoring by external archaeologists detected interventionrelation to the incorrect disposal of Panel No. 5 of Geoglyphs in Pampas Intermedias outside the property ofwaste aerosol and paint cans, and oil filters at our Cerro ColoradoFranceville operation. We have informed the community and instituted corrective measures to prevent further incidents of this nature.measures.
The remaining two fines weresecond fine of US$3,200 was levied in Brazil and the US.US where our Navajo Coal Company operations were cited for failure to rip coal in accordance with the provisions in the mining permit. We have instituted preventative measures.
Further information about our performance, including in relation to environmental regulation can be found in sectionssection 2.8 and 3.3 of this Annual Report and in the Sustainability Report and the Sustainability Supplementary Information, available online atwww.bhpbilliton.com. www.bhpbilliton.com.
7.23 Share capital, restrictions on transfer of shares and other additional information
Information relating to BHP Billiton Plc’s share capital structure, restrictions on the holding or transfer of its securities or on the exercise of voting rights attaching to such securities, and certain agreements triggered on a change of control and the existence of branches of BHP Billiton outside of the UK, is set out in the following sections of this Annual Report:
Section 2.1 (BHP Billiton locations)
Section 2.7 (Government regulations)
Section 2.112.10 (Organisational structure)
Section 2.122.11 (Material contracts)
Section 2.132.12 (Constitution)
Section 5.4 (Board of Directors — Review, re-election and renewal)
Section 7.2 (Share capital and buy-back programs)
Section 11.2 (Share ownership)
Footnote (a) to noteNote 19 ‘Share capital’ and footnote (d) to note 32 ‘Employee share ownership plans’ into the financial statements of this Annual Report.
Further details of all options and rights outstanding as at the date of this Directors’ Report, including shares issued upon exercise of options and rights, are set out in note 32 ‘Employee share ownership plans’ to the financial statements of this Annual Report. Details of movements in share capital during and since the end of the financial year are set out in note 19 ‘Share capital’ to the financial statements of this Annual Report.
Each of the above sections is incorporated by reference into, and forms part of, this Directors’ Report.
The Directors’ Report is made in accordance with a resolution of the Board.
Jac Nasser AO
Chairman
Marius Kloppers
Chief Executive Officer
Dated: 12 September 2012
We are involved from time to time in legal proceedings and governmental investigations of a character normally incidental to our business, including claims and pending actions against us seeking damages or clarification of legal rights and regulatory inquiries regarding business practices. In many cases, insurance or other indemnification protection afforded to us relates to such claims and may offset the financial impact on the Group of a successful claim.
This section summarises the significant legal proceedings and investigations in which we are currently involved.
Pinal Creek/Miami Wash area
BHP Copper Inc (BHP Copper) was, until March 2010, involved in litigation concerning groundwater contamination resulting from historic mining operations near the Pinal Creek/Miami Wash area located in the State of Arizona. BHP Copper and the other members of the Pinal Creek Group (which consists of BHP Copper, Phelps Dodge Miami Inc (now known as Freeport McMoRan Miami Inc (FMMI) and Inspiration Consolidated Copper Co) filed a contribution action in November 1991 in the Federal District Court for the District of Arizona (District Court) against former owners and operators of the properties alleged to have caused the contamination. As part of this action, BHP Copper sought an equitable allocation of clean-up costs between BHP Copper, the other members of the Pinal Creek Group, and BHP Copper’s predecessors. BHP Copper’s predecessors had asserted a counterclaim in this action seeking indemnity from BHP Copper based upon their interpretation of the historical transaction documents relating to the succession in interest of the parties.
In February 2010, BHP Copper, FMMI and Inspiration Copper signed a settlement agreement under which FMMI paid US$40 million to BHP Copper and assumed all responsibility for future groundwater remediation and any future obligations with respect to third party claims related to groundwater contamination. The obligations of FMMI are backed by a parent company guarantee and an indemnity in favour of BHP Copper.
BHP Copper also settled the proceedings with its predecessors in February 2010 with an agreement that US$21.9 million will be held in trust and BHP Copper will be able to draw down on these funds as it completes specified source control projects on the BHP Copper properties over the next five to seven year period. This fund was partially funded by previously recovered insurance proceeds in the approximate amount of US$11 million to which BHP Copper and its predecessors claimed joint rights. These proceeds were previously held in a joint trust account for the benefit of these entities.
The District Court approved the settlement of the proceedings in March 2010. A State consent decree (the Decree) which was approved by the Federal District Court for the District of Arizona in August 1998 remains in place. The Decree authorises and requires groundwater remediation and facility-specific source control activities. BHP Copper continues to retain its obligations under the Decree although FMMI has, through the settlement, agreed to be responsible as indicated above. As a result of the settlement BHP Copper has reversed the US$130 million provision for the future planned remediation work.
BHP Copper has also settled the suits against a number of insurance carriers seeking to recover under various insurance policies for remediation, response, source control and other costs noted above incurred by BHP Copper.
In view of settlements referred to above, this matter is no longer considered material to the Group and we do not intend to include it in future reports.
Rio Algom Pension Plan
In June 2003, Alexander EE. Lomas, a retired member of the Pension Plan for Salaried Employees of Rio Algom Mines Limited (Plan), filed a Notice of Application in a representative capacity in the Ontario Superior Court of Justice Commercial List against Rio Algom Limited (RAL) and the Plan Trustee alleging certain improprieties in their administration of the Pension Plan and use of Pension Plan funds from January 1966 onward.
Mr Lomas seeks relief, both quantified and unquantified, for himself and those Plan members he purports to represent in respect of a number of alleged breaches committed by RAL, including allegations of breach of employment contracts, breach of trust, and breach of the Trust Agreement underlying the Pension Plan. In particular:
Mr Lomas seeks US$115.26117.7 million (C$121.6 million) on account of monies alleged to have been improperly paid out or withheld from the Pension Plan, together with compound interest calculated from the date of each alleged wrongdoing; and
punitive, aggravated and exemplary damages in the sum of US$1.841.9 million (C$1.941.9 million).
Mr Lomas purports to represent members of the defined benefits portion of the Pension Plan. In 2005, the defined contribution members of the Pension Plan were included as parties to this action.
A motion to strike Mr Lomas’ request for the winding upwinding-up of the Plan was heard on 27 November 2006. The court struck out part of Mr Lomas’ claim, but allowed the remainder.remainder to proceed. RAL’s appeal from that decision was dismissed, but further leave to appeal to the Ontario Court of Appeal was granted. On 10 March 2010, the Ontario Court of Appeal ruled in favour of RAL’s motion to strike out that part of the plaintiff’s claim that sought a court order to wind-upwind up the Plan.
RAL has notified its insurers of the application and has advised other third parties of possible claims against them in respect of matters alleged in the application.
Class actions concerning Cerrejón privatisation
The non-government organisation, Corporación Colombia Transparente (CCT), brought three separate class actions (Popular Actions numbers 1,029, 1,032 and 1,048) against various defendants in connection with the privatisation of 50 per cent of the Cerrejón Zona Norte mining complex in Colombia in 2002. Actions 1,029 and 1,048Two of the actions were dismissed andleaving only the only one of these three actions still on foot is popular action 1,032, against Cerrejón Zona Norte SA (CZN), which remains in discovery phase.. The mining complex is currently owned by CZN and Carbones del Cerrejón Limited (CDC). Our subsidiary Billiton Investment 3 BV owns a 33 per cent share in CDC, and our subsidiaries Billiton Investment 3 BV and Billiton Investment 8 BV (BHP Billiton Shareholders) collectively own a 33.33 per cent share in CZN.
CCT alleges, in part, that the defendants failed to comply with the privatisation process, and that the offer price for shares in CZN between Stages 1 and 2 of the privatisation process was not correctly adjusted for inflation.
Our share of the alleged adjustment of the CZN share price would be approximately US$44.7 million. In the alternative, CCT seeks declaration that the privatisation is null and void and forfeiture of the transfer price paid, of which our share would be approximately US$148156.7 million. In both instances, CCT also seeks unquantified sanctions, including payment of stamp taxes, an award of 15 per cent of all monies recovered by the defendants, together with interest on all amounts at the maximum rate authorised by law.
In addition,The CZN action was dismissed on 18 February 2011, the Court determining that there were no irregularities in the privatisation of the Cerrejón Zona Norte mining complex.
CCT’s request for a reconsideration of the judgment was denied. On 15 March 2011 CCT filed an appeal against the dismissal.
A separate class action (Popular Action no. 242) has been brought by an individual, Mr Martín Nicolás Barros Choles, against various defendants, including CDC, arising out of the privatisation of the Cerrejón Zona Norte mining complex in Colombia.has been brought by Mr Martín Nicolás Barros Choles, against various defendants including CDC.
Mr Choles claims that the transferraltransfer of rights by CDC to CZN was ineffective because it only involved a transfer of shares and not the transfer of the underlying rights in the properties and assets used in the Cerrejón North Zone operation.Zona Norte mining complex. Consequently, he is seeking orders that CDC pays for the use and lease of the properties and assets until November 2009, and that from that date the properties and assets of the Cerrejón project revert to the State.
Mt Newman and Goldsworthy railway lines
In June 2004, Fortescue Metals Group Limited (FMG) applied to the National Competition Council (NCC) to have use of parts of the Mt Newman and Goldsworthy railway lines declared as a ‘service’ under Part IIIA of the Trade Practices Act 1974. Declaration under Part IIIA confers a statutory right to negotiate the terms of use of the service, on terms that are determined by arbitration if agreement cannot be reached by negotiation. The NCC found that the two railway lines each provide separate services, and that while the Mt Newman line could be declared, the Goldsworthy line could not because it is part of a ‘production process’. The NCC then proceeded to consider the Mt Newman railway line aspect of the application.
In December 2004, BHP Billiton Iron Ore Pty Ltd (BHPBIO) lodged an application with the Federal Court, challenging the NCC’s decision in relation to the application of the ‘production process’ definition to the Mt Newman railway. FMG similarly instituted proceedings in the Federal Court appealing NCC’s decision in relation to the Goldsworthy railway. The Federal Court held in favour of FMG, and BHPBIO appealed this decision to the Full Court of the Federal Court. The majority of the Full Court decided in favour of FMG and successive appeals by BHPBIO to the Full Court of the Federal Court and the High Court were unsuccessful.
In the interim, the NCC proceeded to recommend to the Federal Treasurer that the Mt Newman railway line be declared. In May 2006, having not published a decision, the Federal Treasurer was deemed to have decided not to declare the Mt Newman railway. FMG sought a reconsideration of this decision by the Australian Competition Tribunal. In November 2007, FMG lodged a further Part IIIA application with the NCC for declaration of the whole of the Goldsworthy railway line. On 27 October 2008, the Federal Treasurer announced that he had declared access to the Goldsworthy line. An application by BHPBIO for reconsideration of this decision was lodged with the Australian Competition Tribunal.
On 30 June 2010, following a lengthy hearing, the Australian Competition Tribunal released its determination. The Tribunal affirmed the decision not to declare the Mt Newman line. The Tribunal also affirmed the Treasurer’s decision to declare the Goldsworthy line service for a period of 20 years commencing on 19 November 2008. Neither of the determinations in relation to Mt Newman or Goldsworthy has been appealed.
Following the Tribunal’s decision, access seekers may now negotiate with BHPBIO to determine terms of access to the Goldsworthy railway, and either the access seeker or BHPBIO could refer disputed matters to the ACCC for arbitration under the statutory framework established under Part IIIA of the Trade Practices Act. The outcome of this process would govern whether access would be provided and on what terms.
Australian Taxation Office assessments
The Australian Taxation Office (ATO) has issued amended assessments during the period from 2005 to 2008 denying bad debt deductions arising from the investments in Hartley, Beenup and Boodarie Iron and the denial of capital allowance claims made on the Boodarie Iron project. BHP Billiton lodged objections against all the amended assessments. An amount of US$686 million was paid to the ATO pursuant to ATO disputed assessment guidelines, which require that taxpayers generally must pay half of the tax in dispute to defer recovery proceedings.
The Boodarie Iron and Beenup bad debt disallowance matters and the Boodarie Iron capital allowance matter were heard concurrently in the Federal Court in January 2009. BHP Billiton was successful on all counts. The ATO appealed and the matter was heard in the Full Federal Court in November 2009. BHP Billiton was again successful on all counts. The ATO sought special leave to appeal to the High Court only in relation to the Beenup bad debt disallowance and the denial of the capital allowance claims on the Boodarie Iron project. The High Court has granted special leave only in relation to the denial of the capital allowance claims on the Boodarie Iron project. A date for the appeal has not yet been set. As a result of the ATO not seeking to challenge the Boodarie Iron bad debt disallowance, the ATO refunded US$552 million to BHP Billiton including interest. BHP Billiton also expects that as a result of the High Court not granting special leave for the Beenup bad debt disallowance, the ATO will refund the amount paid in relation to this dispute of US$62 million plus interest. BHP Billiton settled the Hartley matter with the ATO in September 2009.
The amount remaining in dispute following the decision of the High Court for the denial of capital allowance claims on the Boodarie Iron project is approximately US$435 million, being primary tax of US$328 million and US$107 million of interest (after tax).
Petroleum Resource Rent Tax litigation
BHP Billiton Petroleum (Bass Strait) Pty Ltd iswas involved in litigation in the Federal Court of Australia, disputingAustralia. The dispute related to whether certain receipts related to capacity are subject to Petroleum Resource Rent Tax, as well as the ATO’sAustralian Tax Office’s (ATO’s) assessment of the taxing point for Petroleum Resource Rent Tax purposes in relation to sales of gas and LPGLiquefied Petroleum Gas produced from the Gippsland Joint Venture. The trial has commenced earlier this yearVenture, and the relevant matters remain beforetreatment of gas used for electricity generation. The Federal Court’s decision was handed down in April 2011, finding in favour of the Commissioner in respect of one of the receipts and the taxing point issues. BHP Billiton was successful on other receipts issues and the gas used in electricity generation issue.
Except for the gas used in electricity generation issue that BHP Billiton was successful on in the Federal Court, both parties appealed the findings on which they were unsuccessful to the Full Federal Court.
The Full Federal Court largely upheld the decision of the Federal Court, but found in favour of BHP Billiton on one other receipts issue.
Petroleum Resource Rent Tax has beenwas paid and expensed based on the ATO’s assessment, and any success will result in anassessment. An income tax benefit.
Givenexpense benefit of approximately US$80 million was recognised in the complexityFY2012 financial statements as a result of the matters under dispute, itdecision.
The Australian Government amended the tax law, with effect from 1 July 1990, to provide greater certainty around how the taxing point is not possible at this timecalculated for the purposes of the Petroleum Resource Rent Tax. The amendments provided further statutory support for the Federal Court’s judgment in relation to accurately quantify the anticipated benefit.taxing point.
North West Shelf Excise on Condensate litigation
BHP Billiton Petroleum (North West Shelf) Pty (NWS) has commencedLtd was involved in litigation in both the Federal Court of Australia and the Administrative Appeals Tribunal seeking orders that recentlyexcise by-laws, enacted excise by-lawsin 2008, prescribing a condensate production area for the purposes of the Excise Tariff Act incorrectly definedefined the relevant fields.
As at 30 June 2010, we have paidpart of the May 2011 Federal Budget, the Australian Government announced that it would make several technical legislative amendments, with effect from 13 May 2008, to ensure that condensate production is subject to crude oil excise as announced in the 2008–09 Federal Budget. The amendments included changes to the Excise Tariff Act to introduce a statutory definition of the production area ‘Rankin Trend’, and expensed US$150 million.to ensure that production from ‘Rankin Trend’ does not represent ‘exempt offshore oil and condensate’.
As a result of this amending legislation being enacted, the matter has been discontinued.
Refer to F–1 to F–96.the pages beginning on page F-1 in this annual report.
In the context of American Depositary Shares (ADS) and listed investments, the term ‘quoted’ means ‘traded’ on the relevant exchange.
Term | Definition | |
A$ | Australian dollars being the currency of the Commonwealth of Australia. | |
All Publishers Index (API) | Thermal coal price index as published by Argus Media and IHS McCloskey for: Northwestern Europe – CIF Amsterdam–Rotterdam–Antwerp (API 2); South Africa – FOB Richards Bay (API 4); Australia – FOB Newcastle (API 6). | |
American Depositary Receipt (ADR) | Instruments that trade on the NYSE. | |
American Depositary Share (ADS) | An American Depositary Share is a share issued under a deposit agreement that has been created to permit US-resident investors to hold shares in non-US companies and trade them on the stock exchanges in the US. One ADS is equal to two BHP Billiton Limited or BHP Billiton Plc ordinary shares. ADSs are evidenced by American Depositary Receipts, or ADRs, which are the instruments that trade on the NYSE. | |
Australian Securities and Investments Commission (ASIC) | The Australian Government agency that enforces laws relating to companies, securities, financial services and credit in order to protect consumers, investors and creditors. | |
Australian Securities Exchange (ASX) | ASX is a multi-asset class vertically integrated exchange group that functions as a market operator, clearing house and payments system facilitator. It oversees compliance with its operating rules, promotes standards of corporate governance among Australia’s listed companies and helps educate retail investors. | |
Australian Tax Treaty | Tax Convention between Australia and the United States as to the Avoidance of Double Taxation. | |
BHP Billiton | Being both companies in the dual listed company structure, BHP Billiton Limited and BHP Billiton Plc. | |
BHP Billiton Limited share | A fully paid ordinary share in the capital of BHP Billiton Limited. | |
BHP Billiton Limited shareholders | The holders of BHP Billiton Limited shares. | |
BHP Billiton Limited special voting share | A single voting share issued to facilitate joint voting by shareholders of BHP Billiton Limited on Joint Electorate Actions. | |
BHP Billiton Plc equalisation share | A share that has been authorised to be issued to enable a distribution to be made by BHP Billiton Plc Group to the BHP Billiton Limited Group should this be required under the terms of the DLC merger. | |
BHP Billiton Plc 5.5 per cent preference share | Shares that have the right to repayment of the amount paid up on the nominal value and any unpaid dividends in priority of any other class of shares in BHP Billiton Plc on a return of capital or winding up. | |
BHP Billiton Plc share | A fully paid ordinary share in the capital of BHP Billiton Plc. | |
BHP Billiton Plc shareholders | The holders of BHP Billiton Plc shares. |
Term | Definition | |||
BHP Billiton Plc special voting share | A single voting share issued to facilitate joint voting by shareholders of BHP Billiton Plc on Joint Electorate Actions. | |||
Board | The Board of Directors of BHP Billiton. | |||
CEO | Chief Executive Officer. | |||
Cost and freight (CFR) | The seller must pay the costs and freight necessary to bring the goods to the named port of destination, but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered | |||
Co-Investment Plan (CIP) | Legacy employee share scheme. | |||
Community investment | Contributions made to support communities in which we | |||
Customer Sector Group | A product-based global business | |||
CY20XX | Refers to the calendar year ending 31 December 20XX, where XX is the two-digit number of the year. | |||
Deferred share | A nil-priced option or a conditional right to acquire a share issued under the rules of the GIS. | |||
Dividend Record Date | The date, determined by a company’s board of directors, by when an investor must be recorded as an owner of shares in order to qualify for a forthcoming dividend. |
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DLC merger | The Dual Listed Company merger between BHP Billiton Limited and BHP Billiton Plc on 29 June 2001. | ||
DLC structure | The corporate structure resulting from the DLC merger. | ||
Employee Share Plan (ESP) | A legacy employee share plan that commenced under the jurisdiction of BHP Limited prior to the formation of BHP Billiton. | ||
Expected value | Expected value of a share incentive – the average outcome weighted by probability. This measure takes into account the difficulty of achieving performance conditions and the correlation between these and share price appreciation. The valuation methodology also takes into account factors such as volatility and forfeiture | ||
Extractive Industries Transparency Initiative (EITI) | An international initiative dedicated to the enhancement of transparency around the payments of taxes and royalties derived from resource development. |
Term | Definition | |
Free on board (FOB) | The seller delivers when the goods pass the ship’s rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The FOB term requires the seller to clear the goods for export. This term can be used only for sea or inland waterway transport. | |
Free prior informed consent (FPIC) | A principle requiring that individuals and communities should be informed – in appropriate, accessible language - about projects that might take place on their land. It also guarantees that they are given the opportunity to give or withhold their consent to a project before it commences. | |
FY20XX | Refers to the financial year ending 30 June 20XX, where XX is the two-digit number for the year. | |
GAAP | Generally accepted accounting principles. | |
Gearing | Gearing is defined as the ratio of net debt to net debt plus net assets. | |
Greenhouse Gas (GHG) | For BHP Billiton reporting purposes, these are the aggregate anthropogenic carbon dioxide equivalent emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6). | |
Group | BHP Billiton Limited, BHP Billiton Plc and their subsidiaries. | |
Group | ||
• the governance of BHP Billiton; | ||
• the CEO limits established by the BHP Billiton Board; | ||
• the activities necessary to improve the effectiveness of the Group. | ||
Group Incentive Scheme (GIS) | A short-term incentive plan under which annual incentives are provided through a mix of cash and employee | |
Group Level Document (GLD) | The documents that give effect to the mandatory requirements arising from the BHP Billiton Operating Model as approved by the GMC. They describe the mandatory minimum performance requirements and accountabilities for definitive business obligations, processes, functions and activities across BHP Billiton. | |
Group Management Committee (GMC) | The executive management group within BHP Billiton as determined by the CEO. Its role is defined by the GMC Terms of Reference. | |
International Financial Reporting Standards (IFRS) | Accounting standards as issued by the International Accounting Standards Board. | |
JSE | Johannesburg Stock Exchange. | |
JV | Joint venture. |
Term | Definition | |||
Key Management Personnel (KMP) | Persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly (including | |||
Key Performance Indicator (KPI) | Used to measure the performance of the Group, individual businesses and executives in any one year. | |||
London Metal Exchange | A London exchange which trades metals (e.g. lead, zinc, aluminium and nickel) in forward and option markets. | |||
LSE | London Stock Exchange. | |||
Major capital projects | ||||
Market value | The market value based on closing prices, or, in instances when an executive exercises and sells shares, the actual sale price achieved. | |||
NYSE | New York Stock Exchange. | |||
Occupational exposure limit (OEL) | The concentration of a substance or agent, exposure to which, according to current knowledge, should not cause adverse health effects nor cause undue discomfort to nearly all workers. | |||
Occupational illness | An occupational illness is an illness that occurs as a consequence of work-related activities or exposure. It includes acute or chronic illnesses or diseases, which may be caused by inhalation, absorption, ingestion or direct contact. | |||
Option | A right to acquire a share on payment of an exercise price issued under the rules of the GIS. | |||
OSHA | United States Government Occupational Safety and Health Administration. | |||
Performance share | A nil-priced option or a conditional right to acquire a share, subject to a Performance Hurdle, issued under the rules of the LTIP. |
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Performance share plan (PSP) | An employee share plan that commenced under the jurisdiction of BHP Limited or Billiton Plc and prior to the formation of BHP Billiton. Legacy share scheme. | ||
Project investment | Total budgeted capital expenditure on growth projects under development at year-end. Refer to section 3.7.2 Growth projects, for a full listing of these growth projects. |
Term | Definition | |
Quality-of-life indicators | Measures of people’s overall well-being including material well-being (standard of living) and non-material components such as the quality of the environment, national security, personal safety, and political and economic freedoms. | |
Quoted | In the context of American Depositary Shares (ADS) and listed investments, the term ‘quoted’ means ‘traded’ on the relevant exchange. | |
Resource Endowment initiative (REi) | An initiative of the International Council on Mining and Metals to enhance industry’s socio-economic contribution to the countries and communities where organisations such as BHP Billiton operate, by better understanding the factors that either inhibit or promote social and economic development linked to large-scale mining projects. | |
Restricted Share Scheme (RSS) | Legacy employee share scheme. | |
Return on capital employed (ROCE) | Return on capital employed is calculated as earnings from operations, excluding exceptional items and net finance costs (after tax), divided by average capital employed. Average capital employed is calculated as net assets less net debt. | |
Shareplus | All employee share purchase plan. | |
Significant environmental incident | A significant environmental incident is an occurrence that has resulted in or had the potential to cause significant environmental harm. Our definition of ‘significant’ is conservative to ensure all learnings are captured from relevant | |
STRATE | Share Transactions Totally Electronic is a South African electronic settlement and depository system for dematerialised equities. | |
Total | ||
Total shareholder return (TSR) | ||
Underlying EBIT margin | Calculated as Underlying EBIT (as defined in section 3.3), excluding third party EBIT, divided by revenue net of third party product revenue. | |
United Kingdom Listing Authority (UKLA) | Term used when the UK Financial Services Authority (FSA) acts as the competent authority under Part VI of the UK Financial Services and Markets Act (FSMA). |
Term | Definition | |
United States Securities and Exchange Commission (US SEC) | US regulatory commission that aims to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation. | |
US$ | The Group’s reporting currency and the functional currency of the majority of its operations is the US dollar, as this is assessed to be the principal currency of the economic environments in which they operate. | |
West Texas Intermediate (WTI) | A crude stream produced in Texas and southern Oklahoma which serves as a reference or ‘marker’ for pricing a number of other crude streams and which is traded in the domestic spot market at Cushing, Oklahoma. |
10.2 Mining and mining-related terms
Term | Definition | |
2D | Two | |
3D | Three | |
Alumina | Aluminium oxide (Al2O3). Alumina is produced from bauxite in the refining process. Alumina is then converted (reduced) in an electrolysis cell to produce aluminium metal. | |
Ash | Inorganic material remaining after combustion. | |
AusIMM | The Australasian Institute of Mining and Metallurgy. | |
Bauxite | Chief ore of aluminium. | |
Beneficiation | The process of physically separating ore from gangue prior to subsequent processing of the beneficiated ore. | |
Bio-leaching | Use of naturally occurring bacteria to leach a metal from ore; for example, copper, zinc, uranium, nickel and cobalt from a sulphide mineral. | |
Brownfield | An exploration or development project located within an existing mineral province which can share infrastructure and management with an existing operation. | |
Coal Reserves | The same meaning as Ore Reserves, but specifically concerning coal. | |
Coking coal | ||
Competent Person | A ‘Competent Person’ is a person who is a member or fellow of The Australasian Institute of Mining and Metallurgy or of The Australian Institute of Geoscientists or of a ‘Recognised Overseas Professional Organisation’ included in a list promulgated from time to time. (JORC Code, 2004.) | |
Condensate | A mixture of hydrocarbons that exist in gaseous form in natural underground reservoirs, but which condense to form a liquid at atmospheric conditions. |
Term | Definition | |
Copper cathode | Electrolytically refined copper that has been deposited on the cathode of an electrolytic bath of acidified copper sulphate solution. The refined copper may also be produced through leaching and electrowinning. | |
Crude oil | A mixture of hydrocarbons that exist in liquid form in natural underground reservoirs, and remain liquid at atmospheric pressure after being produced at the well head and passing through surface separating facilities. | |
Cut-off grade | A nominated grade above which is defined some mineral aspect of the | |
CQCA | Central Queensland Coal Associates. | |
ECSA | Engineering Council of South Africa. | |
Electrowinning/electrowon | An electrochemical process in which metal is recovered by dissolving a metal within an electrolyte and plating it onto an electrode. | |
Energy coal | Used as a fuel source in electrical power generation, cement manufacture and various industrial applications. Energy coal may also be referred to as steaming or thermal coal. | |
Ethane | Where sold separately, is largely ethane gas that has been liquefied through pressurisation. One tonne of ethane is approximately equivalent to 26.8 thousand cubic feet of gas. | |
FAusIMM | Fellow of the Australasian Institute of Mining and Metallurgy. | |
Field | An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. There may be two or more reservoirs in a field that are separated vertically by intervening impervious strata, or laterally by local geologic barriers, or by both. Reservoirs that are associated by being in overlapping or adjacent fields may be treated as a single or common operational field. The geological terms structural feature and stratigraphic condition are intended to identify localised geological features as opposed to the broader terms of basins, trends, provinces, plays, areas-of-interest, etc. (per SEC Rule 4-10). | |
Flotation | A method of selectively recovering minerals from finely ground ore using a froth created in water by specific reagents. In the flotation process, certain mineral particles are induced to float by becoming attached to bubbles of froth and the unwanted mineral particles sink. | |
Grade | The relative quantity, or the percentage, of metal or mineral content in an orebody. | |
Greenfield | The development or exploration located outside the area of influence of existing mine operations/infrastructure. | |
Head grade | The average grade of ore delivered to a process for mineral extraction. |
Term | Definition | |
Heap leach(ing) | A process used for the recovery of metals such as copper, nickel, uranium and gold from low-grade ores. The crushed material is laid on a slightly sloping, impermeable pad and leached by uniformly trickling (gravity fed) a chemical solution through the beds to ponds. The metals are recovered from the solution. | |
Ilmenite | The principle ore of titanium composed of iron, titanium and oxygen (FeTiO3). | |
Kriging | A geostatistical method of estimating resources based on a mathematical function known as a semivariogram. | |
Leaching | The process by which a soluble metal can be economically recovered from minerals in ore by dissolution. | |
Liquefied natural gas (LNG) | Consists largely of methane that has been liquefied through chilling and pressurisation. One tonne of LNG is approximately equivalent to 45.9 thousand cubic feet of natural gas. | |
Liquefied petroleum gas (LPG) | Consists of propane and butane and a small amount (less than two per cent) of ethane that has been liquefied through pressurisation. One tonne of LPG is approximately equivalent to 11.6 barrels. | |
Loss on ignition (LOI) | A measure of the percentage of volatile matter (liquid or gas) contained within a mineral or rock. LOI is determined to calculate loss in mass during pyroprocessing. | |
MAIG | Member of the Australian Institute of Geoscientists. | |
Marketable Coal Reserves | Represents beneficiated or otherwise enhanced coal product and should be read in conjunction with, but not instead of, reports of | |
MAusIMM | Member of the Australasian Institute of Mining and Metallurgy. | |
Metallurgical coal | A broader term than coking coal, which includes all coals used in steelmaking, such as coal used for the pulverised coal injection process. | |
Mineralisation | Any single mineral or combination of minerals occurring in a mass, or deposit, of economic interest. | |
NAPEG | Northwest Territories and Nunavut Association of Professional Engineers and Geoscientists. | |
Natural Gas Liquids (NGL) | Natural Gas Liquids, which include propane, butane and ethane. | |
Open-cut/open-pit (OC/OP) | Surface working in which the working area is kept open to the sky. |
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| ||
Ore Reserves | That part of a | ||
Permian Basin | The geological province known as the Permian Basin in the State of Texas. | ||
Probable Ore Reserves | Reserves for which quantity and grade and/or |
Term | Definition | |
Proved oil and gas reserves | ||
Proven Ore Reserves | Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, | |
Reserve life | Current stated ore reserves estimate divided by the current approved | |
Run of mine product (ROM) | Product mined in the course of regular mining activities. | |
Rutile | ||
SACNASP | South African Council for Natural Scientific Professions. | |
SAIMM | The Southern African Institute of Mining and Metallurgy. | |
SME reg’d member | Registered member of the Society of Mining, Metallurgy and Exploration. | |
Solvent extraction | A method of separating one or more metals from a leach solution by treating with a solvent that will extract the required metal, leaving the others. The metal is recovered from the solvent by further treatment. | |
Spud | Commence drilling of an oil or gas well. | |
Stockpile (SP) | An accumulation of ore or mineral built up when demand slackens or when the treatment plant or beneficiation equipment is incomplete or temporarily | |
Tailings | Those portions of washed or milled ore that are too poor to be treated further or remain after the required metals and minerals have been extracted. | |
Tension Leg Platform (TLP) | A vertically moored floating facility for production of oil and gas. | |
Titanium Slag | 85 per cent TiO2 smelter product. | |
Total Coal Reserves | Run of mine reserves as outputs from the mining activities. | |
Total Marketable Reserves | Product reserves as outputs from processing plant which includes sizing and beneficiation. | |
Total Ore Reserves | ||
Underground (UG) | Natural or man-made excavation under the surface of the Earth. | |
Zircon |
Term | Definition | |
A.AI2O3 | available alumina | |
Ag | silver | |
AI2O3 | alumina | |
Anth | anthracite | |
Au | gold | |
cpt | carats per tonne | |
Cu | copper | |
CV | calorific value | |
Fe | iron | |
Fe2O3 | iron oxide | |
insols | insolubles | |
K2O | potassium oxide | |
Met | metallurgical coal | |
MgO | magnesium oxide | |
Mn | manganese | |
Mo | molybdenum | |
Ni | nickel | |
P | phosphorous | |
Pb | lead | |
Pc | phosphorous in concentrate | |
R.SiO2 | reactive silica | |
S | sulphur | |
SCu | soluble copper | |
SiO2 | silica | |
TCu | total copper | |
Th | thermal coal | |
TiO2 | titanium oxide | |
U3O8 | uranium oxide | |
VM | volatile matter | |
Zn | zinc |
Abbreviation | Description | |
% | ||
bbl/d | barrels per day | |
boe | ||
dmt | dry metric tonne | |
dmtu | dry metric tonne | |
g/t | grams per tonne | |
ha | hectare | |
kcal/kg | kilocalories per kilogram | |
kg/tonne or kg/t | kilograms per tonne | |
km | kilometre | |
kV | kilovolt | |
kt | kilotonne | |
kdwt | thousand deadweight tonnes | |
m | metre | |
ML | megalitre | |
Mt | millions of tonnes | |
mm | millimetre | |
MMboe | million barrels of oil equivalent | |
MMBtu | ||
MMcf/d | ||
Mbbl/d | ||
MMbbl/d | ||
MMcm/d | ||
mtpa | ||
MW | ||
psi | ||
ppm | ||
scf | standard cubic feet | |
t | ||
TJ | ||
TJ/d | terajoules per day | |
tpa | tonnes per annum | |
tpd | ||
tph | ||
wmt |
BHP Billiton Limited has a primary listing on the Australian Securities Exchange (ASX) in Australia and BHP Billiton Plc has a premium listing on the UK Listing Authority’s Official List and its ordinary shares are admitted to trading on the London Stock Exchange (LSE). BHP Billiton Plc also has a secondary listing on the Johannesburg Stock Exchange (JSE). in South Africa.
In addition, BHP Billiton Limited and BHP Billiton Plc are listed on the New York Stock Exchange (NYSE). in the United States. Trading on the NYSE is via American Depositary Shares (ADSs), each representing two ordinary shares evidenced by American Depositary Receipts (ADRs). Citibank N.A. (Citibank) is the Depositary for both ADR programs. BHP Billiton Limited’s ADSs have been listed for trading on the NYSE (ticker BHP) since 28 May 1987 and BHP Billiton Plc’s since 25 June 2003 (ticker BBL).
Share capital
The details of the share capital for both BHP Billiton Limited and BHP Billiton Plc are presented in note 19 ‘Share capital’ in the financial statements.
Major shareholders
The tables in sections 7.20 and 7.21 of this Annual Report present information pertaining to the shares held by Directors and other members of the Group Management Committee in BHP Billiton Limited and BHP Billiton Plc.Plc held by Directors and members of the Group Management Committee (GMC).
Neither BHP Billiton Limited nor BHP Billiton Plc is directly or indirectly controlled by another corporation or by any government. Other than as described in section 2.11.2,2.10.2, no major shareholder possesses voting rights that differ from those attaching to all of BHP Billiton Limited’s voting securities.
BHP Billiton Limited
The tables in sections 7.20 and 7.21 of this Annual Report show the holdings for Directors and other members of the Group Management CommitteeGMC of BHP Billiton Limited, as a group, of BHP Billiton Limited’s voting securities. No person beneficially owned more than five per cent of BHP Billiton Limited’s voting securities.
The following table shows holdings of five per cent or more of voting rights in BHP Billiton Limited’s shares as notified to BHP Billiton Limited under the Corporations Act 2001, Section 671B.
Percentage of total voting rights | |||||||||||||||||||||||||||||||||||||
Title of class | Identity of person or | Date of notice received | Date of change | Number owned | 2010 | 2009 | 2008 | Identity of person or group | Date of notice received | Date of change | Number owned | Percentage of total voting rights (1) | |||||||||||||||||||||||||
Title of class | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||
BlackRock Investment Management (Australia) Limited (1) | 4 January 2010 | 02 December 2009 | 183,990,864 | 5.48 | % | — | — | BlackRock Investment Management (Australia) Limited | 4 January 2010 | 2 December 2009 | 161,178,004 | (2) | 5.02 | % | 5.73 | % | 5.48 | % |
(1) | The percentages quoted are based on the total voting rights of BHP Billiton Limited as at the date of the Annual Report each year of 3,211,691,105 (2012), 3,211,691,105 (2011) and 3,358,359,496 (2010). |
(2) | On 2 December 2009, |
BHP Billiton Plc
The following table shows holdings of three per cent or more of voting rights in BHP Billiton Plc’s shares as notified to BHP Billiton Plc under the UK Disclosure and Transparency Rule 5.(1)
Percentage of total voting rights(2) | |||||||||||||||||||||||||||||||||||||||
Title of class | Identity of person or group | Date of last notice | Number owned | Percentage of total voting rights (2) | |||||||||||||||||||||||||||||||||||
Identity of person or | Date of notice received | Date of change | Number owned | 2010 | 2009 | 2008 | Date received | Date of change | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||
Ordinary shares | Legal & General Group Plc(3) | 17 February 2010 | 16 February 2010 | 88,103,187 | 3.99 | % | 4.54 | % | 4.54 | % | Legal & General Group Plc(3) | 17 February 2010 | 16 February 2010 | 88,103,187 | 4.17 | % | 4.17 | % | 3.99 | % | |||||||||||||||||||
Ordinary shares | BlackRock, Inc. (4) | 3 December 2009 | 1 December 2009 | 213,014,043 | 9.65 | % | — | — | BlackRock, Inc. | 3 December 2009 | 1 December 2009 | 213,014,043 | 10.08 | % | 10.08 | % | 9.65 | % |
(1) | Other than as disclosed to the relevant stock exchanges, there has been no change in the holdings of three per cent or more of the voting rights in BHP Billiton Plc’s shares notified to BHP Billiton Plc as at the date of this Report. |
(2) | The percentages quoted are based on the total voting rights of BHP Billiton Plc as at the date of the Annual Report each year of |
(3) | The notification received from Legal & General Group Plc was a group disclosure covering the interests of Legal & General Group Plc and its subsidiaries. |
The following table shows holdings of Directors and members of the Group Management CommitteeGMC of BHP Billiton Plc who were in office as at 30 June 2010,2012, as a group, of BHP Billiton Plc’s voting securities as at that date.(1)
Title of class | Identity of person or group | Number owned | Percentage of total voting rights at 30 June 2010(2) | Identity of person or group | Number owned | Percentage of total voting rights | |||||||||||
Ordinary shares | Directors and executives as a group | 667,072 | 0.03 | % | Directors and Executives as a group | 1,119,552 | 0.05 | % |
(1) | As at the |
(2) | The percentages quoted are based on the total voting rights of BHP Billiton Plc of |
Twenty largest shareholders as at 2724 August 20102012 (as named on the Register of Shareholders)
BHP Billiton Limited | Number of fully paid shares | % of issued capital | ||
1. HSBC Australia Nominees Pty Ltd | 568,691,956 | 16.93 | ||
2. J P Morgan Nominees Australia Limited | 380,666,706 | 11.33 | ||
3. National Nominees Ltd | 354,067,806 | 10.54 | ||
4. Citicorp Nominees Pty Limited <BHP Billiton ADR Holders A/C> | 248,542,952 | 7.40 | ||
5. Citicorp Nominees Pty Limited | 155,173,867 | 4.62 | ||
6. Australian Mutual Provident Society | 84,805,959 | 2.53 | ||
7. ANZ Nominees Limited <Cash Income A/C> | 58,067,540 | 1.73 | ||
8. Potter Warburg Nominees Pty Ltd | 16,074,127 | 0.48 | ||
9. Australian Foundation Investment Company Limited | 14,276,934 | 0.43 | ||
10. Australian Reward Investment Alliance | 10,276,036 | 0.31 | ||
11. Perpetual Trustee Australia Group | 9,583,950 | 0.29 | ||
12. Queensland Investment Corporation | 9,395,068 | 0.28 | ||
13. RBC Dexia Investor Services Australia Nominees Pty Limited <PIPOOLED A/C> | 9,086,179 | 0.27 | ||
14. UBS Nominees Pty Ltd | 8,496,188 | 0.25 | ||
15. Bond Street Custodians Limited | 7,781,689 | 0.23 | ||
16. RBC Dexia Investor Services Australia Nominees Pty Limited <MLCI A/C> | 7,369,807 | 0.22 | ||
17. ARGO Investments Limited | 7,217,411 | 0.21 | ||
18. Tasman Asset Management Limited <Tyndall Australian Share Wholesale Portfolio A/C> | 6,309,450 | 0.19 | ||
19. RBC Dexia Investor Services Australia Nominees Pty Limited <BKCUST A/C> | 5,968,819 | 0.18 | ||
20. INVIA Custodian Pty Limited | 5,590,817 | 0.17 | ||
1,967,443,261 | 58.59 | |||
BHP Billiton Plc | Number of fully paid shares | % of issued capital | ||
1. PLC Nominees (Proprietary) Limited | 422,585,349 | 18.94 | ||
2. National City Nominees Limited | 97,380,499 | 4.36 | ||
3. GEPF Equity | 88,469,041 | 3.97 | ||
4. Chase Nominees Limited <LEND> | 73,949,665 | 3.31 | ||
5. Chase Nominees Limited | 69,100,938 | 3.10 | ||
6. State Street Nominees Limited<OM02> | 68,856,840 | 3.09 | ||
7. HSBC Global Custody Nominee (UK) Ltd <357206> | 59,716,462 | 2.68 | ||
8. The Bank of New York (Nominees) Ltd | 40,528,445 | 1.82 | ||
9. Nortrust Nominees Limited | 39,188,189 | 1.76 | ||
10. Nutraco Nominees Limited <781221> | 39,000,000 | 1.75 | ||
11. State Street Nominees Limited <OD64> | 36,722,978 | 1.65 | ||
12 Nortrust Nominees Limited <SLEND> | 35,586,897 | 1.60 | ||
13. Vidacos Nominees Limited <CLRLUX2> | 35,275,064 | 1.58 | ||
14. Industrial Development Corporation of South Africa | 33,804,582 | 1.52 | ||
15. BNY Mellon Nominees Limited <BSDTGUSD> | 31,325,276 | 1.40 | ||
16. Vidacos Nominees Limited <FGN> | 27,497,115 | 1.23 | ||
17. Lynchwood Nominees Limited <2006420> | 27,345,821 | 1.23 | ||
18. Chase Nominees Limited <BGILIFEL> | 26,050,447 | 1.17 | ||
19. Chase Nominees Limited <USRESLD> | 24,200,133 | 1.08 | ||
20. State Street Nominees Limited <OM04> | 21,860,361 | 0.98 | ||
1,298,444,102 | 58.22 | |||
BHP Billiton Limited | Number of fully paid shares | % of issued capital | ||||||||
1. | HSBC Custody Nominees (Australia) Limited | 541,484,877 | 16.86 | |||||||
2. | J P Morgan Nominees Australia Limited | 391,041,657 | 12.17 | |||||||
3. | National Nominees Limited | 310,249,002 | 9.66 | |||||||
4. | Citicorp Nominees Pty Limited <BHP Billiton ADR Holders A/C> | 210,643,506 | 6.56 | |||||||
5. | Citicorp Nominees Pty Ltd | 108,559,508 | 3.38 | |||||||
6. | J P Morgan Nominees Australia Limited <Cash Income A/C> | 61,718,183 | 1.92 | |||||||
7. | BNP Paribas Noms Pty Ltd <Master Cust DRP> | 51,209,464 | 1.59 | |||||||
8. | Citicorp Nominees Pty Limited <Colonial First State Inv A/C> | 40,380,848 | 1.26 | |||||||
9. | AMP Life Limited | 28,294,856 | 0.88 | |||||||
10. | UBS Wealth Management Australia Nominees Pty Ltd | 14,962,107 | 0.47 | |||||||
11. | BNP Paribas Noms Pty Ltd <SMP Accounts DRP> | 14,472,157 | 0.45 | |||||||
12. | HSBC Custody Nominees (Australia) Limited <NT-Comnwlth Super Corp A/C> | 14,069,216 | 0.44 | |||||||
13. | Australian Foundation Investment Company Limited | 13,990,941 | 0.44 | |||||||
14. | BNP Paribas Noms Pty Ltd <DRP> | 8,061,704 | 0.25 | |||||||
15. | ARGO Investments Limited | 8,024,309 | 0.25 | |||||||
16. | Perpetual Trustee Company Limited | 7,569,447 | 0.24 | |||||||
17. | Queensland Investment Corporation | 6,532,033 | 0.20 | |||||||
18. | Computershare Nominees CI Ltd <ASX Shareplus Control A/C> | 6,304,718 | 0.20 | |||||||
19. | Navigator Australia Ltd <MLC Investment Sett A/C> | 5,536,830 | 0.17 | |||||||
20. | HSBC Custody Nominees (Australia) Limited-GSCO ECA | 4,977,142 | 0.15 | |||||||
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1,848,082,505 | 57.54 | |||||||||
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BHP Billiton Plc | Number of fully paid shares | % of issued capital | ||||||||
1. | PLC Nominees (Proprietary) Limited | 445,927,020 | 20.87 | |||||||
2. | GEPF Equity | 87,131,000 | 4.08 | |||||||
3. | Chase Nominees Limited <LEND> | 81,214,887 | 3.80 | |||||||
4. | State Street Nominees Limited <OM02> | 79,337,339 | 3.71 | |||||||
5. | State Street Nominees Limited <OM04> | 60,946,499 | 2.85 | |||||||
6. | Chase Nominees Limited | 59,957,871 | 2.81 | |||||||
7. | National City Nominees Limited | 53,628,525 | 2.51 | |||||||
8. | The Bank of New York (Nominees) Limited | 51,279,766 | 2.40 | |||||||
9. | Nortrust Nominees Limited | 48,871,754 | 2.29 | |||||||
10. | HSBC Global Custody Nominee (UK) Limited <357206> | 48,764,772 | 2.28 | |||||||
11. | Vidacos Nominees Limited <CLRLUX2> | 39,420,670 | 1.85 | |||||||
12. | Lynchwood Nominees Limited <2006420> | 37,044,855 | 1.73 | |||||||
13. | BNY Mellon Nominees Limited <BSDTGUSD> | 35,974,030 | 1.68 | |||||||
14. | State Street Nominees Limited <OD64> | 34,455,911 | 1.61 | |||||||
15. | Nortrust Nominees Limited <SLEND> | 33,820,946 | 1.58 | |||||||
16. | Industrial Development Corporation | 33,804,582 | 1.58 | |||||||
17. | Nutraco Nominees Limited <781221> | 30,000,000 | 1.40 | |||||||
18. | Chase Nominees Limited <BGILIFEL> | 25,092,618 | 1.18 | |||||||
19. | BNY Mellon Nominees Limited <BSDTGABN> | 24,023,949 | 1.12 | |||||||
20. | State Street Nominees Limited <GB01> | 18,688,842 | 0.88 | |||||||
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1,329,385,836 | 62.21 | |||||||||
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USUnited States share ownership as at 30 June 20102012
BHP Billiton Limited | BHP Billiton Plc | BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||||||||||||||||||||||||||
Shareholders Numbers | % | Shares Numbers | % of issued capital | Shareholders Numbers | % | Shares Numbers | % of issued capital | Shareholders Numbers | % | Shares Numbers | % of issued capital | Shareholders Numbers | % | Shares Numbers | % of issued capital | |||||||||||||||||||||||||||||||||||
Classification of holder | ||||||||||||||||||||||||||||||||||||||||||||||||||
Registered holders of voting securities | 1,953 | 0.33 | 5,459,438 | 0.16 | 73 | 0.35 | 172,439 | 0.01 | 1,857 | 0.31 | 5,977,980 | 0.19 | 68 | 0.31 | 142,535 | 0.01 | ||||||||||||||||||||||||||||||||||
ADR holders | 1,161 | 0.20 | 255,669,208 | (a) | 7.61 | 146 | 0.70 | 102,738,254 | (b) | 4.60 | 1,173 | 0.20 | 205,795,552 | (a) | 6.41 | 188 | 0.86 | 55,634,652 | (b) | 2.60 |
(a) | These shares translate to |
(b) | These shares translate to |
Distribution of shareholders and shareholdings as at 2724 August 20102012
BHP Billiton Limited | BHP Billiton Plc | BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||||||||||||||||||||||||
Shareholders Numbers | % | Shares Numbers | % | Shareholders Numbers | % | Shares Numbers | % | Shareholders Numbers | % | Shares Numbers | % | Shareholders Numbers | % | Shares Numbers | % | |||||||||||||||||||||||||||||||||
Registered address | ||||||||||||||||||||||||||||||||||||||||||||||||
Australia | 573,108 | 96.05 | 3,286,801,433 | 97.87 | 222 | 1.06 | 1,287,410 | 0.05 | 575,715 | 96.14 | 3,140,244,650 | 97.77 | 317 | 1.45 | 2,049,670 | 0.09 | ||||||||||||||||||||||||||||||||
New Zealand | 14,202 | 2.38 | 39,730,763 | 1.18 | 31 | 0.15 | 108,339 | 0.01 | 14,213 | 2.38 | 37,499,317 | 1.17 | 34 | 0.16 | 115,825 | 0.01 | ||||||||||||||||||||||||||||||||
United Kingdom | 3,531 | 0.59 | 11,252,701 | 0.34 | 18,233 | 87.27 | 1,778,165,001 | 79.70 | 3,232 | 0.54 | 10,105,018 | 0.31 | 18,934 | 86.75 | 1,667,838,452 | 78.08 | ||||||||||||||||||||||||||||||||
United States | 1,948 | 0.33 | 5,526,600 | 0.16 | 75 | 0.36 | 169,270 | 0.01 | 1,856 | 0.31 | 5,974,191 | 0.19 | 72 | 0.33 | 231,700 | 0.01 | ||||||||||||||||||||||||||||||||
South Africa | 121 | 0.02 | 227,794 | 0.01 | 1,405 | 6.73 | 437,474,644 | 19.61 | 138 | 0.02 | 242,518 | 0.01 | 1,417 | 6.49 | 461,660,906 | 21.61 | ||||||||||||||||||||||||||||||||
Other | 3,736 | 0.63 | 14,820,205 | 0.44 | 925 | 4.43 | 13,916,538 | 0.62 | 3,659 | 0.61 | 17,625,411 | 0.55 | 1,052 | 4.82 | 4,288,901 | 0.20 | ||||||||||||||||||||||||||||||||
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Total | 596,646 | 100.00 | 3,358,359,496 | 100.00 | 20,891 | 100.00 | 2,231,121,202 | 100.00 | 598,813 | 100.00 | 3,211,691,105 | 100.00 | 21,826 | 100.00 | 2,136,185,454 | 100.00 | ||||||||||||||||||||||||||||||||
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BHP Billiton Limited | BHP Billiton Plc | BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||||||||||||||||||||||||
Shareholders Numbers | % | Shares Numbers (a) | % | Shareholders Numbers | % | Shares Numbers | % | Shareholders Numbers | % | Shares Numbers (a) | % | Shareholders Numbers | % | Shares Numbers (a) | % | |||||||||||||||||||||||||||||||||
Size of holding | ||||||||||||||||||||||||||||||||||||||||||||||||
1 – 500(b) | 260,495 | 43.66 | 60,235,580 | 1.79 | 10,357 | 49.60 | 2,716,378 | 0.12 | 268,302 | 44.80 | 61,036,465 | 1.90 | 11,706 | 53.63 | 2,952,196 | 0.14 | ||||||||||||||||||||||||||||||||
501 – 1,000 | 115,131 | 19.30 | 90,251,249 | 2.69 | 4,589 | 21.97 | 3,402,434 | 0.15 | 114,682 | 19.15 | 88,837,076 | 2.77 | 4,476 | 20.51 | 3,313,128 | 0.15 | ||||||||||||||||||||||||||||||||
1,001 – 5,000 | 170,355 | 28.55 | 385,714,355 | 11.49 | 3,801 | 18.19 | 7,772,304 | 0.35 | 167,440 | 27.96 | 376,466,930 | 11.72 | 3,597 | 16.48 | 7,350,586 | 0.34 | ||||||||||||||||||||||||||||||||
5,001 – 10,000 | 28,884 | 4.84 | 204,755,800 | 6.10 | 494 | 2.36 | 3,518,220 | 0.16 | 27,887 | 4.66 | 197,114,687 | 6.14 | 440 | 2.02 | 3,153,485 | 0.15 | ||||||||||||||||||||||||||||||||
10,001 – 25,000 | 16,164 | 2.71 | 243,962,722 | 7.26 | 402 | 1.93 | 6,411,976 | 0.29 | 15,197 | 2.54 | 228,596,657 | 7.12 | 373 | 1.71 | 6,004,460 | 0.28 | ||||||||||||||||||||||||||||||||
25,001 – 50,000 | 3,542 | 0.59 | 121,393,280 | 3.61 | 237 | 1.13 | 8,604,555 | 0.39 | 3,392 | 0.56 | 115,836,624 | 3.61 | 216 | 0.99 | 7,808,822 | 0.37 | ||||||||||||||||||||||||||||||||
50,001 – 100,000 | 1,329 | 0.22 | 90,955,201 | 2.71 | 230 | 1.10 | 16,827,646 | 0.75 | 1,240 | 0.21 | 85,132,865 | 2.65 | 249 | 1.14 | 17,892,988 | 0.84 | ||||||||||||||||||||||||||||||||
100,001 – 250,000 | 519 | 0.09 | 75,513,649 | 2.25 | 273 | 1.30 | 44,883,874 | 2.01 | 482 | 0.08 | 70,384,524 | 2.19 | 255 | 1.17 | 41,673,162 | 1.95 | ||||||||||||||||||||||||||||||||
250,001 – 500,000 | 119 | 0.02 | 40,397,682 | 1.20 | 184 | 0.88 | 66,276,426 | 2.97 | 102 | 0.02 | 35,549,086 | 1.11 | 178 | 0.81 | 64,560,837 | 3.02 | ||||||||||||||||||||||||||||||||
500,001 – 1,000,000 | 51 | 0.01 | 34,056,164 | 1.01 | 113 | 0.54 | 77,902,819 | 3.49 | 30 | 0.01 | 20,929,204 | 0.65 | 122 | 0.56 | 83,575,257 | 3.91 | ||||||||||||||||||||||||||||||||
1,000,001 and over | 57 | 0.01 | 2,011,123,814 | 59.89 | 211 | 1.00 | 1,992,804,570 | 89.32 | 59 | 0.01 | 1,931,806,987 | 60.14 | 214 | 0.98 | 1,897,900,533 | 88.85 | ||||||||||||||||||||||||||||||||
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Total | 596,646 | 100.00 | 3,358,359,496 | 100.00 | 20,891 | 100.00 | 2,231,121,202 | 100.00 | 598,813 | 100.00 | 3,211,691,105 | 100.00 | 21,826 | 100.00 | 2,136,185,454 | 100.00 | ||||||||||||||||||||||||||||||||
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(a) | One share entitles the holder to one vote. |
(b) | Number of BHP Billiton Limited shareholders holding less than a marketable parcel (A$500) based on the market price of A$ |
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||
Shareholders Numbers | % | Shares Numbers | % | Shareholders Numbers | % | Shares Numbers | % | |||||||||
Classification of holder | ||||||||||||||||
Corporate | 122,339 | 20.50 | 2,321,912,120 | 69.14 | 11,207 | 53.65 | 2,216,833,840 | 99.36 | ||||||||
Private | 474,307 | 79.50 | 1,036,447,375 | 30.86 | 9,684 | 46.35 | 14,287,362 | 0.64 | ||||||||
Total | 596,646 | 100.00 | 3,358,359,497 | 100.00 | 20,891 | 100.00 | 2,231,121,202 | 100.00 | ||||||||
Classification of holder Corporate Private Total BHP Billiton Limited BHP Billiton Plc Shareholders
Numbers % Shares
Numbers % Shareholders
Numbers % Shares
Numbers % 139,668 23.32 2,237,717,117 69.67 11,997 54.97 2,121,772,599 99.33 459,145 76.68 973,973,988 30.33 9,829 45.03 14,412,855 0.67 598,813 100.00 3,211,691,105 100.00 21,826 100.00 2,136,185,454 100.00
Policy
We have a progressive dividend policy that seeks to steadily increase or at least to maintain the dividend in US dollars at each half yearly payment provided that we generate sufficient profit and cash flow to do so.payment.
We declare our dividends and other distributions in US dollars as it is our main functional currency. BHP Billiton Limited pays its dividends in Australian dollars, UK pounds sterling, New Zealand dollars or US dollars, depending on the country of residence of the shareholder. BHP Billiton Plc pays its dividends in UK pounds sterling to shareholders registered on its principal register in the UKUnited Kingdom and in South African rand to shareholders registered on its branch register in South Africa. If shareholders on the UKUnited Kingdom register wish to receive dividends in US dollars they must complete an appropriate election form and return it to the BHP Billiton Share Registrar no later than close of business on the Dividend Record Date.
Payments
BHP Billiton Limited shareholders may have their cash dividends paid directly into a nominated bank, building society or credit union, depending on the shareholder’s country of residence as shown below.
Country where shareholder is resident | Financial institution | |
Australia | Bank, building society, credit union | |
United Kingdom | Bank, building society | |
New Zealand | Bank | |
United States | Bank |
Shareholders from the abovementioned locations who do not provide their direct credit details and shareholders with registered addresses outside Australia, UK,the United Kingdom, New Zealand and USthe United States will receive dividend payments by way of a cheque in Australian dollars.
BHP Billiton Plc shareholders may have their cash dividends paid directly into a bank or building society by completing a dividend mandate form which is available from the BHP Billiton Share Registrar in the UKUnited Kingdom or South Africa.
The following tables show the share prices for the period indicated for ordinary shares and ADSs for each of BHP Billiton Limited and BHP Billiton Plc. The share prices are the highest and lowest closing market quotations for ordinary shares reported on the Daily Official List of the Australian and London Stock Exchanges respectively, and the highest and lowest closing prices for ADSs quoted on the NYSE, adjusted to reflect stock dividends.
BHP Billiton Limited
Ordinary shares | American Depositary Shares (1) | |||||||||
BHP Billiton Limited | High A$ | Low A$ | High US$ | Low US$ | ||||||
FY2005 | 19.50 | 12.41 | 31.01 | 17.36 | ||||||
FY2006 | 32.00 | 18.09 | 49.21 | 27.35 | ||||||
FY2007 | 35.38 | 23.86 | 60.39 | 36.19 | ||||||
FY2008 | 49.55 | 31.00 | 95.00 | 52.27 | ||||||
FY2009 | First quarter | 44.40 | 31.00 | 82.86 | 50.50 | |||||
Second quarter | 32.75 | 21.10 | 51.35 | 24.62 | ||||||
Third quarter | 34.01 | 27.11 | 48.45 | 33.56 | ||||||
Fourth quarter | 38.27 | 31.48 | 61.86 | 44.38 | ||||||
FY2010 | First quarter | 39.59 | 32.14 | 68.89 | 49.54 | |||||
Second quarter | 43.12 | 36.20 | 77.90 | 62.63 | ||||||
Third quarter | 44.47 | 39.20 | 81.80 | 67.90 | ||||||
Fourth quarter | 44.63 | 36.28 | 82.86 | 58.44 |
BHP Billiton Limited Month of January 2010 Month of February 2010 Month of March 2010 Month of April 2010 Month of May 2010 Month of June 2010 Month of July 2010 Month of August 2010 BHP Billiton Limited FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 BHP Billiton Limited Month of January 2012 Month of February 2012 Month of March 2012 Month of April 2012 Month of May 2012 Month of June 2012 Month of July 2012 Month of August 2012 Ordinary shares American Depositary Shares (1) High
A$ Low
A$ High
US$ Low
US$ 44.47 39.40 81.80 69.37 42.16 39.20 75.09 67.90 44.41 40.98 81.11 75.08 44.63 40.50 82.86 72.79 39.53 36.28 71.44 59.10 39.91 36.54 69.61 58.44 40.46 36.98 72.40 62.42 41.55 37.05 75.77 65.42 Ordinary shares American Depositary Shares (1) High A$ Low A$ High US$ Low US$ 35.38 23.86 60.39 36.19 49.55 31.00 95.00 52.27 44.40 21.10 82.86 24.62 44.63 32.14 82.86 49.54 First quarter 41.55 36.98 76.97 62.42 Second quarter 46.47 39.46 92.92 76.38 Third quarter 47.36 42.97 96.02 84.88 Fourth quarter 49.55 41.36 102.68 88.38 First quarter 44.95 33.95 96.80 66.44 Second quarter 38.69 33.86 83.60 64.42 Third quarter 38.21 34.05 82.15 70.70 Fourth quarter 36.25 30.60 75.50 60.87 Ordinary shares American Depositary Shares (1) High A$ Low A$ High US$ Low US$ 37.67 34.80 80.42 72.45 38.21 35.20 82.15 76.07 35.69 34.05 77.26 70.70 35.55 33.59 74.30 68.99 36.25 31.46 75.50 61.53 32.64 30.60 66.98 60.87 32.47 30.18 66.99 61.84 33.41 31.30 69.91 64.98
(1) | Each ADS represents the right to receive two BHP Billiton Limited ordinary shares. |
The total market capitalisation of BHP Billiton Limited at 30 June 20102012 was A$126.4101.0 billion (US$101.4 billion equivalent), which represented approximately 9.177.72 per cent of the total market capitalisation of all companies listed on the ASX. The closing price for BHP Billiton Limited ordinary shares on the ASX on that date was A$37.65.31.45.
BHP Billiton Plc
Ordinary shares | American Depositary Shares (1) | |||||||||
BHP Billiton Plc | High UK pence | Low UK pence | High US$ | Low US$ | ||||||
FY2005 | 776.50 | 474.75 | 30.23 | 17.49 | ||||||
FY2006 | 1,211.50 | 722.00 | 45.50 | 25.90 | ||||||
FY2007 | 1,390.00 | 853.00 | 56.40 | 33.20 | ||||||
FY2008 | 2,196.00 | 1,183.00 | 85.62 | 47.83 | ||||||
FY2009 | First quarter | 1,841.00 | 1,232,00 | 74.18 | 42.44 | |||||
Second quarter | 1,298.00 | 752.50 | 44.00 | 21.16 | ||||||
Third quarter | 1,507.00 | 1,034.00 | 44.93 | 28.59 | ||||||
Fourth quarter | 1,557.00 | 1,333.00 | 51.71 | 39.01 | ||||||
FY2010 | First quarter | 1,766.00 | 1,287.50 | 58.69 | 41.88 | |||||
Second quarter | 2,012.50 | 1,627.00 | 64.66 | 51.93 | ||||||
Third quarter | 2,268.50 | 1,824.50 | 68.88 | 57.26 | ||||||
Fourth quarter | 2,334.50 | 1,735.00 | 70.95 | 49.45 |
Ordinary shares | American Depositary Shares (1) | |||||||
BHP Billiton Plc | High UK pence | Low UK pence | High US$ | Low US$ | ||||
Month of January 2010 | 2,115.50 | 1,842.50 | 68.73 | 58.58 | ||||
Month of February 2010 | 2,029.00 | 1,824.50 | 63.22 | 57.26 | ||||
Month of March 2010 | 2,268.50 | 2,072.00 | 68.88 | 63.20 | ||||
Month of April 2010 | 2,334.50 | 2,025.50 | 70.95 | 61.00 | ||||
Month of May 2010 | 2,025.50 | 1,763.50 | 59.38 | 50.32 | ||||
Month of June 2010 | 2,031.50 | 1,735.00 | 58.95 | 49.45 | ||||
Month of July 2010 | 1,991.50 | 1,684.50 | 61.63 | 51.61 | ||||
Month of August 2010 | 2,038.50 | 1,767.00 | 64.83 | 55.27 |
Ordinary shares | American Depositary Shares (1) | |||||||||||||||||
BHP Billiton Plc | High UK pence | Low UK pence | High US$ | Low US$ | ||||||||||||||
FY2007 | 1,390.00 | 853.00 | 56.40 | 33.20 | ||||||||||||||
FY2008 | 2,196.00 | 1,183.00 | 85.62 | 47.83 | ||||||||||||||
FY2009 | 1,841.00 | 752.50 | 74.18 | 21.16 | ||||||||||||||
FY2010 | 2,334.50 | 1,287.50 | 70.95 | 41.88 | ||||||||||||||
FY2011 | First quarter | 2,038.50 | 1,684.50 | 64.61 | 51.61 | |||||||||||||
Second quarter | 2,616.00 | 2,026.50 | 80.91 | 64.18 | ||||||||||||||
Third quarter | 2,561.00 | 2,213.50 | 82.38 | 70.53 | ||||||||||||||
Fourth quarter | 2,631.50 | 2,244.00 | 85.47 | 72.95 | ||||||||||||||
FY2012 | First quarter | 2,521.50 | 1,731.50 | 80.69 | 53.08 | |||||||||||||
Second quarter | 2,109.00 | 1,667.00 | 67.98 | 51.30 | ||||||||||||||
Third quarter | 2,206.50 | 1,877.50 | 69.96 | 59.99 | ||||||||||||||
Fourth quarter | 2,039.00 | 1,681.00 | 65.55 | 52.20 | ||||||||||||||
Ordinary shares | American Depositary Shares (1) | |||||||||||||||||
BHP Billiton Plc | High UK pence | Low UK pence | High US$ | Low US$ | ||||||||||||||
Month of January 2012 | 2,199.50 | 1,947.50 | 68.40 | 60.26 | ||||||||||||||
Month of February 2012 | 2,206.50 | 2,023.00 | 69.96 | 64.19 | ||||||||||||||
Month of March 2012 | 2,048.00 | 1,877.50 | 65.21 | 59.99 | ||||||||||||||
Month of April 2012 | 1,974.50 | 1,831.50 | 64.36 | 58.22 | ||||||||||||||
Month of May 2012 | 2,039.00 | 1,681.00 | 65.55 | 52.50 | ||||||||||||||
Month of June 2012 | 1,875.50 | 1,694.50 | 58.61 | 52.20 | ||||||||||||||
Month of July 2012 | 1,880.00 | 1,751.00 | 59.23 | 54.76 | ||||||||||||||
Month of August 2012 | 1,991.50 | 1,836.00 | 62.59 | 57.61 |
(1) | Each ADS represents the right to receive two BHP Billiton Plc ordinary shares. |
The total market capitalisation of BHP Billiton Plc at 30 June 20102012 was £38.7£38.1 billion (US$59.2 billion equivalent), which represented approximately 2.422.10 per cent of the total market capitalisation of all companies listed on the LSE. The closing price for BHP Billiton Plc ordinary shares on the LSE on that date was £17.545.£18.06.
11.5 American Depositary Receipts fees and charges
We have American Depositary Receipts (ADR) programs for BHP Billiton Limited and BHP Billiton Plc.
Depositary fees
Citibank serves as the depositary bank for both of our ADR programs. ADR holders agree to the terms in the deposit agreement filed with the SEC for depositing ADSs or surrendering shares for cancellation and for certain services as provided by Citibank. Holders are required to pay all fees for general depositary services provided by Citibank in each of our ADR programs, as set forth in the tables below.
Standard depositary fees:
Depositary service | Fee payable by the ADR holders | |
Issuance of ADSs upon deposit of Shares | Up to US$5.00 per 100 ADSs (or fraction thereof) issued | |
Delivery of Deposited Securities against surrender of ADSs | Up to US$5.00 per 100 ADSs (or fraction thereof) surrendered | |
Distribution of Cash Distributions | No fee |
Corporate actions depositary fees:
Depositary service | Fee payable by the ADR holders | |
Cash Distributions (i.e. sale of rights, other entitlements, return of capital) | Up to US$2.00 per 100 ADSs (or fraction thereof) held | |
Distribution of ADSs pursuant to exercise of rights to purchase additional ADSs. Excludes stock dividends and stock splits | Up to US$5.00 per 100 ADSs (or fraction thereof) held | |
Distribution of securities other than ADSs or rights to purchase additional ADSs (i.e. spin-off shares) | Up to US$5.00 per 100 ADSs (or fraction thereof) held | |
Distribution of ADSs pursuant to an ADR ratio change in which shares are not distributed | No fee |
Fees payable by the Depositary to the Issuer
Citibank has provided BHP Billiton net reimbursement of US$1.6 million in FY2012 for ADR program-related expenses for both of BHP Billiton’s ADR programs (FY2011 US$2.0 million). ADR program-related expenses include legal and accounting fees, listing fees, expenses related to investor relations in the United States, fees payable to service providers for the distribution of material to ADR holders, expenses of Citibank as administrator of the ADS Direct Plan and expenses to remain in compliance with applicable laws.
Citibank has further agreed to waive other ADR program-related expenses for FY2012 amounting to less than US$0.02 million which are associated with the administration of the ADR programs (FY2011 less than US$0.02 million).
Our ADR programs trade on the NYSE under the stock tickers BHP and BBL for the BHP Billiton Limited and BHP Billiton Plc programs respectively. As of 30 June 2012, there were 102,897,776 shares outstanding in the BHP Billiton Limited ADR program and 27,817,326 shares outstanding in the BHP Billiton Plc ADR program. Both of the ADR programs have a 2:1 ordinary shares to ADR ratio.
The taxation discussion below describes the material Australian, income tax, UK tax and US federal income tax consequences to a US holder (as hereinafter defined) of owning BHP Billiton Limited ordinary shares or ADSs or BHP Billiton Plc ordinary shares or ADSs. Accordingly,The discussion below also outlines the potential South African tax issues for US holders of BHP Billiton Plc shares that are listed on the Johannesburg Stock Exchange (JSE).
The following discussion is not relevant to non-US holders of BHP Billiton Limited ordinary shares or ADSs or BHP Billiton Plc ordinary shares or ADSs.
The discussion By its nature the commentary below is based on the Australian, UKof a general nature and US tax laws currently in effect, as well as on the double taxation convention between Australia and the US (the Australian Treaty), the double taxation convention between the UK and the US (the UK Treaty) and the estate tax convention between the UK and the US (the UK–US Inheritance and Gift Tax Treaty). These laws are subject to change, possibly on a retroactive basis. For purposes of this discussion, a US holder is a beneficial owner of ordinary shares or ADSs who is, for US federal income tax purposes: (i) a citizen or resident alien of the US, (ii) a corporation (or other entity treated as a corporation for US federal income tax purposes) that is created or organised under the laws of the US or any political subdivision thereof, (iii) an estate the income of which is subject to US federal income taxation regardless of its source, or (iv) a trust (A) if a court within the US is able to exercise primary supervision over its administration and one or more US persons have the authority to control all of its substantial decisions or (B) that has made a valid election to be treated as a US person for tax purposes.
Wewe recommend that holders of ordinary shares or ADSs consult their own tax advisers regarding the Australian, UK, South African and US federal, state and local tax and other tax consequences of owning and disposing of ordinary shares and ADSs in their particular circumstances.
For purposes of this commentary, a US holder is a beneficial owner of ordinary shares or ADSs who is, for US federal income tax purposes:
(i) | a citizen or resident alien of the US; |
(ii) | a corporation (or other entity treated as a corporation for US federal income tax purposes) that is created or organised under the laws of the US or any political subdivision thereof; |
(iii) | an estate the income of which is subject to US federal income taxation regardless of its source; or |
(iv) | a trust: |
(a) | if a court within the US is able to exercise primary supervision over its administration and one or more US persons have the authority to control all of its substantial decisions; or |
(b) | that has made a valid election to be treated as a US person for tax purposes. |
This discussion of material tax consequences for US holders is based on the Australian, UK, US and South African laws currently in effect, the published practice of tax authorities in those jurisdictions and the double taxation treaties and conventions currently in existence. These laws are subject to change, possibly on a retroactive basis.
ShareholdingsUS holders in BHP Billiton Limited
Australia(a) Australian taxation
In this section, references to ‘resident’ and ‘non-resident’ refer to residence status for Australian income tax purposes.
Dividends
Dividends (including other distributions treated as dividends for Australian tax purpose)purposes) paid by BHP Billiton Limited to aan Australian resident US holder, who or which is a resident of Australia, or to a non-resident of Australia whose holding is effectively connected with with:
a permanent establishment in Australia; or
a fixed base in Australia from which they perform personal services;
may be subject to income tax.
Under the Tax Convention between Australia and the US as to the Avoidance of Double Taxation (the Australian Treaty,Tax Treaty), dividends paid by BHP Billiton Limited to a non-resident US holder who or which is eligible for treaty benefits therein and whose holding holding:
is not effectively connected with a permanent establishment in AustraliaAustralia; or
in the case of a shareholdernon-resident US holder who performs independent personal services from a ‘fixed base’ situated therein, is not connected with that ‘fixed base’, ;
may be subject to Australian withholding tax at a rate not exceeding 15 per cent of such gross dividend. For such a non-resident:
where fully franked dividends are paid to non-residents they are not subject to withholding tax. The payment of Australian income tax by an Australian company, such as BHP Billiton Limited generates a franking credit‘franking credit’ for the company. Broadly, an amount of tax paid by the company flows through to shareholders (as a ‘franking credit’)franking credit) when the company pays a dividend which is franked by the company. Fully franked
dividends paid to non-resident shareholders are not subject to withholding tax.
Dividends paid to non-residents of Australia are also exempt from withholding tax to the extent to which such dividends are declared by BHP Billiton Limited to be conduit foreign income (CFI). CFI is made up of certain amounts that are earned by BHP Billiton Limited that are not subject to tax in Australia, such as dividends remitted to Australia by foreign subsidiaries.
Any
any part of a dividend paid to a US holder that is not ‘franked’ and is not CFI will generally be subject to Australian withholding tax unless a specific exemption applies.
Sale of ordinary shares and ADSs
A US holder who or which is a resident of Australia (other than certain temporary residents) may be liable for income tax on any profit on disposal of ordinary shares or ADSs, or Australian capital gains tax on theany gain on disposal of ordinary shares or ADSs acquired after 19 September 1985.
No incomeIncome or other tax is payable on any profit on disposal of ordinary shares or ADSs held by anon-resident US holder who or which is a non-resident of Australia except ifwhere the profit is of an income nature and sourced in Australia, or the sale is subject to Australian capital gains tax. Undertax because the ordinary shares or ADSs are ‘taxable Australian property’.
If the profit on sale is of an income nature, and the non-resident US holder is subject to the Australian Tax Treaty, if the profit is sourced innon-resident US holder should note that under the Australian Tax Treaty, Australia it will not be taxable in Australia if it represents reserves the right to tax certain income, including:
business profits of an enterprise carried on by a US holder entitledattributable to treaty benefits and the enterprise does not carry on business in Australia through a permanent establishment situated in Australia.Australia through which the enterprise carries on business in Australia;
income from the alienation of property that forms part of the business property of a permanent establishment an enterprise has in Australia, or pertains to a fixed base available to a non-resident US holder in Australia for the purpose of performing independent personal services;
income derived from the disposition of shares in a company, the assets of which consist wholly or principally of real property (which includes rights to exploit or to explore for natural resources) situated in Australia, whether such assets are held directly, or indirectly through one or more interposed entities.
The Australian Government has announced proposals to exempt certain categories of non-resident investors from tax on profits of an income nature on disposals of portfolio interests in Australian public companies, including where ordinary shares or ADSs are held through a non-resident managed fund, with effect from 1 July 2011 (or earlier, in some cases). However, these reforms are not yet law.
If the profit on sale is not of an income nature, there will be no liability to tax unless capital gains tax applies. Australian capital gains tax will not generally apply to a disposal of the ordinary shares or ADSs by a non-resident US holder who or which is a non-resident of Australia unless the shares or ADSs have been acquired after 19 September 1985 and:
the ordinary shares or ADSs have been used by the US holder in carrying on a trade or business through a permanent establishment in Australia; or
the US holder (together with associates) directly or indirectly owns or owned 10 per cent or more of the issued share capital of BHP Billiton Limited at the time of the disposal or throughout a 12-month period during the two years prior to the time of disposal and, the underlying value of BHP Billiton Limited at the time of the disposal, is principally derived fromthe sum of the market values of BHP Billiton Limited’s assets that are taxable Australian real property;property (held directly or through interposed entities) exceeds the sum of the market values of BHP Billiton Limited’s assets (held directly or through interposed entities) that are not taxable Australian real property at that time (real property, for these purposes, includes mining, quarrying or prospecting rights in respect of minerals, petroleum or quarry materials situated in Australia); or
the US holder is an individual who elected on becoming a non-resident of Australia to continue to have the ordinary shares or ADSs subject to Australian capital gains tax.
Stamp duty, gift, estate and inheritance tax
Australia does not impose any stamp duty, gift, estate or inheritance taxes in relation to gifts of shares or ADSs or upon the death of a shareholder.
(b) US taxation
This section describes the material US federal income tax consequences to a US holder of owning ordinary shares or ADSs. It applies only to ordinary shares or ADSs that are held as capital assets for tax purposes. This section does not apply to a holder of ordinary shares or ADSs whothat is a member of a special class of holders subject to special rules, including a dealer in securities, a trader in securities that elects to use a mark-to-market method of accounting for its securities holdings, a tax-exempt organisation, a life insurance company, a person liable for alternative minimum tax, a person who actually or constructively owns 10 per cent or more of the voting stock of BHP Billiton Limited, a person whothat holds ordinary shares or ADSs as part of a straddle or a hedging or conversion transaction, a person that purchases or sells ordinary shares or ADSs as part of a wash sale for tax purposes, or a person whose functional currency is not the US dollar.
If a partnership holds the ordinary shares or ADSs, the US federal income tax treatment of a partner generally will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the ordinary shares or ADSs should consult its tax adviser with regard to the US federal income tax treatment of an investment in the ordinary shares or ADSs.
This section is part based in part uponon the representations of the Depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms.
In general, for US federal income tax purposes, a holder of ADSs will be treated as the owner of the ordinary shares represented by those ADSs. Exchanges of ordinary shares for ADSs, and ADSs for ordinary shares, generally will generally not be subject to US federal income tax.
Dividends
Under US federal income tax laws and subject to the passive foreign investment company or PFIC,(PFIC) rules discussed below, a US holder must include in its gross income the gross amount of any dividend paid by BHP Billiton Limited out of its current or accumulated earnings and profits (as determined for US federal income tax purposes). The holder must include plus any Australian tax withheld from the dividend payment in this gross amount even though the holder does not in fact receive it. The dividend is taxable to the holder when the holder, in the case of ordinary shares, or the Depositary, in the case of ADSs, actually or constructively receives the dividend.
Dividends paid to a non-corporate US holder on shares or ADSs in taxable years beginning before 1 January 20112013 will be taxable at the rate applicable to long-term capital gains (generally at a rate of 15 per cent) provided
that the US holder holds the shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and does not enter into certain risk reduction transactions with respect to the shares or ADSs during the abovementioned holding period. Absent new legislation extending the current rates, dividends paid in taxable years beginning on or after 1 January, 2011 will be subject to ordinary income rates. In addition, a non-corporate US holder that elects to treat the dividend income as ‘investment income’ pursuant to Section 163(d)(4) of the US Internal Revenue Code will not be eligible for the reduced rate of taxation. In the case of a corporate US holder, dividends on shares and ADSs are taxed as ordinary income and will not be eligible for the dividends received deduction generally allowed to US corporations in respect of dividends received from other US corporations.
Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a non-taxable return of capital to the extent of the holder’s tax basis, determined in US dollars, in the ordinary shares or ADSs and thereafter as a capital gain.
The amount of any cash distribution paid in any foreign currency will be equal to the US dollar value of such currency, calculated by reference to the spot rate in effect on the date such distribution is received by the US holder or, in the case of ADSs, by the Depositary, regardless of whether and when the foreign currency is in fact converted into US dollars. If the foreign currency is converted into US dollars on the date received, the US holder generally should not recognise foreign currency gain or loss on such conversion. If the foreign currency is not converted into US dollars on the date received, the US holder will have a basis in the foreign currency equal to its US dollar value on the date received, and generally will recognise foreign currency gain or loss on a subsequent conversion or other disposal of such currency. Such foreign currency gain or loss generally will be treated as US source ordinary income or loss.
Subject to certain limitations, Australian tax withheld in accordance with the Australian Treaty and paid over to Australia will be creditable against youran individual’s US federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are taxed at the capital gains rate. To the extent a refund of the tax withheld is available to a US holder under Australian law or under the Australian Treaty, the amount of tax withheld that is refundable will not be eligible for credit against the holder’s US federal income tax liability. A US holder that does not elect to claim a US foreign tax credit may instead claim a deduction for Australian income tax withheld, but only for a taxable year in which the US holder elects to do so with respect to all foreign income taxes paid or accrued in such taxable year.
Dividends will be income from sources outside the US, and generally will be ‘passive category’ income or, in the case offor certain taxpayers, ‘general category’ income, which are treated separately from each other for the purpose of computing the foreign tax credit allowable to a US holder. In general, youra taxpayer’s ability to use foreign tax credits may be limited and is dependent on yourthe particular circumstances. US holders should consult their own tax advisers with respect to these matters.
Sale of ordinary shares and ADSs
Subject to the PFIC rules discussed below, a US holder who sells or otherwise disposes of ordinary shares or ADSs will recognise a capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realised and the holder’s tax basis, determined in US dollars, in those ordinary shares or ADSs. The gain or loss will generally be income or loss from sources within the US for foreign tax credit limitation purposes. The capital gain of a non-corporate US holder is generally taxed at preferential rates where the holder has a holding period greater than 12 months in the shares or ADSs sold. There are limitations on the deductibility of capital losses.
The US dollar value of any foreign currency received upon a sale or other disposition of ordinary shares or ADSs will be calculated by reference to the spot rate in effect on the date of sale or other disposal (or, in the case of a cash basis or electing accrual basis taxpayer, on the settlement date). A US holder will have a tax basis in the foreign currency received equal to that US dollar amount, and generally will recognise foreign currency gain or loss on a subsequent conversion or other disposal of the foreign currency. This foreign currency gain or loss generally will be treated as US source ordinary income or loss.
Passive Foreign Investment Company (PFIC) Rules
We do not believe that the BHP Billiton Limited ordinary shares or ADSs will be treated as stock of a PFIC for US federal income tax purposes, but this conclusion is a factual determination that is made annually at the end of the year and thus may be subject to change. If BHP Billiton Limited were treated as a PFIC, any gain realised on the sale or other disposition of ordinary shares or ADSs would in general not be treated as a capital gain. Instead, a US holder would be treated as if it had realised such gain and certain ‘excess distributions’ ratably over its holding period for the ordinary shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, dividends received with respect to ordinary shares or ADSs would not be eligible for the special tax rates applicable to qualified dividend income if BHP Billiton Limited were a PFIC either in the taxable year of the distribution or the preceding taxable year, but instead would be taxable at rates applicable to ordinary income. Assuming the shares or ADSs are ‘marketable stock,’stock’, a US holder may mitigate the adverse tax consequences described above by electing to be taxed annually on a mark-to-market basis with respect to such shares or ADSs.
ShareholdingsUS Holders in BHP Billiton Plc
(a) UK taxation
UK taxation
Dividends
Under UK law, no UK tax is required to be withheld at source from dividends paid on ordinary shares or ADSs.
Sale of ordinary shares and ADSs
US holders will not be liable for UK tax on capital gains realised on disposal of ordinary shares or ADSs unless:
they are resident or ordinarily resident in the UK; or
they carry on a trade, profession or vocation in the UK through a branch or agency for the year in which the disposal occurs and the shares or ADSs have been used, held or acquired for the purposes of such trade (or profession or vocation), branch or agency. In the case of a trade, the term ‘branch’ includes a permanent establishment.
An individual who ceases to be a resident in the UK for tax purposes while owning shares or ADSs and then disposes of those shares or ADSs while not a UK resident may become subject to UK tax on capital gains if he/she subsequently becomes treated as a UK resident again before five complete UK tax years of non-UK residence have elapsed from the date he/she left the UK. In this situation US holders will generally be entitled to claim US tax paid on such a disposition as a credit against any corresponding UK tax payable.
UK inheritance tax
Under the current the UK–UK – US Inheritance and Gift Tax Treaty, between the UK and the US, ordinary shares or ADSs held by a US holder who is domiciled for the purposes of the UK–UK – US Inheritance and Gift Tax Treaty in the US, and is not for the purposes of the UK–UK – US Inheritance and Gift Tax Treaty a national of the UK, will generally not be subject to UK inheritance tax on the individual’s death or on a chargeable gift of the ordinary shares or ADSs during the individual’s lifetime, provided that any applicable US federal gift or estate tax liability is paid, unless the ordinary shares or ADSs are part of the business property of a permanent establishment of the individual in the UK or, in the case of a shareholder who performs independent personal services, pertain to a fixed base situated in the UK. Where the ordinary shares or ADSs have been placed in trust by a settlor who, at the time of settlement, was a US resident shareholder, the ordinary shares or ADSs will generally not be subject to UK inheritance tax unless the settlor, at the time of settlement, was not domiciled in the US and was a UK national. In the exceptional case where the ordinary shares or ADSs are subject to both UK inheritance tax and US federal
gift or estate tax, the UK–UK – US Inheritance and Gift Tax Treaty generally provides for double taxation to be relieved by means of credit relief.
UK stamp duty and stamp duty reserve tax
Under applicable legislation, UK stamp duty or stamp duty reserve tax (SDRT) will,is, subject to certain exemptions, be payable on any issue or transfer of shares to the Depositary or their nominee where those shares are for inclusion in the ADSADR program at a rate of 1.5 per cent of their price (if issued), the amount of any consideration provided (if transferred on sale) or their value (if transferred for no consideration). With effectHowever, from 1 October 2009, this 1.5%1.5 per cent charge will nothas generally ceased to apply to issues of shares into EU depositary receipt systems and into EU clearance systems. However,Further, the First-tier Tribunal has recently held that the 1.5 per cent SDRT charge should continueon a transfer of shares to applyan issuer of American Depositary Receipts (ADRs) (as an integral part of a fresh capital raising) was incompatible with European Union law. Her Majesty’s Revenue and Customs has confirmed that it will no longer seek to impose the 1.5 per cent SDRT charge on the issue of shares to a clearance service or a depositary receipt issuer locatedor a clearance service outside the EU. European Union. The law in this area may still be susceptible to change. We recommend advice should be sought in relation to paying the 1.5 per cent SDRT or stamp duty charge in any circumstances.
No SDRT would be payable on the transfer of an ADS. No UK stamp duty should be payable on the transfer of an ADS provided that the instrument of transfer is executed and remains at all times outside the UK. Transfers of ordinary shares to persons other than the Depositary or their nominee will give rise to stamp duty or SDRT at the time of transfer. The relevant rate is currently 0.5 per cent of the amount payable for the shares. The purchaser normally pays the stamp duty or SDRT.
Special rules apply to transactions involving intermediates and stock lending.
(b) US taxation
This section describes the material US federal income tax consequences to a US holder of owning ordinary shares or ADSs. It applies only to ordinary shares or ADSs that are held as capital assets for tax purposes. This section does not apply to a holder of ordinary shares or ADSs whothat is a member of a special class of holders subject to special rules, including a dealer in securities, a trader in securities who elects to use a mark-to-market method of accounting for theirits securities holdings, a tax-exempt organisation, a life insurance company, a person liable for alternative minimum tax, a person who actually or constructively owns 10 per cent or more of the voting stock of BHP Billiton Plc, a person whothat holds ordinary shares or ADSs as part of a straddle or a hedging or conversion transaction, a person that purchases or sells ordinary shares or ADSs as part of a wash sale for tax purposes, or a person whose functional currency is not the US dollar.
If a partnership holds the ordinary shares or ADSs, the US federal income tax treatment of a partner generally will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the ordinary shares or ADSs should consult its tax adviser with regard to the US federal income tax treatment of an investment in the ordinary shares or ADSs.
This section is based in part uponbased on the representations of the Depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with theirits terms.
In general, for US federal income tax purposes, a holder of ADSs will be treated as the owner of the ordinary shares represented by those ADSs. Exchanges of ordinary shares for ADSs, and ADSs for ordinary shares generally will generally not be subject to US federal income tax.
Dividends
Under US federal income tax laws and subject to the PFIC rules discussed below, a US holder must include in its gross income the gross amount of any dividend paid by BHP Billiton Plc out of its current or accumulated earnings and profits (as determined for US federal income tax purposes).The. The dividend is taxable to the holder when the holder, in the case of ordinary shares, or the Depositary, in the case of ADSs, actually or constructively receives the dividend.
Dividends paid to a non-corporate US holder on shares or ADSs in taxable years beginning before 1 January 20112013 will be taxable at the rate applicable to long-term capital gains (generally at a rate of 15 per cent) provided that the US holder holds the shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date, and does not enter into certain risk reduction transactions with respect to the shares or ADSs during the abovementioned holding period. Absent new legislation extending the current rates, dividends paid in taxable years beginning on or after January 1, 2011 will be subject to ordinary income rates. In addition, a non-corporate US holder that elects to treat the dividend income as ‘investment income’ pursuant to Section 163(d)(4) of the Internal Revenue Code will not be eligible for the reduced rate of taxation. In the case of a corporate US holder, dividends on shares and ADSs are taxed as ordinary income and will not be eligible for the dividends received deduction generally allowed to US corporations in respect of dividends received from other US corporations.
Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a non-taxable return of capital to the extent of the holder’s tax basis, determined in US dollars, in the ordinary shares or ADSs and thereafter as a capital gain.
The amount of any cash distribution paid in any foreign currency will be equal to the US dollar value of such currency, calculated by reference to the spot rate in effect on the date such distribution is received by the US holder or, in the case of ADSs, by the Depositary, regardless of whether and when the foreign currency is in fact converted into US dollars. If the foreign currency is converted into US dollars on the date received, the US holder generally should not recognise foreign currency gain or loss on such conversion. If the foreign currency is not converted into US dollars on the date received, the US holder will have a basis in the foreign currency equal to its US dollar value on the date received, and generally will recognise foreign currency gain or loss on a subsequent conversion or other disposal of such currency. Such foreign currency gain or loss generally will be treated as US source ordinary income or loss.
Dividends will be income from sources outside the US, and generally will be ‘passive category’ income or, for certain taxpayers, ‘general category’ income, which are treated separately from each other for the purpose of computing the foreign tax credit allowable to a US holder. In general, youra taxpayer’s ability to use foreign tax credits may be limited and is dependent on yourthe particular circumstances. US holders should consult their own tax advisorsadvisers with respect to these matters.
Sale of ordinary shares and ADSs
Subject to the PFIC rules discussed below, a US holder who sells or otherwise disposes of ordinary shares or ADSs will recognise a capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realised and the holder’s tax basis, determined in US dollars, in those ordinary shares or ADSs. The gain or loss will generally be income or loss from sources within the US for foreign tax credit limitation purposes. The capital gain of a non-corporate US holder is generally taxed at preferential rates where the holder has a holding period greater than 12 months in the shares or ADSs sold. There are limitations on the deductibility of capital losses.
The US dollar value of any foreign currency received upon a sale or other disposition of ordinary shares or ADSs will be calculated by reference to the spot rate in effect on the date of sale or other disposal (or, in the case of a cash basis or electing accrual basis taxpayer, on the settlement date). A US holder will have a tax basis in the foreign currency received equal to that US dollar amount, and generally will recognise foreign currency gain or
loss on a subsequent conversion or other disposal of the foreign currency. This foreign currency gain or loss generally will be treated as US source ordinary income or loss.
Passive Foreign Investment Company (PFIC) Rules
We do not believe that the BHP Billiton Plc ordinary shares or ADSs will be treated as stock of a PFIC for US federal income tax purposes, but this conclusion is a factual determination that is made annually at the end of the year and thus may be subject to change. If BHP Billiton Plc were treated as a PFIC, any gain realised on the sale or other disposition of ordinary shares or ADSs would in general not be treated as a capital gain. Instead, a US holder would be treated as if it had realised such gain and certain ‘excess distributions’ ratably over its holding period for the ordinary shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, dividends received with respect to ordinary shares or ADSs would not be eligible for the special tax rates applicable to qualified dividend income if BHP Billiton Plc were a PFIC either in the taxable year of the distribution or the preceding taxable year, but instead would be taxable at rates applicable to ordinary income. Assuming the shares or ADSs are ‘marketable stock,’stock’, a US holder may mitigate the adverse tax consequences described above by electing to be taxed annually on a mark-to-market basis with respect to such shares or ADSs.
(c) South African Taxation
Dividends
As from 1 April 2012, it is possible that US holders of BHP Billiton Plc shares or ADS that remain South African residents may be subject to South African withholding tax on any dividends received from shares listed on the JSE.
No South African Dividends Tax is required to be withheld from dividends provided the dividends are paid to non-South African tax resident shareholders or South African tax resident corporate shareholders (including South African pension funds). These types of shareholders will generally be required to provide declarations to the regulated intermediaries making dividend payments to them to ensure no Dividend Tax is withheld.
However, Dividend Tax is required to be withheld on dividends paid on ordinary shares and ADSs of BHP Billiton Plc listed on the JSE, where such dividends are paid to South African tax resident shareholders who are natural persons (individuals) or trusts, other than closure rehabilitation trusts. Except for certain exclusions, generally speaking such dividends paid to South African tax resident natural persons or trusts are not taxable under the South African law as the withholding tax is considered a final and non-creditable levy.
Sale of ordinary shares and ADSs
US holders will not be liable for South African tax on capital gains realised on the disposal of ordinary shares or ADSs unless:
such US Holders are tax resident in South Africa;
the shares or ADSs are held in a company, where 80 per cent or more of the market value of those shares or ADSs is attributable (at the time of disposal of those shares or ADSs) directly or indirectly to immovable property situated in South Africa, held otherwise than as trading stock; or
the US holder’s interest (the shares or ADSs in BHP Billiton Plc) is attributable to a permanent establishment which the US holder has in South Africa.
A US holder who holds ordinary shares or ADSs connected to a permanent establishment in South Africa will recognise a capital gain or loss for South African income tax purposes equal to the difference between the Rand value of the amount realised and the holder’s tax basis, determined in Rand, in those ordinary shares or ADSs.
The holder’s tax basis will generally be equal to the cost that was incurred to acquire the shares, if such shares were acquired after 1 October 2001. The capital gain of a non-resident’s permanent establishment in South Africa will be taxed at an effective rate of 18.6 per cent.
Securities Transfer Tax
South African Securities Transfer Tax is levied at 0.25 per cent in respect of the transfer of ordinary shares or ADSs. The tax is levied on the amount of consideration at which the ordinary share or ADS is transferred or, where no value is declared, the closing price of the ordinary shares or ADSs. The tax is borne by the person to whom that ordinary share or ADS is transferred.
11.7 Ancillary information for our shareholders
Information for BHP Billiton Limited and BHP Billiton Plc shareholders is provided in the BHP Billiton Group Annual Report 2012 and the Summary Review 2012.
The Annual Report provides the detailed financial data and information on the BHP Billiton Group’s performance required to comply with the reporting regimes in Australia, the United Kingdom and the United States. There are no specific disclosure requirements for the Summary Review, which is published as a communication for shareholders.
Shareholders of BHP Billiton Limited will receive a copy of the Annual Report or the Summary Review if they have requested a copy. Shareholders of BHP Billiton Plc will receive the Annual Report if they have requested a copy. ADR holders may view all documents online atwww.bhpbilliton.com or opt to receive a hard copy by application to Citibank Shareholder Services, details as listed on the inside back cover of the Annual Report.
Change of shareholder details and enquiries
Shareholders wishing to contact BHP Billiton on any matter relating to their shares or ADR holdings are invited to telephone the appropriate office of the BHP Billiton Share Registrar or Transfer Office listed on the inside back cover of the Annual Report.
Any change in shareholding details should be notified by the shareholder to the relevant Registrar in a timely manner.
Shareholders can also access their current shareholding details and change many of those details online atwww.bhpbilliton.com. The website requires shareholders to quote their Shareholder Reference Number (SRN) or Holder Identification Number (HIN) in order to access this information.
Alternative access to the Annual Report and Summary Review
We offer an alternative for all shareholders who wish to be advised of the availability of the Annual Report and Summary Review through our website via an email notification. By providing an email address through our website, shareholders will be notified by email when the Annual Report and Summary Review have been released. Shareholders will also receive notification of other major BHP Billiton announcements by email. Shareholders requiring further information or to make use of this service, should visit our websitewww.bhpbilliton.com.
ADR holders wishing to receive a hard copy of the Annual Report 2012 can do so by accessingcitibank.ar.wilink.com or by calling Citibank Shareholder Services during business hours. ADR holders may also contact the adviser that administers their investments. Holders of BHP Billiton Plc shares dematerialised into STRATE should liaise directly with their Central Securities Depository Participant (CSDP) or broker.
Key dates for shareholders
The following table sets out future dates in the next financial and calendar year of interest to our shareholders. If there are any changes to these dates, all relevant stock exchanges (see section 11.1) will be notified.
Date | Event | |
28 September 2012 | Final Dividend Payment Date | |
25 October 2012 | BHP Billiton Plc Annual General Meeting in London Venue: The Queen Elizabeth II Conference Centre Broad Sanctuary Westminster London SW1P 3EEUK Time: 11.00am (local time) Details of the business of the meeting are contained in the separate Notice of Meeting | |
29 November 2012 | BHP Billiton Limited Annual General Meeting in Sydney Venue: Sydney Convention Centre Darling Harbour Sydney Australia Time: 10.30am (local time) Details of the business of the meeting are contained in the separate Notice of Meeting | |
20 February 2013 | Interim Results Announced | |
8 March 2013 | Interim Dividend Record Date | |
28 March 2013 | Interim Dividend Payment Date | |
21 August 2013 | Annual Results Announced |
BHP Billiton Group Registered Offices
BHP Billiton Limited
Australia
BHP Billiton Centre
180 Lonsdale Street
Melbourne VIC 3000
Telephone 1300 554 757 (within Australia)
+61 3 9609 3333 (outside Australia)
Facsimile +61 3 9609 3015
BHP Billiton Plc
United Kingdom
Neathouse Place
London SW1V 1BH
Telephone +44 20 7802 4000
Facsimile +44 20 7802 4111
Group Company Secretary
Jane McAloon
BHP Billiton Corporate Centres
South Africa
6 Hollard Street
Marshalltown
Johannesburg 2107
Telephone +27 11 376 9111
Facsimile +27 11 838 4716
Chile
Avenida Americo Vespucio Sur # 100
Piso 7
Las Condes 756999
Santiago
Telephone +56 2 330 5000
Facsimile +56 2 207 6509
United States
1360 Post Oak Boulevard, Suite 150
Houston, TX 77056-3020
Telephone +1 713 961 8500
Facsimile +1 713 961 8400
Marketing Offices
Singapore
10 Marina Boulevard #50-01
Marina Bay Financial Centre, Tower 2
Singapore 018983
Telephone +65 6421 6000
Facsimile +65 6421 7000
Belgium
BHP Billiton Diamonds (Belgium) N.V.
Hoveniersstraat 30
2018 Antwerp
Telephone +32 3 201 1090
Facsimile +32 3 213 0846
Share Registrars and Transfer Offices
Australia
BHP Billiton Limited Registrar
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
Postal Address – GPO Box 2975
Melbourne VIC 3001
Telephone 1300 656 780 (within Australia)
+61 3 9415 4020 (outside Australia)
Facsimile +61 3 9473 2460
Email enquiries:
www.investorcentre.com/bhp
United Kingdom
BHP Billiton Plc Registrar
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
Telephone +44 844 472 7001
Facsimile +44 870 703 6101
Email enquiries:
www.investorcentre.co.uk/contactus
South Africa
BHP Billiton Plc Branch Register
and Transfer Secretary
Computershare Investor Services
(Pty) Limited
70 Marshall Street
Johannesburg 2001
Postal Address – PO Box 61051
Marshalltown 2107
Telephone +27 11 373 0033
Facsimile +27 11 688 5218
Email enquiries:
web.queries@computershare.co.za
Holders of shares dematerialised
into STRATE should contact their
CSDP or stockbroker.
New Zealand
Computershare Investor Services Limited
Level 2/159 Hurstmere Road
Takapuna North Shore City
Postal Address – Private Bag 92119
Auckland 1142
Telephone +64 9 488 8777
Facsimile +64 9 488 8787
United States
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
Postal Address – PO Box 43078
Providence, RI 02940-3078
Telephone +1 888 404 6340
(toll-free within US)
Facsimile +1 312 601 4331
ADR Depositary, Transfer Agent and Registrar
Citibank Shareholder Services
PO Box 43077
Providence, RI 02940-3077
Telephone +1 781 575 4555 (outside of US) +1 877 248 4237 (+1-877-CITIADR)
(toll-free within US)
Facsimile +1 201 324 3284
Email enquiries:
citibank@shareholders-online.com
Website: www.citi.com/dr
BHP Billiton is a Dual Listed Company comprising BHP Billiton Limited and BHP Billiton Plc. The two entities continue to exist as separate companies but operate as a combined Group known as BHP Billiton.
The headquarters of BHP Billiton Limited and the global headquarters of the combined BHP Billiton Group are located in Melbourne, Australia. BHP Billiton Plc is located in London, UK. Both companies have identical Boards of Directors and are run by a unified management team. Throughout this Report, the Boards are referred to collectively as the Board. Shareholders in each company have equivalent economic and voting rights in the BHP Billiton Group as a whole.
Throughout this Annual Report, the terms BHP Billiton, the Company and the Group refer to the combined group, including both BHP Billiton Limited and subsidiary companies and BHP Billiton Plc and subsidiary companies.
Exhibits marked “*” have been filed as exhibits to this annual report on Form 20-F. Remaining exhibits have been incorporated by reference as indicated.
Exhibit 1 Constitution
1.1 | Constitution of BHP Billiton |
1.2 | Memorandum and Articles of Association of BHP Billiton Plc.(1) |
Exhibit 4 Material Contracts
4.1 | DLC Structure Sharing Agreement, dated 29 June 2001, between BHP Limited and Billiton Plc.(2) |
4.2 | SVC Special Voting Shares Deed, dated 29 June 2001, among BHP Limited, BHP SVC Pty Limited, Billiton Plc, Billiton SVC Limited and The Law Debenture Trust Corporation p.l.c.(2) |
4.3 | SVC Special Voting Shares Amendment Deed, dated 13 August 2001, among BHP Limited, BHP SVC Pty Limited, Billiton Plc, Billiton SVC Limited and The Law Debenture Trust Corporation p.l.c.(2) |
4.4 | Deed Poll Guarantee, dated 29 June 2001, of BHP |
4.5 | Deed Poll Guarantee, dated 29 June 2001, of Billiton |
4.6 | Form of Service Agreement for Specified |
4.7 | BHP Billiton Ltd Group Incentive Scheme Rules 2004, dated August |
4.8 | BHP Billiton Ltd Long Term Incentive Plan Rules, dated |
4.9 | BHP Billiton Plc Group Incentive Scheme Rules 2004, dated August |
4.10 | BHP Billiton Plc Long Term Incentive Plan Rules, dated |
4.11 |
|
|
Exhibit 8 List of Subsidiaries
*8.1 | List of subsidiaries of BHP Billiton Limited and BHP Billiton |
Exhibit 12 Certifications (section 302)
*12.1 | Certification by Chief Executive Officer, Mr Marius Kloppers, dated |
*12.2 | Certification by Chief Financial Officer, Mr |
Exhibit 13 Certifications (section 906)
*13.1 | Certification by Chief Executive Officer, Mr Marius Kloppers, dated |
*13.2 | Certification by Chief Financial Officer, Mr |
Exhibit 15 Consent of Independent Registered Public Accounting Firm
*15.1 | Consent of Independent Registered Public Accounting Firms KPMG and KPMG Audit Plc for incorporation by reference of audit |
FootnotesExhibit 95 Mine Safety Health Administration
Disclosure of Mine Safety and Health Administration (“MSHA”) Safety Data. |
Footnotes
(1) | Previously filed as an exhibit to BHP Billiton’s annual report on Form 20-F for the year ended 30 June |
(2) | Previously filed as an exhibit to BHP Billiton’s annual report on Form 20-F for the year ended 30 June 2001 on 19 November 2001. |
(3) | Previously filed as an exhibit to BHP Billiton’s annual report on Form 20-F for the year ended 30 June 2005 on 3 October 2005. |
(4) | Previously filed as an exhibit to BHP Billiton’s annual report on Form 20-F for the year ended 30 June 2008 on 15 September 2008. |
(5) |
Previously filed as |
SIGNATURE
The registrants hereby certify that they meet all of the requirements for filing on Form 20-F and that they have duly caused and authorised the undersigned to sign this annual report on their behalf.
BHP Billiton Limited
BHP Billiton Plc
/s/ Graham Kerr
Graham Kerr Chief Financial Officer |
Date: 2118 September 20102012
CONTENTS9 Financial Statements
Contents | ||||
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F-5 | ||||
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| F-113 | |||
| F-113 | |||
F-114 | ||||
F-116 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS9.1 Consolidated Financial Statements
To the members of BHP Billiton Plc and BHP Billiton Limited:
We have audited the BHP Billiton Group’s (comprising BHP Billiton Plc, BHP Billiton Limited and their respective subsidiaries) internal control over financial reporting as of 30 June 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organisations of the Treadway Commission (COSO). The BHP Billiton Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying section 5.13 Controls and Procedures. Our responsibility is to express an opinion on the BHP Billiton Group’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the BHP Billiton Group maintained, in all material respects, effective internal control over financial reporting as of 30 June 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organisations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the BHP Billiton Group as of 30 June 2010 and 2009, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated cash flow statements for each of the years in the three-year period ended 30 June 2010, and our report dated 21 September 2010 expressed an unqualified opinion on those consolidated financial statements.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
To the members of BHP Billiton Plc and BHP Billiton Limited:
We have audited the accompanying consolidated balance sheets of the BHP Billiton Group (comprising BHP Billiton Plc, BHP Billiton Limited and their respective subsidiaries) as of 30 June 2010 and 2009, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated cash flow statements for each of the years in the three-year period ended 30 June 2010. These consolidated financial statements are the responsibility of the BHP Billiton Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the BHP Billiton Group as of 30 June 2010 and 2009, and the results of its operations and its cash flows for each of the years in the three-year period ended 30 June 2010, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the BHP Billiton Group’s internal control over financial reporting as of 30 June 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organisations of the Treadway Commission (COSO), and our report dated 21 September 2010 expressed an unqualified opinion on the effectiveness of BHP Billiton Group’s internal control over financial reporting.
9.1.1 Consolidated Income Statement
for the year ended 30 June 20102012
Notes | 2012 | 2011 | 2010 | ||||||||||||||||||||||||
Notes | 2010 US$M | 2009 US$M | 2008 US$M | US$M | US$M | US$M | |||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||
Group production | 48,193 | 44,113 | 51,918 | 68,747 | 67,903 | 48,193 | |||||||||||||||||||||
Third party products | 2 | 4,605 | 6,098 | 7,555 | 2 | 3,479 | 3,836 | 4,605 | |||||||||||||||||||
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Revenue | 2 | 52,798 | 50,211 | 59,473 | 2 | 72,226 | 71,739 | 52,798 | |||||||||||||||||||
Other income | 4 | 528 | 589 | 648 | 4 | 906 | 531 | 528 | |||||||||||||||||||
Expenses excluding net finance costs | 5 | (33,295 | ) | (38,640 | ) | (35,976 | ) | 5 | (49,380 | ) | (40,454 | ) | (33,295 | ) | |||||||||||||
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Profit from operations | 20,031 | 12,160 | 24,145 | 23,752 | 31,816 | 20,031 | |||||||||||||||||||||
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Comprising: | |||||||||||||||||||||||||||
Group production | 19,920 | 11,657 | 24,529 | 23,626 | 31,718 | 19,920 | |||||||||||||||||||||
Third party products | 111 | 503 | (384 | ) | 126 | 98 | 111 | ||||||||||||||||||||
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20,031 | 12,160 | 24,145 | 23,752 | 31,816 | 20,031 | ||||||||||||||||||||||
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Financial income | 6 | 215 | 309 | 293 | 6 | 225 | 245 | 215 | |||||||||||||||||||
Financial expenses | 6 | (674 | ) | (852 | ) | (955 | ) | 6 | (955 | ) | (806 | ) | (674 | ) | |||||||||||||
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Net finance costs | 6 | (459 | ) | (543 | ) | (662 | ) | 6 | (730 | ) | (561 | ) | (459 | ) | |||||||||||||
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Profit before taxation | 19,572 | 11,617 | 23,483 | 23,022 | 31,255 | 19,572 | |||||||||||||||||||||
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Income tax expense | 7 | (6,112 | ) | (4,784 | ) | (6,798 | ) | 7 | (7,238 | ) | (6,481 | ) | (6,112 | ) | |||||||||||||
Royalty related taxation (net of income tax benefit) | 7 | (451 | ) | (495 | ) | (723 | ) | ||||||||||||||||||||
Royalty-related taxation (net of income tax benefit) | 7 | (252 | ) | (828 | ) | (451 | ) | ||||||||||||||||||||
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Total taxation expense | 7 | (6,563 | ) | (5,279 | ) | (7,521 | ) | 7 | (7,490 | ) | (7,309 | ) | (6,563 | ) | |||||||||||||
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Profit after taxation | 13,009 | 6,338 | 15,962 | 15,532 | 23,946 | 13,009 | |||||||||||||||||||||
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Attributable to non-controlling interests | 287 | 461 | 572 | 115 | 298 | 287 | |||||||||||||||||||||
Attributable to members of BHP Billiton Group | 12,722 | 5,877 | 15,390 | 15,417 | 23,648 | 12,722 | |||||||||||||||||||||
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Earnings per ordinary share (basic) (US cents) | 8 | 228.6 | 105.6 | 275.3 | 8 | 289.6 | 429.1 | 228.6 | |||||||||||||||||||
Earnings per ordinary share (diluted) (US cents) | 8 | 227.8 | 105.4 | 274.8 | 8 | 288.4 | 426.9 | 227.8 | |||||||||||||||||||
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Dividends per ordinary share – paid during the period (US cents) | 9 | 83.0 | 82.0 | 56.0 | 9 | 110.0 | 91.0 | 83.0 | |||||||||||||||||||
Dividends per ordinary share – declared in respect of the period (US cents) | 9 | 87.0 | 82.0 | 70.0 | 9 | 112.0 | 101.0 | 87.0 | |||||||||||||||||||
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The accompanying notes form part of these financial statements.
9.1.2 Consolidated Statement of Comprehensive Income for the year ended 30 June 2012
Notes | 2012 | 2011 | 2010 | |||||||||||||
US$M | US$M | US$M | ||||||||||||||
Profit after taxation | 15,532 | 23,946 | 13,009 | |||||||||||||
Other comprehensive income | ||||||||||||||||
Actuarial losses on pension and medical schemes | (250 | ) | (113 | ) | (38 | ) | ||||||||||
Available for sale investments: | ||||||||||||||||
Net valuation (losses)/gains taken to equity | (32 | ) | (70 | ) | 167 | |||||||||||
Net valuation (gains)/losses transferred to the income statement | (2 | ) | (47 | ) | 2 | |||||||||||
Cash flow hedges: | ||||||||||||||||
Losses taken to equity | (320 | ) | – | (15 | ) | |||||||||||
Realised losses transferred to the income statement | – | – | 2 | |||||||||||||
Unrealised losses transferred to the income statement | 205 | – | – | |||||||||||||
Exchange fluctuations on translation of foreign operations taken to equity | 19 | 19 | 1 | |||||||||||||
Exchange fluctuations on translation of foreign operations transferred to the income statement | – | – | (10 | ) | ||||||||||||
Tax recognised within other comprehensive income | 7 | 89 | 120 | 111 | ||||||||||||
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Total other comprehensive income | (291 | ) | (91 | ) | 220 | |||||||||||
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Total comprehensive income | 15,241 | 23,855 | 13,229 | |||||||||||||
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Attributable to non-controlling interests | 117 | 284 | 294 | |||||||||||||
Attributable to members of BHP Billiton Group | 15,124 | 23,571 | 12,935 | |||||||||||||
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The accompanying notes form part of these financial statements.
9.1.3 Consolidated Balance Sheet as at 30 June 2012
Notes | 2012 | 2011 | ||||||||||
US$M | US$M | |||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 23 | 4,781 | 10,084 | |||||||||
Trade and other receivables | 10 | 7,704 | 8,197 | |||||||||
Other financial assets | 11 | 282 | 264 | |||||||||
Inventories | 12 | 6,233 | 6,154 | |||||||||
Assets held for sale | 26 | 848 | – | |||||||||
Current tax assets | 137 | 273 | ||||||||||
Other | 466 | 308 | ||||||||||
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Total current assets | 20,451 | 25,280 | ||||||||||
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Non-current assets | ||||||||||||
Trade and other receivables | 10 | 1,475 | 2,093 | |||||||||
Other financial assets | 11 | 1,881 | 1,602 | |||||||||
Inventories | 12 | 424 | 363 | |||||||||
Property, plant and equipment | 13 | 95,247 | 67,945 | |||||||||
Intangible assets | 14 | 5,112 | 1,456 | |||||||||
Deferred tax assets | 7 | 4,525 | 3,993 | |||||||||
Other | 158 | 188 | ||||||||||
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Total non-current assets | 108,822 | 77,640 | ||||||||||
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Total assets | 129,273 | 102,920 | ||||||||||
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LIABILITIES | ||||||||||||
Current liabilities | ||||||||||||
Trade and other payables | 15 | 12,024 | 9,723 | |||||||||
Interest bearing liabilities | 16 | 3,531 | 3,519 | |||||||||
Liabilities held for sale | 26 | 433 | – | |||||||||
Other financial liabilities | 17 | 200 | 288 | |||||||||
Current tax payable | 2,811 | 3,693 | ||||||||||
Provisions | 18 | 2,784 | 2,256 | |||||||||
Deferred income | 251 | 259 | ||||||||||
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Total current liabilities | 22,034 | 19,738 | ||||||||||
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Non-current liabilities | ||||||||||||
Trade and other payables | 15 | 509 | 555 | |||||||||
Interest bearing liabilities | 16 | 24,799 | 12,388 | |||||||||
Other financial liabilities | 17 | 317 | 79 | |||||||||
Deferred tax liabilities | 7 | 5,287 | 2,683 | |||||||||
Provisions | 18 | 8,914 | 9,293 | |||||||||
Deferred income | 328 | 429 | ||||||||||
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Total non-current liabilities | 40,154 | 25,427 | ||||||||||
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Total liabilities | 62,188 | 45,165 | ||||||||||
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Net assets | 67,085 | 57,755 | ||||||||||
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EQUITY | ||||||||||||
Share capital – BHP Billiton Limited | 19 | 1,186 | 1,183 | |||||||||
Share capital – BHP Billiton Plc | 19 | 1,069 | 1,070 | |||||||||
Treasury shares | 19 | (533 | ) | (623 | ) | |||||||
Reserves | 20 | 1,912 | 2,001 | |||||||||
Retained earnings | 20 | 62,236 | 53,131 | |||||||||
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Total equity attributable to members of BHP Billiton Group | 65,870 | 56,762 | ||||||||||
Non-controlling interests | 20 | 1,215 | 993 | |||||||||
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Total equity | 67,085 | 57,755 | ||||||||||
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The accompanying notes form part of these financial statements.
The financial statements were approved by the Board of Directors on 12 September 2012 and signed on its behalf by:
Jac Nasser AO | ||
Chairman | Chief Executive Officer |
9.1.4 Consolidated Cash Flow Statement of Comprehensive Income
for the year ended 30 June 20102012
Notes | 2010 US$M | 2009 US$M | 2008 US$M | ||||||||
Profit after taxation | 13,009 | 6,338 | 15,962 | ||||||||
Other comprehensive income | |||||||||||
Actuarial losses on pension and medical schemes | (38 | ) | (227 | ) | (96 | ) | |||||
Available for sale investments: | |||||||||||
Net valuation gains/(losses) taken to equity | 167 | 3 | (76 | ) | |||||||
Net valuation losses transferred to the income statement | 2 | 58 | — | ||||||||
Cash flow hedges: | |||||||||||
(Losses)/gains taken to equity | (15 | ) | 710 | (383 | ) | ||||||
Realised losses transferred to the income statement | 2 | 22 | 73 | ||||||||
Unrealised gain transferred to the income statement | — | (48 | ) | — | |||||||
Gains transferred to the initial carrying amount of hedged items | — | (26 | ) | (190 | ) | ||||||
Exchange fluctuations on translation of foreign operations taken to equity | 1 | 27 | (21 | ) | |||||||
Exchange fluctuations on translation of foreign operations transferred to the income statement | (10 | ) | — | — | |||||||
Tax recognised within other comprehensive income | 7 | 111 | (253 | ) | 306 | ||||||
Total other comprehensive income | 220 | 266 | (387 | ) | |||||||
Total comprehensive income | 13,229 | 6,604 | 15,575 | ||||||||
Attributable to non-controlling interests | 294 | 458 | 571 | ||||||||
Attributable to members of BHP Billiton Group | 12,935 | 6,146 | 15,004 | ||||||||
Notes | 2012 | 2011 | 2010 | |||||||||||||
US$M | US$M | US$M | ||||||||||||||
Operating activities | ||||||||||||||||
Profit before taxation | 23,022 | 31,255 | 19,572 | |||||||||||||
Adjustments for: | ||||||||||||||||
Non-cash exceptional items | 3,417 | (150 | ) | (255 | ) | |||||||||||
Depreciation and amortisation expense | 6,408 | 5,039 | 4,759 | |||||||||||||
Net gain on sale of non-current assets | (116 | ) | (41 | ) | (114 | ) | ||||||||||
Impairments of property, plant and equipment, financial assets and intangibles | 100 | 74 | 35 | |||||||||||||
Employee share awards expense | 270 | 266 | 170 | |||||||||||||
Financial income and expenses | 730 | 561 | 459 | |||||||||||||
Other | (481 | ) | (384 | ) | (265 | ) | ||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Trade and other receivables | 1,464 | (1,960 | ) | (1,713 | ) | |||||||||||
Inventories | (208 | ) | (792 | ) | (571 | ) | ||||||||||
Trade and other payables | (288 | ) | 2,780 | 565 | ||||||||||||
Net other financial assets and liabilities | (18 | ) | 46 | (90 | ) | |||||||||||
Provisions and other liabilities | (1,026 | ) | 387 | (306 | ) | |||||||||||
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Cash generated from operations | 33,274 | 37,081 | 22,246 | |||||||||||||
Dividends received | 25 | 12 | 20 | |||||||||||||
Interest received | 127 | 107 | 99 | |||||||||||||
Interest paid | (715 | ) | (562 | ) | (520 | ) | ||||||||||
Income tax refunded | 530 | 74 | 552 | |||||||||||||
Income tax paid | (7,842 | ) | (6,025 | ) | (4,931 | ) | ||||||||||
Royalty related taxation paid | (1,015 | ) | (607 | ) | (576 | ) | ||||||||||
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Net operating cash flows | 24,384 | 30,080 | 16,890 | |||||||||||||
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Investing activities | ||||||||||||||||
Purchases of property, plant and equipment | (18,385 | ) | (11,147 | ) | (9,323 | ) | ||||||||||
Exploration expenditure | (2,452 | ) | (1,240 | ) | (1,333 | ) | ||||||||||
Exploration expenditure expensed and included in operating cash flows | 1,602 | 981 | 1,030 | |||||||||||||
Purchase of intangibles | (220 | ) | (211 | ) | (85 | ) | ||||||||||
Investment in financial assets | (341 | ) | (238 | ) | (152 | ) | ||||||||||
Investment in subsidiaries, operations and jointly controlled entities, net of their cash | (12,556 | ) | (4,807 | ) | (508 | ) | ||||||||||
Payment on sale of operations | – | – | (156 | ) | ||||||||||||
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Cash outflows from investing activities | (32,352 | ) | (16,662 | ) | (10,527 | ) | ||||||||||
Proceeds from sale of property, plant and equipment | 159 | 80 | 132 | |||||||||||||
Proceeds from financial assets | 151 | 118 | 34 | |||||||||||||
Proceeds from sale or partial sale of subsidiaries, operations and jointly controlled entities, net of their cash | 6 | – | 376 | |||||||||||||
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Net investing cash flows | (32,036 | ) | (16,464 | ) | (9,985 | ) | ||||||||||
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Financing activities | ||||||||||||||||
Proceeds from interest bearing liabilities | 13,287 | 1,374 | 567 | |||||||||||||
(Settlements)/Proceeds from debt related instruments | (180 | ) | 222 | 103 | ||||||||||||
Repayment of interest bearing liabilities | (4,280 | ) | (2,173 | ) | (1,155 | ) | ||||||||||
Proceeds from ordinary shares | 21 | 32 | 12 | |||||||||||||
Contributions from non-controlling interests | 101 | – | 335 | |||||||||||||
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts | (424 | ) | (469 | ) | (274 | ) | ||||||||||
Share buy-back – BHP Billiton Limited | – | (6,265 | ) | – | ||||||||||||
Share buy-back – BHP Billiton Plc | (83 | ) | (3,595 | ) | – | |||||||||||
Dividends paid | (5,877 | ) | (5,054 | ) | (4,618 | ) | ||||||||||
Dividends paid to non-controlling interests | (56 | ) | (90 | ) | (277 | ) | ||||||||||
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Net financing cash flows | 2,509 | (16,018 | ) | (5,307 | ) | |||||||||||
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Net (decrease)/increase in cash and cash equivalents | (5,143 | ) | (2,402 | ) | 1,598 | |||||||||||
Cash and cash equivalents, net of overdrafts, at the beginning of the financial year | 10,080 | 12,455 | 10,831 | |||||||||||||
Effect of foreign currency exchange rate changes on cash and cash equivalents | (56 | ) | 27 | 26 | ||||||||||||
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Cash and cash equivalents, net of overdrafts, at the end of the financial year | 23 | 4,881 | 10,080 | 12,455 | ||||||||||||
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The accompanying notes form part of these financial statements.
9.1.5 Consolidated Balance SheetStatement of Changes in Equity for the year ended 30 June 2012
Attributable to members of the BHP Billiton Group | ||||||||||||||||||||||||||||||||
Share capital – BHP Billiton Limited | Share capital – BHP Billiton Plc | Treasury shares | Reserves | Retained earnings | Total | Non controlling interests | Total equity | |||||||||||||||||||||||||
US$M | ||||||||||||||||||||||||||||||||
Balance as at 1 July 2011 | 1,183 | 1,070 | (623 | ) | 2,001 | 53,131 | 56,762 | 993 | 57,755 | |||||||||||||||||||||||
Total comprehensive income | – | – | – | (163 | ) | 15,287 | 15,124 | 117 | 15,241 | |||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Proceeds from the issue of shares | 3 | – | – | – | – | 3 | – | 3 | ||||||||||||||||||||||||
BHP Billiton Plc shares cancelled | – | (1 | ) | 83 | 1 | (83 | ) | – | – | – | ||||||||||||||||||||||
Purchase of shares by ESOP Trusts | – | – | (424 | ) | �� | – | – | (424 | ) | – | (424 | ) | ||||||||||||||||||||
Employee share awards exercised net of employee contributions | – | – | 431 | (189 | ) | (213 | ) | 29 | – | 29 | ||||||||||||||||||||||
Employee share awards forfeited | – | – | – | (8 | ) | 8 | – | – | – | |||||||||||||||||||||||
Accrued employee entitlement for unexercised awards | – | – | – | 270 | – | 270 | – | 270 | ||||||||||||||||||||||||
Dividends | – | – | – | – | (5,894 | ) | (5,894 | ) | (56 | ) | (5,950 | ) | ||||||||||||||||||||
Equity contributed | – | – | – | – | – | – | 161 | 161 | ||||||||||||||||||||||||
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Balance as at 30 June 2012 | 1,186 | 1,069 | (533 | ) | 1,912 | 62,236 | 65,870 | 1,215 | 67,085 | |||||||||||||||||||||||
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Balance as at 1 July 2010 | 1,227 | 1,116 | (525 | ) | 1,906 | 44,801 | 48,525 | 804 | 49,329 | |||||||||||||||||||||||
Total comprehensive income | – | – | – | (66 | ) | 23,637 | 23,571 | 284 | 23,855 | |||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
BHP Billiton Limited shares bought back and cancelled | (44 | ) | – | – | – | (6,301 | ) | (6,345 | ) | – | (6,345 | ) | ||||||||||||||||||||
BHP Billiton Plc shares bought back | – | – | (3,678 | ) | – | – | (3,678 | ) | – | (3,678 | ) | |||||||||||||||||||||
BHP Billiton Plc shares cancelled | – | (46 | ) | 3,595 | 46 | (3,595 | ) | – | – | – | ||||||||||||||||||||||
Purchase of shares by ESOP Trusts | – | – | (469 | ) | – | – | (469 | ) | – | (469 | ) | |||||||||||||||||||||
Employee share awards exercised net of employee contributions | – | – | 454 | (121 | ) | (294 | ) | 39 | – | 39 | ||||||||||||||||||||||
Employee share awards forfeited | – | – | – | (9 | ) | 9 | – | – | – | |||||||||||||||||||||||
Accrued employee entitlement for unexercised awards | – | – | – | 266 | – | 266 | – | 266 | ||||||||||||||||||||||||
Distribution to option holders | – | – | – | (21 | ) | – | (21 | ) | (17 | ) | (38 | ) | ||||||||||||||||||||
Dividends | – | – | – | – | (5,126 | ) | (5,126 | ) | (90 | ) | (5,216 | ) | ||||||||||||||||||||
Equity contributed | – | – | – | – | – | – | 12 | 12 | ||||||||||||||||||||||||
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Balance as at 30 June 2011 | 1,183 | 1,070 | (623 | ) | 2,001 | 53,131 | 56,762 | 993 | 57,755 | |||||||||||||||||||||||
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as at 30 June 2010
Attributable to members of the BHP Billiton Group | ||||||||||||||||||||||||||||||||
Share capital – BHP Billiton Limited | Share capital – BHP Billiton Plc | Treasury shares | Reserves | Retained earnings | Total | Non controlling interests | Total equity | |||||||||||||||||||||||||
US$M | ||||||||||||||||||||||||||||||||
Balance as at 1 July 2009 | 1,227 | 1,116 | (525 | ) | 1,305 | 36,831 | 39,954 | 757 | 40,711 | |||||||||||||||||||||||
Total comprehensive income | – | – | – | 197 | 12,738 | 12,935 | 294 | 13,229 | ||||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Purchase of shares by ESOP Trusts | – | – | (274 | ) | – | – | (274 | ) | – | (274 | ) | |||||||||||||||||||||
Employee share awards exercised net of employee contributions | – | – | 274 | (88 | ) | (178 | ) | 8 | – | 8 | ||||||||||||||||||||||
Employee share awards forfeited | – | – | – | (28 | ) | 28 | – | – | – | |||||||||||||||||||||||
Accrued employee entitlement for unexercised awards | – | – | – | 170 | – | 170 | – | 170 | ||||||||||||||||||||||||
Issue of share options to non-controlling interests | – | – | – | 43 | – | 43 | 16 | 59 | ||||||||||||||||||||||||
Distribution to option holders | – | – | – | (10 | ) | – | (10 | ) | (6 | ) | (16 | ) | ||||||||||||||||||||
Dividends | – | – | – | – | (4,618 | ) | (4,618 | ) | (277 | ) | (4,895 | ) | ||||||||||||||||||||
Equity contributed | – | – | – | 317 | – | 317 | 20 | 337 | ||||||||||||||||||||||||
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Balance as at 30 June 2010 | 1,227 | 1,116 | (525 | ) | 1,906 | 44,801 | 48,525 | 804 | 49,329 | |||||||||||||||||||||||
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Notes | 2010 US$M | 2009 US$M | ||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | 23 | 12,456 | 10,833 | |||||
Trade and other receivables | 10 | 6,543 | 5,153 | |||||
Other financial assets | 11 | 292 | 763 | |||||
Inventories | 12 | 5,334 | 4,821 | |||||
Assets held for sale | 3 | — | 213 | |||||
Current tax assets | 189 | 424 | ||||||
Other | 320 | 279 | ||||||
Total current assets | 25,134 | 22,486 | ||||||
Non-current assets | ||||||||
Trade and other receivables | 10 | 1,381 | 762 | |||||
Other financial assets | 11 | 1,510 | 1,543 | |||||
Inventories | 12 | 343 | 200 | |||||
Property, plant and equipment | 13 | 55,576 | 49,032 | |||||
Intangible assets | 14 | 687 | 661 | |||||
Deferred tax assets | 7 | 4,053 | 3,910 | |||||
Other | 168 | 176 | ||||||
Total non-current assets | 63,718 | 56,284 | ||||||
Total assets | 88,852 | 78,770 | ||||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Trade and other payables | 15 | 6,467 | 5,619 | |||||
Interest bearing liabilities | 16 | 2,191 | 1,094 | |||||
Liabilities held for sale | 3 | — | 363 | |||||
Other financial liabilities | 17 | 511 | 705 | |||||
Current tax payable | 1,685 | 1,931 | ||||||
Provisions | 18 | 1,899 | 1,887 | |||||
Deferred income | 289 | 251 | ||||||
Total current liabilities | 13,042 | 11,850 | ||||||
Non-current liabilities | ||||||||
Trade and other payables | 15 | 469 | 187 | |||||
Interest bearing liabilities | 16 | 13,573 | 15,325 | |||||
Other financial liabilities | 17 | 266 | 142 | |||||
Deferred tax liabilities | 7 | 4,320 | 3,038 | |||||
Provisions | 18 | 7,433 | 7,032 | |||||
Deferred income | 420 | 485 | ||||||
Total non-current liabilities | 26,481 | 26,209 | ||||||
Total liabilities | 39,523 | 38,059 | ||||||
Net assets | 49,329 | 40,711 | ||||||
EQUITY | ||||||||
Share capital – BHP Billiton Limited | 19 | 1,227 | 1,227 | |||||
Share capital – BHP Billiton Plc | 19 | 1,116 | 1,116 | |||||
Treasury shares | 19 | (525 | ) | (525 | ) | |||
Reserves | 20 | 1,906 | 1,305 | |||||
Retained earnings | 20 | 44,801 | 36,831 | |||||
Total equity attributable to members of BHP Billiton Group | 48,525 | 39,954 | ||||||
Non-controlling interests | 804 | 757 | ||||||
Total equity | 49,329 | 40,711 | ||||||
The accompanying notes form part of these financial statements.
Consolidated Cash Flow Statement
for the year ended 30 June 2010
Notes | 2010 US$M | 2009 US$M | 2008 US$M | ||||||||
Operating activities | |||||||||||
Profit before taxation | 19,572 | 11,617 | 23,483 | ||||||||
Adjustments for: | |||||||||||
Non-cash exceptional items | (255 | ) | 5,460 | 137 | |||||||
Depreciation and amortisation expense | 4,759 | 3,871 | 3,612 | ||||||||
Exploration and evaluation expense (excluding impairment) | 1,030 | 1,009 | 859 | ||||||||
Net gain on sale of non-current assets | (114 | ) | (38 | ) | (129 | ) | |||||
Impairments of property, plant and equipment, financial assets and intangibles | 35 | 190 | 137 | ||||||||
Employee share awards expense | 170 | 185 | 97 | ||||||||
Financial income and expenses | 459 | 543 | 662 | ||||||||
Other | (265 | ) | (320 | ) | (629 | ) | |||||
Changes in assets and liabilities: | |||||||||||
Trade and other receivables | (1,713 | ) | 4,894 | (4,255 | ) | ||||||
Inventories | (571 | ) | (116 | ) | (1,313 | ) | |||||
Trade and other payables | 565 | (847 | ) | 1,824 | |||||||
Net other financial assets and liabilities | (90 | ) | (769 | ) | 526 | ||||||
Provisions and other liabilities | (306 | ) | (497 | ) | 137 | ||||||
Cash generated from operations | 23,276 | 25,182 | 25,148 | ||||||||
Dividends received | 20 | 30 | 51 | ||||||||
Interest received | 99 | 205 | 169 | ||||||||
Interest paid | (520 | ) | (519 | ) | (799 | ) | |||||
Income tax refunded | 552 | — | — | ||||||||
Income tax paid | (4,931 | ) | (5,129 | ) | (5,867 | ) | |||||
Royalty related taxation paid | (576 | ) | (906 | ) | (885 | ) | |||||
Net operating cash flows | 17,920 | 18,863 | 17,817 | ||||||||
Investing activities | |||||||||||
Purchases of property, plant and equipment | (9,323 | ) | (9,492 | ) | (7,558 | ) | |||||
Exploration expenditure (including amounts expensed) | (1,333 | ) | (1,243 | ) | (1,350 | ) | |||||
Purchase of intangibles | (85 | ) | (141 | ) | (16 | ) | |||||
Investment in financial assets | (152 | ) | (40 | ) | (166 | ) | |||||
Investment in subsidiaries, operations and jointly controlled entities, net of their cash | (508 | ) | (286 | ) | (154 | ) | |||||
Payment on sale of operations | (156 | ) | (126 | ) | — | ||||||
Cash outflows from investing activities | (11,557 | ) | (11,328 | ) | (9,244 | ) | |||||
Proceeds from sale of property, plant and equipment | 132 | 164 | 43 | ||||||||
Proceeds from sale of financial assets | 34 | 96 | 59 | ||||||||
Proceeds from sale or partial sale of subsidiaries, operations and jointly controlled entities, net of their cash | 376 | 17 | 78 | ||||||||
Net investing cash flows | (11,015 | ) | (11,051 | ) | (9,064 | ) | |||||
Financing activities | |||||||||||
Proceeds from interest bearing liabilities | 567 | 7,323 | 7,201 | ||||||||
Proceeds from debt related instruments | 103 | 354 | 342 | ||||||||
Repayment of interest bearing liabilities | (1,155 | ) | (3,748 | ) | (7,951 | ) | |||||
Proceeds from ordinary shares | 12 | 29 | 24 | ||||||||
Contributions from non-controlling interests | 335 | — | — | ||||||||
Purchase of shares by Employee Share Ownership Plan Trusts | (274 | ) | (169 | ) | (250 | ) | |||||
Share buy-back – BHP Billiton Plc | — | — | (3,115 | ) | |||||||
Dividends paid | (4,618 | ) | (4,563 | ) | (3,135 | ) | |||||
Dividends paid to non-controlling interests | (277 | ) | (406 | ) | (115 | ) | |||||
Net financing cash flows | (5,307 | ) | (1,180 | ) | (6,999 | ) | |||||
Net increase in cash and cash equivalents | 1,598 | 6,632 | 1,754 | ||||||||
Cash and cash equivalents, net of overdrafts, at beginning of year | 10,831 | 4,173 | 2,398 | ||||||||
Effect of foreign currency exchange rate changes on cash and cash equivalents | 26 | 26 | 21 | ||||||||
Cash and cash equivalents, net of overdrafts, at end of year | 23 | 12,455 | 10,831 | 4,173 | |||||||
The accompanying notes form part of these financial statements.
Consolidated Statement of Changes in Equity
for the year ended 30 June 2010
Attributable to members of the BHP Billiton Group | |||||||||||||||||||||||
US$M | Share capital – BHP Billiton Limited | Share capital – BHP Billiton Plc | Treasury shares | Reserves | Retained earnings | Total | Non-controlling interests | Total equity | |||||||||||||||
Balance as at 1 July 2009 | 1,227 | 1,116 | (525 | ) | 1,305 | 36,831 | 39,954 | 757 | 40,711 | ||||||||||||||
Total comprehensive income | — | — | — | 197 | 12,738 | 12,935 | 294 | 13,229 | |||||||||||||||
Transactions with owners: | |||||||||||||||||||||||
Purchase of shares by ESOP Trusts | — | — | (274 | ) | — | — | (274 | ) | — | (274 | ) | ||||||||||||
Employee share awards exercised following vesting net of employee contributions | — | — | 274 | (88 | ) | (178 | ) | 8 | — | 8 | |||||||||||||
Employee share awards lapsed | — | — | — | (28 | ) | 28 | — | — | — | ||||||||||||||
Accrued employee entitlement for unvested awards | — | — | — | 170 | — | 170 | — | 170 | |||||||||||||||
Issue of share options to non-controlling interests | — | — | — | 43 | — | 43 | 16 | 59 | |||||||||||||||
Distribution to option holders | — | — | — | (10 | ) | — | (10 | ) | (6 | ) | (16 | ) | |||||||||||
Dividends paid | — | — | — | — | (4,618 | ) | (4,618 | ) | (277 | ) | (4,895 | ) | |||||||||||
Transactions with owners – contributed equity | — | — | — | 317 | — | 317 | 20 | 337 | |||||||||||||||
Balance as at 30 June 2010 | 1,227 | 1,116 | (525 | ) | 1,906 | 44,801 | 48,525 | 804 | 49,329 | ||||||||||||||
Balance as at 1 July 2008 | 1,227 | 1,116 | (514 | ) | 750 | 35,756 | 38,335 | 708 | 39,043 | ||||||||||||||
Total comprehensive income | — | — | — | 404 | 5,742 | 6,146 | 458 | 6,604 | |||||||||||||||
Transactions with owners: | |||||||||||||||||||||||
Purchase of shares by ESOP Trusts | — | — | (169 | ) | — | — | (169 | ) | — | (169 | ) | ||||||||||||
Employee share awards exercised following vesting net of employee contributions | — | — | 158 | (34 | ) | (104 | ) | 20 | — | 20 | |||||||||||||
Accrued employee entitlement for unvested awards | — | — | — | 185 | — | 185 | — | 185 | |||||||||||||||
Dividends paid | — | — | — | — | (4,563 | ) | (4,563 | ) | (406 | ) | (4,969 | ) | |||||||||||
Transaction with owners – contributed equity | — | — | — | — | — | — | (3 | ) | (3 | ) | |||||||||||||
Balance as at 30 June 2009 | 1,227 | 1,116 | (525 | ) | 1,305 | 36,831 | 39,954 | 757 | 40,711 | ||||||||||||||
Balance as at 1 July 2007 | 1,221 | 1,183 | (1,457 | ) | 991 | 27,729 | 29,667 | 251 | 29,918 | ||||||||||||||
Total comprehensive income | — | — | — | (368 | ) | 15,372 | 15,004 | 571 | 15,575 | ||||||||||||||
Transactions with owners: | |||||||||||||||||||||||
Exercise of Employee Share Plan Options | 6 | — | — | — | — | 6 | — | 6 | |||||||||||||||
BHP Billiton Plc shares bought back and cancelled | — | (67 | ) | — | 67 | — | — | — | — | ||||||||||||||
Purchase of shares by ESOP Trusts | — | — | (250 | ) | — | — | (250 | ) | — | (250 | ) | ||||||||||||
Employee share awards exercised following vesting net of employee contributions | — | — | 260 | (37 | ) | (204 | ) | 19 | — | 19 | |||||||||||||
Shares bought back | — | — | (3,075 | ) | — | — | (3,075 | ) | — | (3,075 | ) | ||||||||||||
Shares cancelled | — | — | 4,008 | — | (4,008 | ) | — | — | — | ||||||||||||||
Accrued employee entitlement for unvested awards | — | — | — | 97 | — | 97 | — | 97 | |||||||||||||||
Dividends paid | — | — | — | — | (3,133 | ) | (3,133 | ) | (113 | ) | (3,246 | ) | |||||||||||
Transaction with owners – contributed equity | — | — | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||
Balance as at 30 June 2008 | 1,227 | 1,116 | (514 | ) | 750 | 35,756 | 38,335 | 708 | 39,043 | ||||||||||||||
The accompanying notes form part of these financial statements.
9.1.6 Notes to Financial Statements
Dual Listed Companies’ structure and basis of preparation of financial statements
Merger terms
On 29 June 2001, BHP Billiton Limited (previously known as BHP Limited), an Australian listed company, and BHP Billiton Plc (previously known as Billiton Plc), a UKUnited Kingdom (UK) listed company, entered into a Dual Listed Company (DLC) merger. This was effected by contractual arrangements between the Companies and amendments to their constitutional documents.
The effect of the DLC merger is that BHP Billiton Limited and its subsidiaries (the BHP Billiton Limited Group) and BHP Billiton Plc and its subsidiaries (the BHP Billiton Plc Group) operate together as a single economic entity (the Group). Under the arrangements:
the shareholders of BHP Billiton Limited and BHP Billiton Plc have a common economic interest in both Groups;
the shareholders of BHP Billiton Limited and BHP Billiton Plc take key decisions, including the election of Directors, through a joint electoral procedure under which the shareholders of the two Companies effectively vote on a joint basis;
BHP Billiton Limited and BHP Billiton Plc have a common Board of Directors, a unified management structure and joint objectives;
dividends and capital distributions made by the two Companies are equalised;
BHP Billiton Limited and BHP Billiton Plc each executed a deed poll guarantee, guaranteeing (subject to certain exceptions) the contractual obligations (whether actual or contingent, primary or secondary) of the other incurred after 29 June 2001 together with specified obligations existing at that date.
If either BHP Billiton Limited or BHP Billiton Plc proposes to pay a dividend to its shareholders, then the other Company must pay a matching cash dividend of an equivalent amount per share to its shareholders. If either Company is prohibited by law or is otherwise unable to declare, pay or otherwise make all or any portion of such a matching dividend, then BHP Billiton Limited or BHP Billiton Plc will, so far as it is practicable to do so, enter into such transactions with each other as the Boards agree to be necessary or desirable so as to enable both Companies to pay dividends as nearly as practicable at the same time.
The DLC merger did not involve the change of legal ownership of any assets of BHP Billiton Limited or BHP Billiton Plc, any change of ownership of any existing shares or securities of BHP Billiton Limited or BHP Billiton Plc, the issue of any shares or securities or any payment by way of consideration, save for the issue by each Company of one special voting share to a trustee company which is the means by which the joint electoral procedure is operated.
Accounting for the DLC merger
The basis of accounting for the DLC merger was established under Australian and UK Generally Accepted Accounting PrinciplesPractice (GAAP), pursuant to the requirements of the Australian Securities and Investments Commission (ASIC) Practice Note 71 ‘Financial Reporting by Australian Entities in Dual-Listed Company Arrangements’, an order issued by ASIC under section 340 of the Corporations Act 2001 on 2 September 2002, and in accordance with the UK Companies Act 1985. In accordance with the transitional provisions of IFRS 1/AASB 1 ‘First-time Adoption of International Financial Reporting Standards’, the same basis of accounting is
applied under International Financial Reporting Standards. Accordingly, these financial statements consolidate the Group as follows:
Results for the years ended 30 June 2010,2012, 30 June 20092011 and 30 June 20082010 are of the consolidated entity comprising the BHP Billiton Limited Group and the BHP Billiton Plc Group.
Assets and liabilities of the BHP Billiton Limited Group and the BHP Billiton Plc Group were consolidated at the date of the merger at their existing carrying amounts.
Notes to Financial Statements continued
1 Accounting policies continued
Basis of preparation
This general purpose financial report for the year ended 30 June 20102012 has been prepared in accordance with the requirements of the Australian Corporations Act 2001 and the UK Companies Act 2006 and with:
Australian Accounting Standards, being Australian equivalents to International Financial Reporting Standards and interpretations as issued by the Australian Accounting Standards Board (AASB) and interpretations effective as of 30 June 2010;2012;
International Financial Reporting Standards and interpretations as adopted by the European Union (EU) effective as of 30 June 2010;2012;
International Financial Reporting Standards and interpretations as issued by the International Accounting Standards Board effective as of 30 June 2010.2012.
The above accounting standards and interpretations are collectively referred to as ‘IFRS’ in this report.
The principalThere were no significant impacts arising from accounting standards andor interpretations that have been adopted for the first time in these financial statements are:
Amendment to IFRS 2/AASB 2 ‘Share-based Payment’ which modifies the definition of vesting conditions and broadens the scope of accounting for cancellations of share-based payment arrangements;
Amendment to IFRS 3/AASB 3 ‘Business Combinations’ which modifies the application of acquisition accounting for business combinations. Associated amendments to IAS 27/AASB 127 ‘Consolidated and Separate Financial Statements’ change the accounting for non-controlling interests;
IFRS 8/AASB 8 ‘Operating Segments’ which requires segment information to be determined on the same basis used for reporting to senior management. Segment results are therefore presented exclusive of exceptional items;
‘Improvements to IFRSs 2008’/AASB 2008-5 ‘Amendments to Australian Accounting Standards arising from the Annual Improvements Project’ and AASB 2008-6 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project’ which includes a collection of minor amendments to IFRS;
IFRIC 18 ‘Transfers of Assets from Customers’ which provides guidance on how to account for items of property, plant and equipment received from customers, or cash received from customers to acquire/construct specific assets that will be used to supply goods or services.
The adoption of these standards and interpretations did not have a material impact on the financial statements of the Group except for the amendments to IAS 27/AASB 127 ‘Consolidated and Separate Financial Statements’. These amendments have resulted in the excess of consideration received over the book value of net assets attributable to the equity instruments issued to non-controlling interests being recognised in equity rather than the income statement. Refer to note 20 for the financial impact of this amendment.
As a result of the Group applying IAS 1/AASB 101 ‘Presentation of Financial Statements’ (revised from 1 July 2009), the financial statements include a Consolidated Statement of Comprehensive Income (which replaces the Consolidated Statement of Recognised Income and Expenses) and a Consolidated Statement of Changes in Equity.statements.
The following accounting standards and interpretations may have an impact on the Group in future reporting periods but are not yet effective:
Amendments to IFRS 2/AASB 2 ‘Share-based Payment’. These amendments clarify the accounting for group cash settled share-based payment transactions;
‘Improvements to IFRSs 2009’/AASB 2009-4 ‘Amendments to Australian Accounting Standards arising from the Annual Improvements Project’ and AASB 2009-5 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project’ which includes a collection of minor amendments to IFRS. The amendments include a requirement to classify expenditures on unrecognised assets as a cash flow from operating activities which will result in Group exploration cash flows which are not recognised as assets being reclassified from cash flows from investing activities to cash flows from operating activities in the Consolidated Cash Flow Statement;
IFRS 9/AASB 9 ‘Financial Instruments’ modifies the classification and measurement of certain classes of financial assets;assets and liabilities. The most significant change is to rationalise from four to two primary categories for financial assets.
‘ImprovementsIFRS 10/AASB 10 ‘Consolidated Financial Statements’ is a replacement of IAS 27/AASB 127 ‘Consolidations’. The revised standard introduces a modified single concept of control that applies to IFRSs 2010’/all entities. It changes the requirements for determining whether an entity is consolidated by revising the definition of control and adding further guiding principles.
A review of all entities and contractual arrangements in the Group which are less than 100 per cent owned, currently proportionately consolidated, or currently accounted for as joint operations or assets has been completed to assess the impact of IFRS 10 on the Group. That review determined that Escondida will be controlled by the Group under IFRS 10 and consolidated into the results of the Group from 1 July 2013. Accordingly, the Group will no longer recognise its 57.5 per cent share of Escondida’s assets, liabilities, revenue, expenses and cash flows but will recognise 100% of Escondida’s revenues, expenses, assets, liabilities and cash flows and a non-controlling interest equal to 42.5 per cent of Escondida’s profit and net assets.
IFRS 11/AASB 2010-3 ‘Amendments11 ‘Joint Arrangements’ modifies the accounting for joint arrangements in two ways:
It changes the definition of joint control with reference to Australian Accounting Standardsthe definition of unanimous consent (the contractually agreed sharing of control of an arrangement with reference to voting on relevant activities). Arrangements which do not fall within this definition are beyond the scope of IFRS 11.
For those entities within the scope of IFRS 11, a distinction is made between joint ventures and joint operations based on the rights and obligations of the parties arising from the Annual Improvements Project’arrangement in the normal course of business. Entities for which it is determined the Group has rights only to the net assets of the arrangement are classified as ‘joint ventures’ and AASB 2010-4 ‘Further Amendmentsare equity accounted. Entities for which it is determined the Group has rights to Australian Accounting Standardsthe underlying assets and obligations for the liabilities of the arrangement are classified as ‘joint operations’ and therefore the Group recognises its proportionate share of the jointly held assets and liabilities, revenue from the sale of its share of the output arising from the Annual Improvements Project’ include a collectionjoint operation and from the sale of minor amendmentsthe output by the joint operation and its share of any expenses incurred jointly.
A review of all entities and contractual arrangements in the Group which are less than 100 per cent owned, currently proportionately consolidated, or currently accounted for as joint operations or assets has been completed to IFRS.assess the impact of IFRS 11 on the Group.
That review determined that:
Antamina, Cerrejón, Newcastle Infrastructure Group, Cleopatra Oil Pipeline and Caesar Oil Pipeline arrangements no longer meet the definition of unanimous consent and therefore will be accounted for under the requirements of the revised IAS 28 ‘Investments in Associates and Joint Ventures’.
Samarco and Richards Bay Minerals are classified as joint ventures under IFRS 11 and therefore will be accounted for under the requirements of the revised IAS 28 ‘Investments in Associates and Joint Ventures’.
As a result, the Group will no longer recognise its proportionate share of the revenue, expenses, assets, liabilities and cash flows of each of the above operations. Commencing 1 July 2013, the Group will recognise its share of net assets on a single line in the Consolidated Balance Sheet, its share of net profit on a single line in the Consolidated Income Statement and cash flows from dividends in the Consolidated Cash Flow Statement.
NotesThe following joint arrangements meet the definition of joint operations and as a result, the Group will continue to Financial Statements continuedrecognise its share of assets, liabilities, revenues, expenses and cash flows; Petroleum Joint Arrangements (including Onshore US), Alumar, Worsley, Central Queensland Coal Associates, Gregory, Guinea Alumina, Mozal and Phola Coal Processing.
WAIO and EKATI contractual arrangements do not fall within the scope of either IFRS 10 or IFRS 11 and as a result, these operations will be accounted for under other IFRS. The Group will continue to recognise its share of revenues, expenses, assets, liabilities and cash flows on a line by line basis in the financial statements.
1 Accounting policies continuedIFRS 13/AASB 13 ‘Fair Value Measurement’ replaces fair value measurement guidance in individual IFRSs with a single source of fair value measurement guidance.
Amendments to IAS 19/AASB 119 ‘Employee Benefits’. These amendments require all actuarial gains and losses to be recognised immediately in other comprehensive income (consistent with current Group policy) and require the expected return on plan assets (recognised in the income statement) to be calculated based on the rate used to discount the defined benefit obligation. Amendments to IAS 31/AASB 132 ‘Financial Instruments: Presentation’ clarify the criteria for offsetting financial assets and liabilities.
IFRIC 20 ‘Stripping Costs in the Production Phase of a Surface Mine’ requires an entity to recognise a production stripping asset only if certain criteria are met.
These standards and interpretations are available for early adoption in the 30 June 20102012 financial year (other than inas permitted by the EU)Australian Corporations Act 2001 but have not been applied in the preparation of these financial statements. The potential impacts onExcept for the financial statements
amendments to IAS 19 ‘Employee Benefits’, none of the Group of adopting these standards and interpretations have not yet been determined unless otherwise indicated. The latter two standards referred to above have not been endorsed by the EU and hence are not available for early adoption in the EU. The potential impacts on the financial statements of the Group of adopting these standards have not yet been determined unless otherwise indicated.
Basis of measurement
The financial statements are drawn up on the basis of historical cost principles, except for derivative financial instruments and certain other financial assets which are carried at fair value.
Currency of presentation
All amounts are expressed in millions of US dollars, unless otherwise stated, consistent with the predominant functional currency of the Group’s operations.
Change in accounting policy
The accounting policies have been consistently applied by all entities included in the Group consolidated financial statements and are consistent with those applied in all prior years presented other than changes required by the adoption of new and amended accounting standards and interpretations as discussed above.above and a change in accounting policy relating to the basis on which borrowings are classified as current or non-current.
Borrowings otherwise due for repayment within 12 months of balance date are now classified as non-current only if the committed refinancing facility is with the same lender and on the same or similar terms. Under the previous policy, it was not necessary for such facilities to be with the same party for the borrowings to be classified as non-current. This change in policy was adopted in light of amendments to IAS 1 ‘Presentation of Financial Statements’ recommended by the IASB, modifying criteria for the classification of such borrowings as current. Borrowings of US$995 million drawn under the Group’s commercial paper program have therefore been classified as current with no impact on comparative amounts as the program was undrawn in all prior periods presented in the financial statements.
Principles of consolidation
The financial statements of the Group include the consolidation of BHP Billiton Limited, BHP Billiton Plc and their respective subsidiaries. Subsidiaries are entities controlled by either parent entity. Control exists where either parent entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Subsidiaries are included in the consolidated financial report from the date control commences until the date control ceases. Where the Group’s interest is less than 100 per cent, the interest attributable to outside shareholders is reflected in non-controlling interests. The effects of all transactions between entities within the Group have been eliminated.
Joint ventures
The Group undertakes a number of business activities through joint ventures. Joint ventures are established through contractual arrangements that require the unanimous consent of each of the venturers regarding the strategic, financial and operating policies of the venture (joint control). The Group’s joint ventures are of two types:
Jointly controlled entities
A jointly controlled entity is a corporation, partnership or other entity in which each participant holds an interest. A jointly controlled entity operates in the same way as other entities, controlling the assets of the joint venture, earning its own income and incurring its own liabilities and expenses. Interests in jointly controlled entities are
accounted for using the proportionate consolidation method, whereby the Group’s proportionate interest in the assets, liabilities, revenues and expenses of jointly controlled entities are recognised within each applicable line item of the financial statements. The share of jointly controlled entities’ results is recognised in the Group’s financial statements from the date that joint control commences until the date aton which it ceases.
Jointly controlled assets
The Group has certain contractual arrangements with other participants to engage in joint activities that do not give rise to a jointly controlled entity. These arrangements involveinvolving the joint ownership of assets dedicated to the purposes of each venture butventure. These arrangements do not create a jointly controlled entity as the venturers directly derive the benefits of operation of their jointly owned assets, rather than deriving returns from an interest in a separate entity.
The financial statements of the Group include its share of the assets in such joint ventures, together with the liabilities, revenues and expenses arising jointly or otherwise from those operations. All such amounts are measured in accordance with the terms of each arrangement, which are usually in proportion to the Group’s interest in the jointly controlled assets.
Notes to Financial Statements continued
1 Accounting policies continued
Business combinations
Business combinations that occurred between 1 July 2004 and 30 June 2009 were accounted for by applying the purchase method of accounting, whereby the purchase consideration of the combination is allocated to the identifiable net assets acquired. Business combinations prior to 1 July 2004 have been accounted for in accordance with the Group’s previous policies under Australian GAAP and UK GAAP and have not been restated.
Business combinations in the current financial yearundertaken from 1 July 2010 are accounted for by applying the acquisition method of accounting, whereby the identifiable assets, liabilities and contingent liabilities (identifiable net assets) are measured on the basis of fair value at the date of acquisition.
Goodwill
Where the fair value of consideration paid for a business combination exceeds the fair value of the Group’s share of the identifiable net assets acquired, the difference is treated as purchased goodwill. Where the fair value of the Group’s share of the identifiable net assets acquired exceeds the cost of acquisition, the difference is immediately recognised in the income statement. The recognition and measurement of goodwill attributable to a non-controlling interest in a business combination is determined on a transaction by transaction basis. Goodwill is not amortised, however its carrying amount is assessed annually against its recoverable amount as explained below under ‘Impairment of non-current assets’. On the subsequent disposal or termination of a previously acquired business, any remaining balance of associated goodwill is included in the determination of the profit or loss on disposal or termination.
Intangible assets
Amounts paid for the acquisition of identifiable intangible assets, such as software and licences, are capitalised at the fair value of consideration paid and are recorded at cost less accumulated amortisation and impairment charges. Identifiable intangible assets with a finite life are amortised on a straight-line basis over their expected useful life, which is typically no greater than eight years. The Group has no identifiable intangible assets for which the expected useful life is indefinite.
Foreign currencies
The Group’s reporting currency and the functional currency of the majority of its operations is the US dollar as this is assessed to be the principal currency of the economic environments in which they operate.
Transactions denominated in foreign currencies (currencies other than the functional currency of an operation) are recorded using the exchange rate ruling at the date of the underlying transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange rulingprevailing at year endyear-end and the gains or losses on retranslation are included in the income statement, with the exception of foreign exchange gains or losses on foreign currency provisions for site closure and rehabilitation, which are capitalised in property, plant and equipment for operating sites.
Exchange variations resulting from the retranslation at closing rate of the net investments in subsidiaries and joint ventures arising after 1 July 2004 are accounted for in accordance with the policy stated below. Exchange variations arising before this date were transferred to retained earnings at the date of transition to IFRS.
Subsidiaries and joint ventures that have functional currencies other than US dollars translate their income statement items to US dollars using the exchange rate prevailing at the date of each transaction. Assets and liabilities are translated atusing exchange rates prevailing at year end.year-end. Exchange variations resulting from the retranslation at closing rate of the net investment in such subsidiaries and joint ventures, together with differences between their income statement items translated at actual and closing rates, are recognised in the foreign currency translation reserve. For the purpose of foreign currency translation, the net investment in a foreign operation is determined inclusive of foreign currency intercompany balances for which settlement is neither planned nor likely to occur in the foreseeable future. The balance of the foreign currency translation reserve relating to a foreign operation that is disposed of, or partially disposed of, is recognised in the income statement at the time of disposal.
Notes to Financial Statements continued
1 Accounting policies continued
Share-based payments
The fair value at grant date of equity settled share awards granted on or after 8 November 2002 is charged to the income statement over the period for which the benefits of employee services are expected to be derived. The corresponding accrued employee entitlement is recorded in the employee share awards reserve. The fair value of awards is calculated using an option pricing model which considers the following factors:
exercise price
expected life of the award
current market price of the underlying shares
expected volatility
expected dividends
risk-free interest rate
market-based performance hurdles
non-vesting conditions
For equity-settled share awards granted on or before 7 November 2002 and that remained unvested at 1 July 2004, the estimated cost of share awards is charged to the income statement from grant date to the date of expected vesting. The estimated cost of awards is based on the market value of shares at the grant date or the intrinsic value of options awarded, adjusted to reflect the impact of performance conditions, where applicable.
Where awards are forfeited because non-market based vesting conditions are not satisfied, the expense previously recognised is proportionately reversed. Where shares in BHP Billiton Limited or BHP Billiton Plc are acquired by on-market purchases prior to settling vested entitlements, the cost of the acquired shares is carried as treasury shares and deducted from equity. When awards are satisfied by delivery of acquired shares, any difference between their acquisition cost and the remuneration expense recognised is charged directly to retained earnings. The tax effect of awards granted is recognised in income tax expense, except to the extent that the total
tax deductions are expected to exceed the cumulative remuneration expense. In this situation, the excess of the associated current or deferred tax is recognised in equity asother comprehensive income and forms part of the employee share awards reserve.
Sales revenue
Revenue from the sale of goods and disposal of other assets is recognised when persuasive evidence usually(usually in the form of an executed sales agreement, oragreement) of an arrangement exists indicating and;
there has been a transfer of risks and rewards to the customer, customer;
no further work or processing is required by the Group, Group;
the quantity and quality of the goods has been determined with reasonable accuracy, accuracy;
the price is fixed or determinable, and determinable;
collectability is reasonably assured. This
Revenue is therefore generally recognised when title passes.
In the majority of sales for most commodities, sales agreements specify that title passes on the bill of lading date, which is the date the commodity is delivered to the shipping agent. For these sales, revenue is recognised on the bill of lading date. For certain sales (principally coal sales to adjoining power stations and diamond sales), title passes and revenue is recognised when the goods have been delivered.
In cases where the terms of the executed sales agreement allow for an adjustment to the sales price based on a survey of the goods by the customer (for instance an assay for mineral content), recognition of the sales revenue is based on the most recently determined estimate of product specifications.
For certain commodities, the sales price is determined on a provisional basis at the date of sale; adjustments to the sales price subsequently occurs based on movements in quoted market or contractual prices up to the date of final pricing. The period between provisional invoicing and final pricing is typically between 60 and 120 days. Revenue on provisionally priced sales is recognised based on the estimated fair value of the total consideration receivable. The revenue adjustment mechanism embedded within provisionally priced sales arrangements has the character of a commodity derivative. Accordingly, the fair value of the final sales price adjustment is re-estimated continuously and changes in fair value are recognised as an adjustment to revenue. In all cases, fair value is estimated by reference to forward market prices.
Revenue is not reduced for royalties and other taxes payable from the Group’s production.
Notes to Financial Statements continued
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The Group separately discloses sales of Group production from sales of third party products due tobecause of the significant difference in profit margin earned on these sales.
Exploration and evaluation expenditure
Exploration and evaluation activity involves the search for mineral and petroleum resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource. Exploration and evaluation activity includes:
researching and analysing historical exploration datadata;
gathering exploration data through topographical, geochemical and geophysical studiesstudies;
exploratory drilling, trenching and samplingsampling;
determining and examining the volume and grade of the resourceresource;
surveying transportation and infrastructure requirementsrequirements;
conducting market and finance studiesstudies.
Administration costs that are not directly attributable to a specific exploration area are charged to the income statement. Licence costs paid in connection with a right to explore in an existing exploration area are capitalised and amortised over the term of the permit.
Exploration and evaluation expenditure (including amortisation of capitalised licence costs) is charged to the income statement as incurred except in the following circumstances, in which case the expenditure may be capitalised:
In respect of minerals activities:
the exploration and evaluation activity is within an area of interest which was previously acquired as an asset acquisition or in a business combination and measured at fair value on acquisition; or
the existence of a commercially viable mineral deposit has been established;established.
In respect of petroleum activities:
the exploration and evaluation activity is within an area of interest for which it is expected that the expenditure will be recouped by future exploitation or sale; or
exploration and evaluation activity has not reached a stage which permits a reasonable assessment of the existence of commercially recoverable reserves.
Capitalised exploration and evaluation expenditure considered to be tangible is recorded as a component of property, plant and equipment at cost less impairment charges. Otherwise, it is recorded as an intangible asset (such as licences). As the capitalised exploration and evaluation expenditure asset is not available for use, it is not depreciated. All capitalised exploration and evaluation expenditure is monitored for indications of impairment. Where a potential impairment is indicated, assessment is performed for each area of interest in conjunction with the group of operating assets (representing a cash generating unit) to which the exploration is attributed. Exploration areas at which reserves have been discovered but that require major capital expenditure before production can begin, are continually evaluated to ensure that commercial quantities of reserves exist or to ensure that additional exploration work is under way or planned. To the extent that capitalised expenditure is notno longer expected to be recovered it is charged to the income statement.
Cash flows associated with exploration and evaluation expenditure (comprising both amounts expensed and amounts capitalised) are classified as investing activities in the cash flow statement.
Development expenditure
When proved reserves are determined and development is sanctioned, capitalised exploration and evaluation expenditure is reclassified as ‘assetsassets under construction’,construction, and is disclosed as a component of property, plant and equipment. All subsequent development expenditure is capitalised and classified as ‘assetsassets under construction’.construction provided commercial viability conditions continue to be satisfied. Development expenditure is net of proceeds from the sale of ore extracted during the development phase. On completion of development, all assets included in ‘assetsassets under construction’construction are reclassified as either ‘plantplant and equipment’equipment or ‘otherother mineral assets’.
Notes to Financial Statements continued
assets.
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Property, plant and equipment
Property, plant and equipment is recorded at cost less accumulated depreciation and impairment charges. Cost is the fair value of consideration given to acquire the asset at the time of its acquisition or construction and includes the direct cost of bringing the asset to the location and condition necessary for operation and the estimated future cost of dismantlingclosure and removing the asset. Disposals are taken to account in the income statement. Where the disposal involves the sale or abandonment of a significant business (or allrehabilitation of the assets associated with such a business) the gain or loss is disclosed as an exceptional item.facility.
Other mineral assets
Other mineral assets comprise:
Capitalised exploration, evaluation and development expenditure (including development stripping) for properties now in production;
Mineral rights and petroleum interests acquired;
Capitalised production stripping (as described below in ‘Overburden removal costs’).
Depreciation of property, plant and equipment
The carrying amounts of property, plant and equipment (including initial and any subsequent capital expenditure) are depreciated to their estimated residual value over the estimated useful lives of the specific assets concerned, or the estimated life of the associated mine, field or lease, if shorter. Estimates of residual values and useful lives are reassessed annually and any change in estimate is taken into account in the determination of remaining depreciation charges. Depreciation commences on the date of commissioning. The major categories of property, plant and equipment are depreciated on a unit of production and/or straight-line basis using estimated lives indicated below. However, where assets are dedicated to a mine, field or lease and are not readily transferable, the below useful lives are subject to the lesser of the asset category’s useful life and the life of the mine, field or lease:
• Buildings | – | 25 to 50 years | ||||
• Land | – | not depreciated | ||||
• Plant and equipment | – | 3 to 30 years straight-line | ||||
• Mineral rights and Petroleum interests | – | based on reserves on a unit of production basis | ||||
• Capitalised exploration, evaluation and development expenditure | – | based on reserves on a unit of production basis |
Leased assets
Assets held under leases which result in the Group receiving substantially all the risks and rewards of ownership of the asset (finance leases) are capitalised at the lower of the fair value of the property, plant and equipment or the estimated present value of the minimum lease payments.
The corresponding finance lease obligation is included within interest bearing liabilities. The interest element is allocated to accounting periods during the lease term to reflect a constant rate of interest on the remaining balance of the obligation.
Operating lease assets are not capitalised and rental payments are included in the income statement on a straight-line basis over the lease term. Provision is made for the present value of future operating lease payments in relation to surplus lease space when it is first determined that the space will be of no probable future benefit. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the liability.
Impairment of non-current assets
Formal impairment tests are carried out annually for goodwill. FormalIn addition, formal impairment tests for all other assets are performed when there is an indication of impairment. The Group conducts annually an internal review of asset values which is used as a source of information to assess for any indications of impairment. External factors, such as changes in expected future prices, costs and other market factors are also monitored to assess for
indications of impairment. If any such indication exists, an estimate of the asset’s recoverable amount is calculated, being the higher of fair value less direct costs to sell and the asset’s value in use.
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1 Accounting policies continued
If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged to the income statement so as to reduce the carrying amount in the balance sheet to its recoverable amount.
Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. Fair value for mineral assets is generally determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset, including any expansion prospects, and its eventual disposal, using assumptions that an independent market participant may take into account. These cash flows are discounted byat an appropriate discount rate to arrive at a net present value of the asset.
Value in use is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset in its present form and its eventual disposal. Value in use is determined by applying assumptions specific to the Group’s continued use and cannot take into account future development. These assumptions are different to those used in calculating fair value and consequently the value in use calculation is likely to give a different result (usually lower) to a fair value calculation.
In testing for indications of impairment and performing impairment calculations, assets are considered as collective groups and referred to as cash generating units. Cash generating units are the smallest identifiable group of assets, liabilities and associated goodwill that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
The impairment assessments are based on a range of estimates and assumptions, including:
Estimates/assumptions: | Basis: | |||||
|
| |||||
• | proved and probable reserves, resource estimates and, in certain cases, expansion projects | |||||
• Commodity prices | • forward market and contract prices, and longer-term price protocol estimates | |||||
• Exchange rates | • current (forward) market exchange rates | |||||
• Discount rates | • cost of capital risk-adjusted appropriate to the resource |
Overburden removal costs
Overburden and other mine waste materials are often removed during the initial development of a mine site in order to access the mineral deposit. This activity is referred to as development stripping. The directly attributable costs (inclusive of an allocation of relevant overhead expenditure) are initially capitalised as ‘assetsassets under construction’.construction. Capitalisation of development stripping costs ceases at the time that saleable material begins to be extracted from the mine. On completion of development, all capitalised development stripping included in ‘assetsassets under construction’ areconstruction is transferred to ‘otherother mineral assets’.assets.
Production stripping commences at the time that saleable materials begin to be extracted from the mine and normally continues throughout the life of a mine. The costs of production stripping are charged to the income statement as operating costs when the ratio of waste material to ore extracted for an area of interest is expected to be constant throughout its estimated life. When the ratio of waste to ore is not expected to be constant, production stripping costs are accounted for as follows:
All costs are initially charged to the income statement and classified as operating costs.
When the current ratio of waste to ore is greater than the estimated life-of-mine ratio, a portion of the stripping costs (inclusive of an allocation of relevant overhead expenditure) is capitalised to ‘otherother mineral assets’.assets.
In subsequent years when the ratio of waste to ore is less than the estimated life-of-mine ratio, a portion of capitalised stripping costs is charged to the income statement as operating costs.
The amount of production stripping costs capitalised or charged in a financial year is determined so that the stripping expense for the financial year reflects the estimated life-of-mine ratio. Changes to the estimated life-of-mine ratio are accounted for prospectively from the date of the change.
Inventories
Inventories, including work in progress, are valued at the lower of cost and net realisable value. Cost is determined primarily on the basis of average costs. For processed inventories, cost is derived on an absorption costing basis. Cost comprises cost of purchasing raw materials and cost of production, including attributable mining and manufacturing overheads.
Notes to Financial Statements continued
In respect of minerals inventory, quantities are assessed primarily through surveys and assays. In respect of petroleum inventory, quantities are derived through flow rate or tank volume measurement; volume calculation and composition is derived via sample analysis.
1 Accounting policies continued
Finance costs
Finance costs are generally expensed as incurred except where they relate to the financing of construction or development of qualifying assets requiring a substantial period of time to prepare for their intended future use.
Finance costs are capitalised up to the date when the asset is ready for its intended use. The amount of finance costs capitalised (before the effects of income tax) for the period is determined by applying the interest rate applicable to appropriate borrowings outstanding during the period to the average amount of capitalised expenditure for the qualifying assets during the period.
Taxation
Taxation on the profit or loss for the year comprises current and deferred tax. Taxation is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case the tax is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year using rates enacted or substantively enacted at the year end,year-end, and includes any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax assessment or deduction purposes. Where an asset has no deductible or depreciable amount for income tax purposes, but has a deductible amount on sale or abandonment for capital gains tax purposes, that amount is included in the determination of temporary differences. The tax effect of certain temporary differences is not recognised, principally with respect toto: goodwill; temporary differences arising on the initial recognition of assets or liabilities (other than those arising in a business combination or in a manner that initially impacted accounting or taxable profit); and temporary differences relating to investments in subsidiaries, jointly controlled entities and associates to the extent that the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference iswill not expected to reverse in the foreseeable future. The amount of deferred tax recognised is based on the expected manner and timing of realisation or settlement of the carrying amount of assets and liabilities, with the exception of items that have a tax base solely derived under capital gains tax legislation, using tax rates enacted or substantively enacted at period end. To the extent that an item’s tax base is solely derived from the amount deductible under capital gains tax legislation, deferred tax is determined as if such amounts are deductible in determining future assessable income.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each balance sheet date and amended to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group has both the right and the intention to settle its current tax assets and liabilities on a net or simultaneous basis.
Royalties and resource rent taxes are treated as taxation arrangements when they have the characteristics of a tax. This is considered to be the case when they are imposed under government authority and the amount payable is calculated by reference to revenue derived (net of any allowable deductions) after adjustment for items comprising temporary differences. For such arrangements, current and deferred tax is provided on the same basis as described above for other forms of taxation. Obligations arising from royalty arrangements that do not satisfy these criteria are recognised as current provisions and included in expenses.
Provision for employee benefits
Provision is made in the financial statements for all employee benefits, including on-costs. In relation to industry-based long service leave funds, the Group’s liability, including obligations for funding shortfalls, is determined after deducting the fair value of dedicated assets of such funds.
Liabilities for unpaid wages and salaries including non-monetary benefits,are recognised in sundry creditors. Current entitlements to annual leave and accumulating sick leave obligedaccrued for services up to be settled within 12 months of the reporting date are recognised in sundry creditors or provision for employee benefits in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities forpaid. Entitlements to non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.
Notes to Financial Statements continued
1 Accounting policies continued
taken.
The current liability for long service leave for(for which settlement within 12 months of the reporting date cannot be deferreddeferred) is recognised in the current provision for employee benefits and is measured in accordance with annual leave described above. The non-current liability for long service leave for which settlement can be deferred beyond 12 months from the reporting date is recognised in the non-current provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Superannuation, pensions and other post-retirement benefits
The Group operates or participates in a number of pension (including superannuation) schemes throughout the world. The funding of the schemes complies with local regulations. The assets of the schemes are generally held separately from those of the Group and are administered by trustees or management boards.
For defined contribution schemes or schemes operated on an industry-wide basis where it is not possible to identify assets attributable to the participation by the Group’s employees, the pension charge is calculated on the basis of contributions payable.
For defined benefit schemes, the cost of providing pensions is charged to the income statement so as to recognise current and past service costs, interest cost on defined benefit obligations, and the effect of any curtailments or settlements, net of expected returns on plan assets. Actuarial gains and losses are recognised directly in equity. An asset or liability is consequently recognised in the balance sheet based on the present value of defined benefit obligations, less any unrecognised past service costs and the fair value of plan assets, except that any such asset cannot exceed the total of unrecognised past service costs and the present value of expected refunds from and reductions in future contributions to the plan. Defined benefit obligations are estimated by discounting expected future payments using market yields at the reporting date on high-quality corporate bonds in countries that have developed corporate bond markets. However, where developed corporate bond markets do not exist, the discount
rates are selected by reference to national government bonds. In both instances, the bonds are selected with terms to maturity and currency that match, as closely as possible, the estimated future cash flows.
Certain Group companies provide post-retirement medical benefits to qualifying retirees. In some cases the benefits are provided through medical care schemes to which the Group, the employees, the retirees and covered family members contribute. In some schemes there is no funding of the benefits before retirement. These schemes are recognised on the same basis as described above for defined benefit pension schemes.
Closure and rehabilitation
The mining, extraction and processing activities of the Group normally give rise to obligations for site closure or rehabilitation. Closure and rehabilitation works can include facility decommissioning and dismantling; removal or treatment of waste materials; site and land rehabilitation. The extent of work required and the associated costs are dependent on the requirements of relevant authorities and the Group’s environmental policies.
Provisions for the cost of each closure and rehabilitation program are recognised at the time that environmental disturbance occurs. When the extent of disturbance increases over the life of an operation, the provision is increased accordingly. Costs included in the provision encompass all closure and rehabilitation activity expected to occur progressively over the life of the operation and at the time of closure in connection with disturbances at the reporting date. Routine operating costs that may impact the ultimate closure and rehabilitation activities, such as waste material handling conducted as an integral part of a mining or production process, are not included in the provision. Costs arising from unforeseen circumstances, such as the contamination caused by unplanned discharges, are recognised as an expense and liability when the event gives rise to an obligation which is probable and capable of reliable estimation.
The timing of the actual closure and rehabilitation expenditure is dependent upon a number of factors such as the life and nature of the asset, the operating licence conditions, the principles of our Charterthe Group’s charter and the environment in which the mine operates. Expenditure may occur before and after closure and can continue for an extended period of time dependent on closure and rehabilitation requirements. The majority of the expenditure is expected to be paid over periods of up to 50 years with some payments into perpetuity.
Notes to Financial Statements continued
1 Accounting policies continued
Closure and rehabilitation provisions are measured at the expected value of future cash flows, discounted to their present value and determined according to the probability of alternative estimates of cash flows occurring for each operation. Discount rates used are specific to the country in which the operation is located. Significant judgements and estimates are involved in forming expectations of future activities and the amount and timing of the associated cash flows. Those expectations are formed based on existing environmental and regulatory requirements or, if more stringent, Group environmental policies which give rise to a constructive obligation.
When provisions for closure and rehabilitation are initially recognised, the corresponding cost is capitalised as an asset, representing part of the cost of acquiring the future economic benefits of the operation. The capitalised cost of closure and rehabilitation activities is recognised in property, plant and equipment and depreciated accordingly. The value of the provision is progressively increased over time as the effect of discounting unwinds, creating an expense recognised in financial expenses.
Closure and rehabilitation provisions are also adjusted for changes in estimates. Those adjustments are accounted for as a change in the corresponding capitalised cost, except where a reduction in the provision is greater than the undepreciated capitalised cost of the related assets, in which case the capitalised cost is reduced to nil and the remaining adjustment is recognised in the income statement. In the case of closed sites, changes to estimated costs are recognised immediately in the income statement. Changes to the capitalised cost result in an adjustment to future depreciation and financial charges.depreciation. Adjustments to the estimated amount and timing of future closure and rehabilitation cash
flows are a normal occurrence in light of the significant judgements and estimates involved. Factors influencing those changes include:
revisions to estimated reserves, resources and lives of operations;
developments in technology;
regulatory requirements and environmental management strategies;
changes in the estimated extent and costs of anticipated activities, including the effects of inflation and movements in foreign exchange rates;
movements in interest rates affecting the discount rate applied.
Financial instruments
All financial assets are initially recognised at the fair value of consideration paid. Subsequently, financial assets are carried at fair value or amortised cost less impairment. Where non-derivative financial assets are carried at fair value, gains and losses on remeasurement are recognised directly in equity unless the financial assets have been designated as being held at fair value through profit or loss, in which case the gains and losses are recognised directly in the income statement. Financial assets are designated as being held at fair value through profit or loss when this is necessary to reduce measurement inconsistencies for related assets and liabilities. All financial liabilities other than derivatives are initially recognised at fair value of consideration received net of transaction costs as appropriate (initial cost) and subsequently carried at amortised cost.
Derivatives, including those embedded in other contractual arrangements but separated for accounting purposes because they are not clearly and closely related to the host contract, are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss on remeasurement depends on whether the derivative is designated as a hedging instrument, and, if so, the nature of the item being hedged. The measurement of fair value is based on quoted market prices. Where no price information is available from a quoted market source, alternative market mechanisms or recent comparable transactions, fair value is estimated based on the Group’s views on relevant future prices, net of valuation allowances to accommodate liquidity, modelling and other risks implicit in such estimates.
Forward exchange contracts and interest rate swaps held for hedging purposes are accounted for as either cash flow or fair value hedges. Interest rate swaps held for hedging purposes are generally accounted for as fair value hedges. Derivatives embedded within other contractual arrangements and the majority of commodity-based transactions executed through derivative contracts do not qualify for hedge accounting.
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Any difference between the change in fair value of the derivative and the hedged risk constitutes ineffectiveness of the hedge and is recognised immediately in the income statement.
Notes to Financial Statements continued
1 Accounting policies continued
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled into the income statement in the periods when the hedged item affects profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, plant and equipment purchases) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a hedged forecast transaction is no longer expected to occur, the cumulative hedge gain or loss that was reported in equity is immediately transferred to the income statement.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement.
Available for sale and trading investments
Available for sale and trading investments are measured at fair value. Gains and losses on the remeasurement of trading investments are recognised directly in the income statement. Gains and losses on the remeasurement of available for sale investments are recognised directly in equity and subsequently recognised in the income statement when realised by sale or redemption, or when a reduction in fair value is judged to represent an impairment.
Application of critical accounting policies and estimates
The preparation of the consolidated financial statements requires management to make judgements and estimates and form assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported revenue and expenses during the periods presented therein. On an ongoing basis, management evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the results of which form the basis of the carrying valuesamounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.
The Group has identified the following critical accounting policies under which significant judgements, estimates and assumptions are made and where actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.
Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements.
Reserve estimates
Reserves are estimates of the amount of product that can be economically and legally extracted from the Group’s properties. In order to estimate reserves, estimates are required about a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates.
Estimating the quantity and/or grade of reserves requires the size, shape and depth of orebodiesore bodies or fields to be determined by analysing geological data such as drilling samples. This process may require complex and difficult geological judgements to interpret the data.
Notes to Financial Statements continued
1 Accounting policies continued
The Group determines and reports ore reserves in Australia and the UK under the principles incorporated in the Australasian Code for Reporting Exploration Results of Mineral Resources and Ore Reserves December 2004, known as the JORC Code. The JORC Code requires the use of reasonable investment assumptions when reporting reserves. As a result, management will form a view of forecast sales prices, based on current and long-termlong-
term historical average price trends. For example, if current prices remain above long-term historical averages for an extended period of time, management may assume that lower prices will prevail in the future and as a result, those lower prices are used to estimate reserves under the JORC Code. Lower price assumptions generally result in lower estimates of reserves.
Reserve reporting requirements for SEC (United States of America) filings are specified in Industry Guide 7, which requires economic assumptions to be based on current economic conditions (which may differ from assumptions based on reasonable investment assumptions). Accordingly, for SEC filings, we test our reserve estimates derived under JORC against assumed ‘current economic conditions’. ‘Current economic conditions’ are based on the three-year average of historical average contract and market prices for commodities such as iron ore and coal, and the three-year average of historical averagemarket prices for commodities that are traded on the London Metal Exchange, such as copper and nickel. However, we only report a different reserve in the US if, based on the US SEC pricing assumptions test, the reserve will be lower than that reported under JORC in Australia and the UK.
Oil and gas reserves reported in Australia and the UK, and the US for SEC filing purposes, are based on the average of prices prevailing on the first day of each month for the past 12 months as required under the new SEC Rules ‘Modernisation of Oil & Gas Reporting’. Reserves reported in prior periods are based on the prices prevailing at the time of the estimates as previously required by Statement of Financial Accounting Standards No. 69 ‘Disclosures about Oil and Gas Producing Activities’, issued by the US Financial Accounting Standards Board.
Because the economic assumptions used to estimate reserves change from period to period, and because additional geological data is generated during the course of operations, estimates of reserves may change from period to period. Changes in reported reserves may affect the Group’s financial results and financial position in a number of ways, including the following:
Asset carrying amounts may be affected due to changes in estimated future cash flows.
Depreciation, depletion and amortisation charged in the income statement may change where such charges are determined by the units of production basis, or where the useful economic lives of assets change.
Overburden removal costs recorded on the balance sheet or charged to the income statement may change due to changes in stripping ratios or the units of production basis of depreciation.
Decommissioning, site restoration and environmental provisions may change where changes in estimated reserves affect expectations about the timing or cost of these activities.
The carrying amount of deferred tax assets may change due to changes in estimates of the likely recovery of the tax benefits.
Exploration and evaluation expenditure
The Group’s accounting policy for exploration and evaluation expenditure results in certain items of expenditure being capitalised for an area of interest where it is considered likely to be recoverable by future exploitation or sale or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. This policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular whether an economically viable extraction operation can be established. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised the expenditure under the policy, a judgement is made that recovery of the expenditure is unlikely, the relevant capitalised amount will be written off to the income statement.
Development expenditure
Development activities commence after project sanctioning by the appropriate level of management. Judgement is applied by management in determining when a project is economically viable. In exercising this judgement,
management is required to make certain estimates and assumptions similar to those described above for capitalised exploration and evaluation expenditure. Any such estimates and assumptions may change as new information becomes available. If, after having commenced the development activity, a judgement is made that a development asset is impaired, the appropriate amount will be written off to the income statement.
Notes to Financial Statements continued
1 Accounting policies continued
Property, plant and equipment and Intangible assets – recoverable amount
In accordance with the Group’s accounting policy, each asset or cash generating unit is evaluated every reporting period to determine whether there are any indications of impairment. If any such indication exists, a formal estimate of recoverable amount is performed and an impairment loss recognised to the extent that carrying amount exceeds recoverable amount. The recoverable amount of an asset or cash generating group of assets is measured at the higher of fair value less costs to sell and value in use.
The determination of fair value and value in use requires management to make estimates and assumptions about expected production and sales volumes, commodity prices (considering current and historical prices, price trends and related factors), reserves (see ‘Reserve estimates’ above), operating costs, closure and rehabilitation costs and future capital expenditure. These estimates and assumptions are subject to risk and uncertainty; hence there is a possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying valueamount of the assets may be further impaired or the impairment charge reduced with the impact recorded in the income statement.
Defined benefit pension schemes
The Group’s accounting policy for defined benefit pension schemes requires management to make judgements as to the nature of benefits provided by each scheme and thereby determine the classification of each scheme. For defined benefit schemes, management is required to make annual estimates and assumptions about future returns on classes of scheme assets, future remuneration changes, employee attrition rates, administration costs, changes in benefits, inflation rates, exchange rates, life expectancy and expected remaining periods of service of employees. In making these estimates and assumptions, management considers advice provided by external advisers, such as actuaries. Where actual experience differs to these estimates, actuarial gains and losses are recognised directly in equity. Refer to note 29 for details of the key assumptions.
Provision for closure and rehabilitation
The Group’s accounting policy for the recognition of closure and rehabilitation provisions requires significant estimates and assumptions such as: requirements of the relevant legal and regulatory framework; the magnitude of possible contaminationcontamination; and the timing, extent and costs of required closure and rehabilitation activity. These uncertainties may result in future actual expenditure differing from the amounts currently provided.
The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for operating sites are recognised in the balance sheet by adjusting both the closure and rehabilitation asset and provision. For closed sites, changes to estimated costs are recognised immediately in the income statement.
In addition to the uncertainties noted above, certain closure and rehabilitation activities are subject to legal disputes and depending on the ultimate resolution of these issues, the final liability for these matters could vary.
Taxation
The Group’s accounting policy for taxation, including royalty-related taxation, requires management’s judgement as to the types of arrangements considered to be a tax on income in contrast to an operating cost. Judgement is also required in assessing whether deferred tax assets and certain deferred tax liabilities are
recognised on the balance sheet. Deferred tax assets, including those arising from unrecouped tax losses, capital losses, foreign tax credits and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from temporary differences in investments, caused principally by retained earnings held in foreign tax jurisdictions, are recognised unless repatriation of retained earnings can be controlled and are not expected to occur in the foreseeable future.
Assumptions about the generation of future taxable profits and repatriation of retained earnings depend on management’s estimates of future cash flows. These depend on estimates of future production and sales volumes, commodity prices, reserves, operating costs, closure and rehabilitation costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation.legislation and its interaction with income tax accounting principles. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amount of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the income statement.
Notes to Financial Statements continued
1 Accounting policies continued
Rounding of amounts
Amounts in these financial statements have, unless otherwise indicated, been rounded to the nearest million dollars.
Comparatives
Where applicable, comparatives have been adjusted to measure or present them on the same basis as current period figures. Certain comparatives have also been restated on finalisation of business combination accounting – refer note 24.
Exchange rates
The following exchange rates relative to the US dollar have been applied in the financial statements:
Average year ended 30 June 2010 | Average year ended 30 June 2009 | Average year ended 30 June 2008 | As at 30 June 2010 | As at 30 June 2009 | As at 30 June 2008 | Average year ended 30 June 2012 | Average year ended 30 June 2011 | Average year ended 30 June 2010 | As at 30 June 2012 | As at 30 June 2011 | As at 30 June 2010 | |||||||||||||||||||||||||
Australian dollar(a) | 0.88 | 0.75 | 0.90 | 0.85 | 0.81 | 0.96 | 1.03 | 0.99 | 0.88 | 1.00 | 1.07 | 0.85 | ||||||||||||||||||||||||
Brazilian real | 1.80 | 2.08 | 1.78 | 1.81 | 1.95 | 1.60 | 1.78 | 1.68 | 1.80 | 2.08 | 1.57 | 1.81 | ||||||||||||||||||||||||
Canadian dollar | 1.06 | 1.16 | 1.01 | 1.06 | 1.16 | 1.01 | 1.00 | 1.00 | 1.06 | 1.03 | 0.97 | 1.06 | �� | |||||||||||||||||||||||
Chilean peso | 529 | 582 | 489 | 545 | 530 | 522 | 492 | 486 | 529 | 510 | 470 | 545 | ||||||||||||||||||||||||
Colombian peso | 1,970 | 2,205 | 1,935 | 1,920 | 2,159 | 1,899 | 1,825 | 1,843 | 1,970 | 1,807 | 1,779 | 1,920 | ||||||||||||||||||||||||
Euro | 0.75 | 0.73 | 0.72 | 0.80 | 0.69 | 0.82 | ||||||||||||||||||||||||||||||
South African rand | 7.59 | 9.01 | 7.29 | 7.68 | 7.82 | 7.91 | 7.77 | 7.01 | 7.59 | 8.41 | 6.80 | 7.68 | ||||||||||||||||||||||||
Euro | 0.72 | 0.73 | 0.68 | 0.82 | 0.71 | 0.63 | ||||||||||||||||||||||||||||||
UK pound sterling | 0.63 | 0.63 | 0.50 | 0.66 | 0.60 | 0.50 | 0.63 | 0.63 | 0.63 | 0.64 | 0.62 | 0.66 |
(a) | Displayed as US$ to A$1 based on common convention. |
Business segments
The Group operateshas nine Customer Sector Groupsreportable segments aligned with the commodities which we extract and market, reflecting the structure used by the Group’s management to assess the performance of the Group:
| Principal activities | |
Petroleum | Exploration, development and production of oil and gas | |
Aluminium | Mining of bauxite, refining of bauxite into alumina and smelting of alumina into aluminium metal | |
Base Metals | Mining of copper, silver, lead, zinc, molybdenum, uranium and gold | |
Diamonds and Specialty Products | Mining of diamonds and titanium minerals; potash development | |
Stainless Steel Materials | Mining and production of nickel products | |
Iron Ore | Mining of iron ore | |
Manganese | Mining of manganese ore and production of manganese metal and alloys | |
Metallurgical Coal | Mining of metallurgical coal | |
Energy Coal | Mining of thermal (energy) coal |
Group and unallocated items represent Group centre functions. Exploration and technology activities are recognised within relevant segments.
It is the Group’s policy that inter-segment sales are made on a commercial basis.
Year ended 30 June 2012 Revenue Group production Third party products Rendering of services Inter-segment revenue Total revenue(a) Underlying EBITDA(b) Depreciation and amortisation Impairment (losses)/reversals recognised Underlying EBIT (b) Comprising: Group production Third party products Underlying EBIT (b) Net finance costs(c) Exceptional items (d) Profit before taxation Capital expenditure Total assets(e) Total liabilities Notes to Financial Statements continued Petroleum Aluminium Base Metals Diamonds and
Specialty
Products Stainless Steel
Materials Iron Ore Manganese Metallurgical
Coal EnergyCoal Group and
unallocated
items/
eliminations BHP
Billiton
Group US$M 12,616 3,279 11,162 1,326 2,919 22,156 2,136 7,569 5,155 – 68,318 230 1,487 434 – 60 86 16 – 856 310 3,479 91 – – – – 320 – 7 11 – 429 – – – – 14 39 – – – (53 ) – 12,937 4,766 11,596 1,326 2,993 22,601 2,152 7,576 6,022 257 72,226 9,415 25 4,687 353 425 15,027 359 1,991 1,601 (137 ) 33,746 (2,916 ) (316 ) (793 ) (154 ) (393 ) (826 ) (102 ) (423 ) (374 ) (111 ) (6,408 ) (151 ) – 71 – – – (22 ) 2 – – (100 ) 6,348 (291 ) 3,965 199 32 14,201 235 1,570 1,227 (248 ) 27,238 6,345 (292 ) 3,982 199 18 14,170 231 1,570 1,137 (248 ) 27,112 3 1 (17 ) – 14 31 4 – 90 – 126 6,348 (291 ) 3,965 199 32 14,201 235 1,570 1,227 (248 ) 27,238 (730 ) (3,486 ) 23,022 5,830 852 2,650 598 513 5,634 418 2,808 893 27 20,223 38,461 9,931 17,638 3,468 4,513 22,726 2,556 9,406 7,067 13,507 129,273 5,763 1,371 3,627 1,033 1,391 4,024 1,100 2,561 2,636 38,682 62,188
Year ended 30 June 2011 Revenue Group production Third party products Rendering of services Inter-segment revenue Total revenue(a) Underlying EBITDA(b) Depreciation and amortisation Impairment (losses)/reversals recognised Underlying EBIT(b) Comprising: Group production Third party products Underlying EBIT(b) Net finance costs(c) Exceptional items(d) Profit before taxation Capital expenditure Total assets Total liabilities Petroleum Aluminium Base Metals Diamonds and
Specialty
Products Stainless Steel
Materials Iron Ore Manganese Metallurgical
Coal Energy Coal Group and
unallocated
items/
eliminations BHP
Billiton
Group US$M 10,603 3,601 13,550 1,517 3,698 20,182 2,423 7,565 4,651 – 67,790 127 1,620 602 – 158 93 – – �� 851 385 3,836 2 – – – – 98 – 8 5 – 113 5 – – – 5 39 – – – (49 ) – 10,737 5,221 14,152 1,517 3,861 20,412 2,423 7,573 5,507 336 71,739 8,319 596 7,525 779 990 13,946 780 3,027 1,469 (338 ) 37,093 (1,913 ) (330 ) (735 ) (192 ) (404 ) (618 ) (83 ) (357 ) (340 ) (67 ) (5,039 ) (76 ) – – – 2 – – – – – (74 ) 6,330 266 6,790 587 588 13,328 697 2,670 1,129 (405 ) 31,980 6,325 275 6,796 587 583 13,296 697 2,670 1,058 (405 ) 31,882 5 (9 ) (6 ) – 5 32 – – 71 – 98 6,330 266 6,790 587 588 13,328 697 2,670 1,129 (405 ) 31,980 (561 ) (164 ) 31,255 1,984 1,329 1,404 319 651 3,627 276 1,172 754 94 11,610 18,674 9,602 15,973 2,833 4,912 17,585 2,439 6,731 6,176 17,995 102,920 4,529 1,606 3,118 664 1,579 3,652 1,049 2,088 2,386 24,494 45,165
2 Segment reporting continued
US$M | Petroleum | Aluminium | Base Metals | Diamonds and Specialty Products | Stainless Steel Materials | Iron Ore | Manganese | Metallurgical Coal | Energy Coal | Group and unallocated items/ eliminations | BHP Billiton Group | ||||||||||||||||||||||
Year ended 30 June 2010 | |||||||||||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||||
Group production | 8,682 | 2,948 | 9,528 | 1,272 | 3,311 | 10,964 | 2,143 | 6,019 | 3,214 | — | 48,081 | ||||||||||||||||||||||
Third party products | 86 | 1,405 | 881 | — | 306 | 67 | 7 | — | 1,051 | 802 | 4,605 | ||||||||||||||||||||||
Rendering of services | 3 | — | — | — | — | 69 | — | 40 | — | — | 112 | ||||||||||||||||||||||
Inter-segment revenue | 11 | — | — | — | — | 39 | — | — | — | (50 | ) | — | |||||||||||||||||||||
Total revenue(a) | 8,782 | 4,353 | 10,409 | 1,272 | 3,617 | 11,139 | 2,150 | 6,059 | 4,265 | 752 | 52,798 | ||||||||||||||||||||||
Underlying EBITDA(b) | 6,571 | 684 | 5,393 | 648 | 1,085 | 6,496 | 784 | 2,363 | 971 | (482 | ) | 24,513 | |||||||||||||||||||||
Depreciation and amortisation | (1,998 | ) | (278 | ) | (729 | ) | (163 | ) | (427 | ) | (495 | ) | (72 | ) | (309 | ) | (228 | ) | (60 | ) | (4,759 | ) | |||||||||||
Impairment (losses)/reversals recognised | — | — | (32 | ) | — | 10 | — | — | (1 | ) | (13 | ) | 1 | (35 | ) | ||||||||||||||||||
Underlying EBIT(b) | 4,573 | 406 | 4,632 | 485 | 668 | 6,001 | 712 | 2,053 | 730 | (541 | ) | 19,719 | |||||||||||||||||||||
Comprising: | |||||||||||||||||||||||||||||||||
Group production | 4,570 | 393 | 4,639 | 485 | 646 | 6,003 | 717 | 2,053 | 642 | (540 | ) | 19,608 | |||||||||||||||||||||
Third party products | 3 | 13 | (7 | ) | — | 22 | (2 | ) | (5 | ) | — | 88 | (1 | ) | 111 | ||||||||||||||||||
Underlying EBIT(b) | 4,573 | 406 | 4,632 | 485 | 668 | 6,001 | 712 | 2,053 | 730 | (541 | ) | 19,719 | |||||||||||||||||||||
Net finance costs(c) | (459 | ) | |||||||||||||||||||||||||||||||
Exceptional items(d) | 312 | ||||||||||||||||||||||||||||||||
Profit before taxation | 19,572 | ||||||||||||||||||||||||||||||||
Capital expenditure | 1,951 | 1,019 | 763 | 127 | 265 | 3,838 | 182 | 653 | 881 | 87 | 9,766 | ||||||||||||||||||||||
Total assets | 12,733 | 8,078 | 14,970 | 2,588 | 4,507 | 13,592 | 2,082 | 5,597 | 5,425 | 19,280 | 88,852 | ||||||||||||||||||||||
Total liabilities | 3,175 | 1,318 | 2,621 | 527 | 1,154 | 2,526 | 794 | 1,475 | 1,965 | 23,968 | 39,523 | ||||||||||||||||||||||
|
Notes to Financial Statements continued
2 Segment reporting continued
US$M | Petroleum | Aluminium | Base Metals | Diamonds and Specialty Products | Stainless Steel Materials | Iron Ore | Manganese | Metallurgical Coal | Energy Coal | Group and unallocated items/ eliminations | BHP Billiton Group | ||||||||||||||||||||||
Year ended 30 June 2009 | |||||||||||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||||
Group production | 6,924 | 3,219 | 6,616 | 896 | 2,202 | 9,815 | 2,473 | 7,988 | 3,830 | — | 43,963 | ||||||||||||||||||||||
Third party products | 192 | 932 | 488 | — | 112 | 132 | 63 | 18 | 2,694 | 1,467 | 6,098 | ||||||||||||||||||||||
Rendering of services | 6 | — | — | — | — | 61 | — | 81 | — | 2 | 150 | ||||||||||||||||||||||
Inter-segment revenue | 89 | — | 1 | — | 41 | 40 | — | — | — | (171 | ) | — | |||||||||||||||||||||
Total revenue(a) | 7,211 | 4,151 | 7,105 | 896 | 2,355 | 10,048 | 2,536 | 8,087 | 6,524 | 1,298 | 50,211 | ||||||||||||||||||||||
Underlying EBITDA(b) | 5,456 | 476 | 1,994 | 370 | (366 | ) | 6,631 | 1,397 | 4,988 | 1,676 | (347 | ) | 22,275 | ||||||||||||||||||||
Depreciation and amortisation | (1,288 | ) | (298 | ) | (663 | ) | (222 | ) | (439 | ) | (384 | ) | (48 | ) | (277 | ) | (210 | ) | (42 | ) | (3,871 | ) | |||||||||||
Impairment (losses)/reversals recognised | (83 | ) | 14 | (39 | ) | (3 | ) | (49 | ) | (18 | ) | — | — | (6 | ) | (6 | ) | (190 | ) | ||||||||||||||
Underlying EBIT(b) | 4,085 | 192 | 1,292 | 145 | (854 | ) | 6,229 | 1,349 | 4,711 | 1,460 | (395 | ) | 18,214 | ||||||||||||||||||||
Comprising: | |||||||||||||||||||||||||||||||||
Group production | 4,081 | 202 | 1,326 | 145 | (905 | ) | 6,022 | 1,358 | 4,704 | 1,174 | (396 | ) | 17,711 | ||||||||||||||||||||
Third party products | 4 | (10 | ) | (34 | ) | — | 51 | 207 | (9 | ) | 7 | 286 | 1 | 503 | |||||||||||||||||||
Underlying EBIT(b) | 4,085 | 192 | 1,292 | 145 | (854 | ) | 6,229 | 1,349 | 4,711 | 1,460 | (395 | ) | 18,214 | ||||||||||||||||||||
Net finance costs(c) | (543 | ) | |||||||||||||||||||||||||||||||
Exceptional items(d) | (6,054 | ) | |||||||||||||||||||||||||||||||
Profit before taxation | 11,617 | ||||||||||||||||||||||||||||||||
Capital expenditure | 1,905 | 863 | 1,018 | 112 | 685 | 1,922 | 279 | 1,562 | 876 | 114 | 9,336 | ||||||||||||||||||||||
Total assets | 12,444 | 7,575 | 14,812 | 2,073 | 4,767 | 8,735 | 1,454 | 4,929 | 4,555 | 17,426 | 78,770 | ||||||||||||||||||||||
Total liabilities | 3,388 | 1,242 | 2,995 | 292 | 1,482 | 1,501 | 571 | 1,249 | 2,004 | 23,335 | 38,059 | ||||||||||||||||||||||
|
Notes to Financial Statements continued
2 Segment reporting continued
Petroleum | Aluminium | Base Metals | Diamonds and Specialty Products | Stainless Steel Materials | Iron Ore | Manganese | Metallurgical Coal | Energy Coal | Group and unallocated items/ eliminations | BHP Billiton Group | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
US$M | Petroleum | Aluminium | Base Metals | Diamonds and Specialty Products | Stainless Steel Materials | Iron Ore | Manganese | Metallurgical Coal | Energy Coal | Group and unallocated items/ eliminations | BHP Billiton Group | US$M | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 30 June 2008 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 30 June 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Group production | 7,997 | 4,675 | 13,231 | 969 | 5,040 | 9,246 | 2,844 | 3,818 | 3,921 | — | 51,741 | 8,682 | 2,948 | 9,528 | 1,272 | 3,311 | 10,964 | 2,143 | 6,019 | 3,214 | – | 48,081 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Third party products | 254 | 1,071 | 1,543 | — | 48 | 108 | 68 | 61 | 2,639 | 1,763 | 7,555 | 86 | 1,405 | 881 | – | 306 | 67 | 7 | – | 1,051 | 802 | 4,605 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rendering of services | 10 | — | — | — | — | 63 | — | 62 | — | 42 | 177 | 3 | – | – | – | – | 69 | – | 40 | – | – | 112 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inter-segment revenue | 121 | — | — | — | — | 38 | — | — | — | (159 | ) | — | 11 | – | – | – | – | 39 | – | – | – | (50 | ) | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total revenue(a) | 8,382 | 5,746 | 14,774 | 969 | 5,088 | 9,455 | 2,912 | 3,941 | 6,560 | 1,646 | 59,473 | 8,782 | 4,353 | 10,409 | 1,272 | 3,617 | 11,139 | 2,150 | 6,059 | 4,265 | 752 | 52,798 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Underlying EBITDA(b) | 6,653 | 1,775 | 8,657 | 364 | 1,739 | 4,962 | 1,692 | 1,209 | 1,326 | (346 | ) | 28,031 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Underlying EBITDA (b) | 6,571 | 684 | 5,393 | 648 | 1,085 | 6,496 | 784 | 2,363 | 971 | (482 | ) | 24,513 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Depreciation and amortisation | (1,113 | ) | (309 | ) | (658 | ) | (142 | ) | (450 | ) | (331 | ) | (48 | ) | (272 | ) | (241 | ) | (48 | ) | (3,612 | ) | (1,998 | ) | (278 | ) | (729 | ) | (163 | ) | (427 | ) | (495 | ) | (72 | ) | (309 | ) | (228 | ) | (60 | ) | (4,759 | ) | |||||||||||||||||||||||||||||||||
Impairment (losses)/reversals recognised | (55 | ) | (1 | ) | (10 | ) | (33 | ) | (14 | ) | — | — | — | (28 | ) | 4 | (137 | ) | – | – | (32 | ) | – | 10 | – | – | (1 | ) | (13 | ) | 1 | (35 | ) | ||||||||||||||||||||||||||||||||||||||||||||
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Underlying EBIT(b) | 5,485 | 1,465 | 7,989 | 189 | 1,275 | 4,631 | 1,644 | 937 | 1,057 | (390 | ) | 24,282 | 4,573 | 406 | 4,632 | 485 | 668 | 6,001 | 712 | 2,053 | 730 | (541 | ) | 19,719 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Comprising: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Group production | 5,483 | 1,445 | 8,190 | 189 | 1,275 | 4,748 | 1,644 | 941 | 1,146 | �� | (395 | ) | 24,666 | 4,570 | 393 | 4,639 | 485 | 646 | 6,003 | 717 | 2,053 | 642 | (540 | ) | 19,608 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Third party products | 2 | 20 | (201 | ) | — | — | (117 | ) | — | (4 | ) | (89 | ) | 5 | (384 | ) | 3 | 13 | (7 | ) | – | 22 | (2 | ) | (5 | ) | – | 88 | (1 | ) | 111 | ||||||||||||||||||||||||||||||||||||||||||||||
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Underlying EBIT(b) | 5,485 | 1,465 | 7,989 | 189 | 1,275 | 4,631 | 1,644 | 937 | 1,057 | (390 | ) | 24,282 | 4,573 | 406 | 4,632 | 485 | 668 | 6,001 | 712 | 2,053 | 730 | (541 | ) | 19,719 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Net finance costs(c) | (662 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exceptional items(d) | (137 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net finance costs (c) | (459 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exceptional items (d) | 312 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Profit before taxation | 23,483 | 19,572 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital expenditure | 2,116 | 556 | 989 | 123 | 1,191 | 1,832 | 155 | 500 | 438 | 29 | 7,929 | 1,951 | 1,019 | 763 | 127 | 265 | 3,838 | 182 | 653 | 881 | 87 | 9,766 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 11,874 | 7,672 | 15,356 | 1,964 | 8,477 | 8,656 | 1,688 | 3,916 | 5,173 | 11,232 | 76,008 | 12,733 | 8,078 | 14,970 | 2,588 | 4,507 | 13,592 | 2,082 | 5,597 | 5,425 | 19,280 | 88,852 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities | 2,980 | 1,308 | 4,197 | 270 | 1,202 | 1,862 | 534 | 1,269 | 3,174 | 20,169 | 36,965 | 3,175 | 1,318 | 2,621 | 527 | 1,154 | 2,526 | 794 | 1,475 | 1,965 | 23,968 | 39,523 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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(a) | Revenue not attributable to reportable segment reflects sales of freight and fuel to third parties. |
(b) | Underlying EBIT is earnings before net finance costs, |
(c) | Refer to note 6. |
(d) | Refer to note 3. |
(e) | ||
|
Notes to Financial Statements continuedGeographical information
2 Segment reporting continued
Geographical information
Revenue by location of customer | ||||||
2010 US$M | 2009 US$M | 2008 US$M | ||||
Australia | 4,515 | 4,621 | 5,841 | |||
United Kingdom | 1,289 | 3,042 | 3,091 | |||
Rest of Europe | 8,554 | 7,764 | 11,258 | |||
China | 13,236 | 9,873 | 11,670 | |||
Japan | 5,336 | 7,138 | 6,885 | |||
Other Asia | 9,840 | 9,280 | 10,111 | |||
North America | 5,547 | 4,020 | 4,771 | |||
South America | 2,013 | 1,652 | 2,640 | |||
Southern Africa | 1,227 | 1,374 | 2,003 | |||
Rest of world | 1,241 | 1,447 | 1,203 | |||
52,798 | 50,211 | 59,473 | ||||
Revenue by location of customer | ||||||||||||||||||
Non-current assets by location of assets(a) | 2012 | 2011 | 2010 | |||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | US$M | US$M | US$M | |||||||||||||
Australia | 35,267 | 28,779 | 28,166 | 5,318 | 5,487 | 4,515 | ||||||||||||
United Kingdom | 316 | 245 | 388 | |||||||||||||||
UK | 956 | 1,043 | 1,289 | |||||||||||||||
Rest of Europe | 7,419 | 8,370 | 8,554 | |||||||||||||||
China | 21,617 | 20,261 | 13,236 | |||||||||||||||
Japan | 8,920 | 9,002 | 5,336 | |||||||||||||||
Rest of Asia | 15,035 | 15,805 | 9,840 | |||||||||||||||
North America | 7,143 | 7,382 | 7,050 | 8,099 | 6,167 | 5,547 | ||||||||||||
South America | 9,230 | 9,163 | 8,823 | 2,013 | 2,592 | 2,013 | ||||||||||||
Southern Africa | 5,466 | 4,286 | 3,883 | 1,437 | 1,548 | 1,227 | ||||||||||||
Rest of world | 733 | 976 | 1,084 | 1,412 | 1,464 | 1,241 | ||||||||||||
Unallocated assets | 5,563 | 5,453 | 4,934 | |||||||||||||||
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| ||||||||||||||||
63,718 | 56,284 | 54,328 | 72,226 | 71,739 | 52,798 | |||||||||||||
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|
| ||||||||||||||||
Non-current assets by location of assets | ||||||||||||||||||
2012 | 2011 | 2010 | ||||||||||||||||
US$M | US$M | US$M | ||||||||||||||||
Australia | 53,072 | 42,723 | 35,267 | |||||||||||||||
UK | 238 | 229 | 316 | |||||||||||||||
North America | 31,124 | 11,748 | 7,143 | |||||||||||||||
South America | 11,857 | 10,125 | 9,230 | |||||||||||||||
Southern Africa | 5,381 | 5,944 | 5,466 | |||||||||||||||
Rest of world | 744 | 849 | 733 | |||||||||||||||
Unallocated assets(a) | 6,406 | 6,022 | 5,563 | |||||||||||||||
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| ||||||||||||||||
108,822 | 77,640 | 63,718 | ||||||||||||||||
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(a) |
|
|
Notes to Financial Statements continued
Exceptional items are those items where their nature and amount is considered material to the financial statements. Such items included within the GroupGroup’s profit for the year are detailed below.
Year ended 30 June 2010 | Gross US$M | Tax US$M | Net US$M | ||||||
Exceptional items by category | |||||||||
Pinal Creek rehabilitation | 186 | (53 | ) | 133 | |||||
Disposal of Ravensthorpe nickel operations | 653 | (196 | ) | 457 | |||||
Restructuring of operations and deferral of projects | (298 | ) | 12 | (286 | ) | ||||
Renegotiation of power supply agreements | (229 | ) | 50 | (179 | ) | ||||
Release of income tax provisions | — | 128 | 128 | ||||||
312 | (59 | ) | 253 | ||||||
Year ended 30 June 2012 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Impairment of Fayetteville goodwill and other assets | (2,835 | ) | 996 | (1,839 | ) | |||||||
Impairment of Nickel West goodwill and other assets | (449 | ) | 94 | (355 | ) | |||||||
Suspension or early closure of operations and the change in status of specific projects (a) | (502 | ) | 108 | (394 | ) | |||||||
Settlement of insurance claims(a) | 300 | (90 | ) | 210 | ||||||||
Recognition of deferred tax assets on enactment of MRRT and PRRT extension legislation in Australia | – | 637 | 637 | |||||||||
|
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|
|
| |||||||
(3,486 | ) | 1,745 | (1,741 | ) | ||||||||
|
|
|
|
|
|
(a) | Includes gross amounts attributable to non-controlling interest of US$(34) million (US$7 million tax expense). |
Exceptional items are classified by nature as follows:
Year ended 30 June 2012 | Impairment of goodwill and other assets | Idle capacity costs and inventory write-downs | Restructuring costs | Insurance recoveries | Gross | |||||||||||||||
US$M | US$M | US$M | US$M | US$M | ||||||||||||||||
Impairment of Fayetteville goodwill and other assets | (2,835 | ) | – | – | – | (2,835 | ) | |||||||||||||
Impairment of Nickel West goodwill and other assets | (406 | ) | (43 | ) | – | – | (449 | ) | ||||||||||||
Suspension or early closure of operations and the change in status of specific projects | (422 | ) | (40 | ) | (40 | ) | – | (502 | ) | |||||||||||
Settlement of insurance claims | – | – | – | 300 | 300 | |||||||||||||||
|
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|
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|
| |||||||||||
(3,663 | ) | (83 | ) | (40 | ) | 300 | (3,486 | ) | ||||||||||||
|
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|
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|
|
|
|
|
Impairment of Fayetteville goodwill and other assets:
As a result of the fall in United States domestic gas prices and the company’s decision to adjust its development plans, the Group has recognised impairments of goodwill and other assets in relation to its Fayetteville shale gas assets. A total impairment charge of US$2,835 million (US$996 million tax benefit) was recognised in the year ended 30 June 2012.
Impairment of Nickel West goodwill and other assets:
The Group has recognised impairments of goodwill and other assets at Nickel West as a result of the continued downturn in the nickel price and margin deterioration. A total impairment charge of US$449 million (US$94 million tax benefit) was recognised in the year ended 30 June 2012.
Suspension or early closure of operations and change in status of specific projects:
As part of our regular portfolio review, various operations and projects around the Group have either been suspended, closed early or changed in status. These include: the change in status of the Olympic Dam expansion project; the temporary suspension of production at TEMCO and the permanent closure of the Metalloys South Plant in South Africa; the indefinite cessation of production at Norwich Park; and the suspension of other minor capital projects. As a result, impairment charges of US$422 million (US$84 million tax benefit), idle capacity costs and inventory write-down of US$40 million (US$12 million tax benefit) and other restructuring costs of US$40 million (US$12 million tax benefit) were recognised in the year ended 30 June 2012.
Settlement of insurance claims:
During 2008, extreme weather across the central Queensland coalfields affected production from the BHP Billiton Mitsubishi Alliance (BMA) and BHP Billiton Mitsui Coal (BMC) operations. The Group settled insurance claims in respect of the lost production and insurance claim income of US$300 million (US$90 million tax expense) was recognised in the year ended 30 June 2012.
Recognition of deferred tax assets on enactment of MRRT and PRRT extension legislation in Australia:
The Australian Minerals Resource Rent Tax (MRRT) and Petroleum Resource Rent Tax (PRRT) extension legislation were enacted in March 2012. Under the legislation, the Group is entitled to a deduction against future
MRRT and PRRT liabilities based on the market value of its coal, iron ore and petroleum assets. A deferred tax asset, and an associated net income tax benefit of US$637 million, was recognised in the year ended 30 June 2012 to reflect the future deductibility of these market values for MRRT and PRRT purposes, to the extent they are considered recoverable.
Year ended 30 June 2011 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Withdrawn offer for PotashCorp | (314 | ) | – | (314 | ) | |||||||
Newcastle steelworks rehabilitation | 150 | (45 | ) | 105 | ||||||||
Release of income tax provisions | – | 718 | 718 | |||||||||
Reversal of deferred tax liabilities | – | 1,455 | 1,455 | |||||||||
|
|
|
|
|
| |||||||
(164 | ) | 2,128 | 1,964 | |||||||||
|
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|
|
|
|
Exceptional items are classified by nature as follows:
Year ended 30 June 2011 | External services | Closure and rehabilitation provisions released | Gross | |||||||||
US$M | US$M | US$M | ||||||||||
Withdrawn offer for PotashCorp | (314 | ) | – | (314 | ) | |||||||
Newcastle steelworks rehabilitation | – | 150 | 150 | |||||||||
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| |||||||
(314 | ) | 150 | (164 | ) | ||||||||
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|
|
Withdrawn offer for Potash Corporation of Saskatchewan Inc. (PotashCorp):
The Group withdrew its offer for PotashCorp on 15 November 2010 following the Board’s conclusion that the condition of the offer relating to receipt of a net benefit as determined by the Minister of Industry under the Investment Canada Act could not be satisfied. The Group incurred fees associated with the US$45 billion debt facility (US$240 million), investment bankers’, lawyers’ and accountants’ fees, printing expenses and other charges (US$74 million) in progressing this matter during the period up to the withdrawal of the offer, which were expensed as operating costs in the year ended 30 June 2011.
Newcastle steelworks rehabilitation:
The Group recognised a decrease of US$150 million (US$45 million tax charge) to rehabilitation obligations in respect of former operations at the Newcastle steelworks, Australia, following a full review of the progress of the Hunter River Remediation Project and estimated costs to completion.
Release of income tax provisions:
The Australian Taxation Office (ATO) issued amended assessments in prior years denying bad debt deductions arising from the investments in Beenup and Boodarie Iron and the denial of capital allowance claims made on the Boodarie Iron project. The Group challenged the assessments and was successful on all counts before the Full Federal Court. The ATO obtained special leave in September 2010 to appeal to the High Court in respect of the denial of capital allowance claims made on the Boodarie Iron project. The Group’s position in respect of the capital allowance claims on the Boodarie Iron project was confirmed by the High Court in June 2011. As a result of these appeals, US$138 million was released from the Group’s income tax provision in September 2010 and US$580 million in June 2011.
Reversal of deferred tax liabilities:
Consistent with the functional currency of the Group’s operations, eligible Australian entities elected to adopt a US dollar tax functional currency from 1 July 2011. As a result, the deferred tax liability relating to certain US dollar denominated financial arrangements was derecognised, resulting in a credit to income tax expense of US$1,455 million.
Year ended 30 June 2010 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Pinal Creek rehabilitation | 186 | (53 | ) | 133 | ||||||||
Disposal of Ravensthorpe nickel operations | 653 | (196 | ) | 457 | ||||||||
Restructuring of operations and deferral of projects | (298 | ) | 12 | (286 | ) | |||||||
Renegotiation of power supply agreements | (229 | ) | 50 | (179 | ) | |||||||
Release of income tax provisions | – | 128 | 128 | |||||||||
|
|
|
|
|
| |||||||
312 | (59 | ) | 253 | |||||||||
|
|
|
|
|
|
Exceptional items are classified by nature as follows:
Year ended 30 June 2010 | (Impairment)/ impairment reversal of property, plant and equipment | Closure and rehabilitation provisions released | Funding received for past and future rehabilitation costs | Contract cancellation, redundancy and other restructuring costs (incurred)/ released | Embedded derivative revaluations | Gross | ||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||
Renegotiation of power supply agreements | – | – | – | – | (229 | ) | (229 | ) | ||||||||||||||||
Restructuring of operations and deferral of projects | (292 | ) | – | – | (6 | ) | – | (298 | ) | |||||||||||||||
Disposal of the Ravensthorpe nickel operations | 611 | – | – | 42 | – | 653 | ||||||||||||||||||
Pinal Creek rehabilitation | – | 130 | 56 | – | – | 186 | ||||||||||||||||||
|
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| |||||||||||||
319 | 130 | 56 | 36 | (229 | ) | 312 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Pinal Creek rehabilitation:
On 22 February 2010, a settlement was reached in relation to the Pinal Creek, (US)US, groundwater contamination which resulted in other parties taking on full responsibility for groundwater remediation and partly funding the Group for past and future rehabilitation costs. As a result, a gain of US$186 million (US$53 million tax expense) has beenwas recognised reflecting the release of rehabilitation provisions and cash received.
Disposal of Ravensthorpe nickel operations:
On 9 December 2009, the Group announced it had signed an agreement to sell the Ravensthorpe nickel operations, (Australia).Australia. The sale was completed on 10 February 2010. As a result of the sale, impairment charges
recognised as exceptional items in the financial year ended 30 June 2009 have beenwere partially reversed totalling US$611 million (US$183 million tax expense). In addition, certain obligations that remained with the Group were mitigated and related provisions released; together with minor net operating costs this resulted in a gain of US$42 million (US$13 million tax expense).
Restructuring of operations and deferral of projects:
Continuing power supply constraints impacting the Group’s three Aluminium smelter operations in southern Africa, and temporary delays with the Guinea Alumina project, have givengave rise to charges for the impairment of property, plant and equipment and restructuring provisions. A total charge of US$298 million (US$12 million tax benefit) was recognised by the Group in the financial year ended 30 June 2010.
Renegotiation of power supply arrangements:
Renegotiation of long-term power supply arrangements in southern Africa have impacted the value of embedded derivatives contained within those arrangements. A total charge of US$229 million (US$50 million tax benefit) was recognised by the Group in the financial year ended 30 June 2010.
Release of income tax provisions:
The Australian Taxation Office (ATO)ATO issued amended assessments in prior years denying bad debt deductions arising from the investments in Hartley, Beenup and Boodarie Iron and the denial of capital allowance claims made on the Boodarie Iron project. BHP Billiton lodged objections and has beenwas successful on all counts in the Federal Court and the Full Federal Court. The ATO has not sought to appeal the Boodarie Iron bad debt disallowance to the High Court which resulted in a release of US$128 million from the Group’s income tax provisions. The ATO sought special leave to appeal to the High Court in relation to the Beenup bad debt disallowance and the denial of the capital allowance claims on the Boodarie Iron project and has beenwas granted special leave only in relation to the denial of the capital allowance claims on the Boodarie Iron project.
Notes to Financial Statements continued
3 Exceptional items continued
Exceptional items are classified by nature of expense as follows:
Year ended 30 June 2010 US$M | (Impairment)/ impairment reversal of property, plant and equipment | Closure and rehabilitation provisions released | Funding received for past and future rehabilitation costs | Contract cancellation, redundancy and other restructuring costs (incurred)/ released | Embedded derivative revaluations | Gross | ||||||||||
Renegotiation of power supply agreements | — | — | — | — | (229 | ) | (229 | ) | ||||||||
Restructuring of operations and deferral of projects | (292 | ) | — | — | (6 | ) | — | (298 | ) | |||||||
Disposal of the Ravensthorpe nickel operations | 611 | — | — | 42 | — | 653 | ||||||||||
Pinal Creek rehabilitation | — | 130 | 56 | — | — | 186 | ||||||||||
319 | 130 | 56 | 36 | (229 | ) | 312 | ||||||||||
Year ended 30 June 2009 | Gross US$M | Tax US$M | Net US$M | ||||||
Exceptional items by category | |||||||||
Suspension of Ravensthorpe nickel operations | (3,615 | ) | 1,076 | (2,539 | ) | ||||
Announced sale of Yabulu refinery | (510 | ) | (175 | ) | (685 | ) | |||
Withdrawal or sale of other operations | (665 | ) | (23 | ) | (688 | ) | |||
Deferral of projects and restructuring of operations | (306 | ) | 86 | (220 | ) | ||||
Newcastle steelworks rehabilitation | (508 | ) | 152 | (356 | ) | ||||
Lapsed offers for Rio Tinto | (450 | ) | 93 | (357 | ) | ||||
(6,054 | ) | 1,209 | (4,845 | ) | |||||
Suspension of Ravensthorpe nickel operations:
On 21 January 2009, the Group announced the suspension of operations at Ravensthorpe nickel operations (Australia) and as a consequence stopped the processing of the mixed nickel cobalt hydroxide product at Yabulu (Australia). As a result, an impairment charge and increased provisions for contract cancellation, redundancy and other closure costs of US$3,615 million (US$1,076 million tax benefit) were recognised. This exceptional item did not include the loss from operations of Ravensthorpe nickel operations of US$173 million.
Announced sale of Yabulu refinery:
On 3 July 2009, the Group announced the sale of the Yabulu operations. As a result, impairment charges of US$510 million (US$ nil tax benefit) were recognised in addition to those recognised on suspension of the Ravensthorpe nickel operations. As a result of the sale, deferred tax assets of US$175 million were no longer expected to be realised by the Group and were recognised as a charge to income tax expense. The remaining assets and liabilities of the Yabulu operations were classified as held for sale as at 30 June 2009.
Withdrawal or sale of other operations:
As part of the Group’s regular review of the long-term viability of operations, a total charge of US$665 million (US$23 million tax expense) was recognised primarily in relation to the decisions to cease development of the Maruwai Haju trial mine (Indonesia), sell the Suriname operations, suspend copper sulphide mining operations at Pinto Valley (US) and cease the pre-feasibility study at Corridor Sands (Mozambique). The remaining assets and liabilities of the Suriname operations were classified as held for sale as at 30 June 2009.
Deferral of projects and restructuring of operations:
As part of the Group’s regular review of the long-term viability of continuing operations, a total charge of US$306 million (US$86 million tax benefit) was recognised primarily in relation to the deferral of expansions at the Nickel West operations (Australia), deferral of the Guinea Alumina project (Guinea) and the restructuring of the Bayside Aluminium Casthouse operations (South Africa).
Notes to Financial Statements continued
3 Exceptional items continued
Newcastle steelworks rehabilitation:
The Group recognised a charge of US$508 million (US$152 million tax benefit) for additional rehabilitation obligations in respect of former operations at the Newcastle steelworks (Australia). The increase in obligations related to changes in the estimated volume of sediment in the Hunter River requiring remediation and treatment, and increases in estimated treatment costs.
Lapsed offers for Rio Tinto:
The Group’s offers for Rio Tinto lapsed on 27 November 2008 following the Board’s decision that it no longer believed that completion of the offers was in the best interests of BHP Billiton shareholders. The Group incurred fees associated with the US$55 billion debt facility (US$156 million cost, US$31 million tax benefit), investment bankers’, lawyers’ and accountants’ fees, printing expenses and other charges (US$294 million cost, US$62 million tax benefit) in progressing this matter over the 18 months up to the lapsing of the offers, which were expensed in year ended 30 June 2009.
Exceptional items are classified by nature of expense as follows:
Year ended 30 June 2009 US$M | Impairments of property, plant and equipment (a) | Closure and rehabilitation provisions | Contract cancellation, redundancy and other closure costs | Inventory impairments | Rio Tinto offer costs | Gross | ||||||||||||
Suspension of Ravensthorpe nickel operations | (3,260 | ) | — | (228 | ) | (127 | ) | — | (3,615 | ) | ||||||||
Announced sale of Yabulu refinery | (510 | ) | — | — | — | — | (510 | ) | ||||||||||
Withdrawal or sale of other operations | (463 | ) | (34 | ) | (137 | ) | (31 | ) | — | (665 | ) | |||||||
Deferral of projects and restructuring of operations | (217 | ) | — | (80 | ) | (9 | ) | — | (306 | ) | ||||||||
Newcastle steelworks rehabilitation | — | (508 | ) | — | — | — | (508 | ) | ||||||||||
Lapsed offers for Rio Tinto | — | — | — | — | (450 | ) | (450 | ) | ||||||||||
(4,450 | ) | (542 | ) | (445 | ) | (167 | ) | (450 | ) | (6,054 | ) | |||||||
|
Assets held for sale:
The remaining assets and liabilities of Yabulu and Suriname were classified as current assets held for sale of US$213 million (comprising inventory of US$131 million, property, plant and equipment of US$55 million and other working capital assets of US$27 million), and as current liabilities held for sale of US$363 million (comprising closure and rehabilitation provision of US$260 million and working capital liabilities of US$103 million) at 30 June 2009.
Year ended 30 June 2008 | Gross US$M | Tax US$M | Net US$M | ||||
Exceptional items by category | |||||||
Recognition of benefit of tax losses in respect of the acquisition of WMC and consequent reduction in goodwill | (137 | ) | 159 | 22 | |||
(137 | ) | 159 | 22 | ||||
Recognition of benefit of tax losses in respect of the acquisition of WMC and consequent reduction in goodwill:
Tax losses incurred by WMC Resources Ltd (WMC) were not recognised as a deferred tax asset at acquisition pending a ruling application to the Australian Taxation Office. The ruling was issued confirming the availability of those losses. This resulted in the recognition of a deferred tax asset (US$197 million) and consequential adjustment to deferred tax liabilities (US$38 million) through income tax expense at current exchange rates. As a further consequence, the Group recognised an expense for a corresponding reduction in goodwill measured at the exchange rate at the date of acquisition.
Notes to Financial Statements continued
2012 | 2011 | 2010 | ||||||||||
US$M | US$M | US$M | ||||||||||
Dividend income | 25 | 12 | 16 | |||||||||
Royalties | 28 | 27 | 12 | |||||||||
Gains/(losses) on sale of property, plant and equipment | 99 | (12 | ) | 76 | ||||||||
(Losses)/gains on sale of investments | (2 | ) | 53 | 22 | ||||||||
Gains on sale of subsidiaries and operations | 19 | – | 16 | |||||||||
Commission income | 131 | 142 | 118 | |||||||||
Insurance recoveries (a) | 304 | 10 | 21 | |||||||||
Other income | 302 | 299 | 247 | |||||||||
|
|
|
|
|
| |||||||
Total other income | 906 | 531 | 528 | |||||||||
|
|
|
|
|
|
2010 US$M | 2009 US$M | 2008 US$M | ||||||
Dividend income | 16 | 33 | 53 | |||||
Royalties | 12 | 11 | 18 | |||||
Gains on sale of property, plant and equipment | 76 | 48 | 64 | |||||
Gains/(losses) on sale of investments | 22 | 8 | (1 | ) | ||||
Gains/(losses) on sale of subsidiaries and operations | 16 | (18 | ) | 66 | ||||
Commission income | 118 | 106 | 100 | |||||
Insurance recoveries | 21 | 88 | 38 | |||||
Other income | 247 | 313 | 310 | |||||
Total other income | 528 | 589 | 648 | |||||
(a) | Includes exceptional item of US$300 million (2011: US$ nil; 2010: US$ nil). Refer to note 3. |
2010 US$M | 2009 US$M | 2008 US$M | |||||||
Changes in inventories of finished goods and work in progress | (501 | ) | (11 | ) | (750 | ) | |||
Raw materials and consumables used | 6,652 | 6,227 | 7,529 | ||||||
Employee benefits expense | 4,661 | 4,147 | 4,271 | ||||||
External services (including transportation) | 9,733 | 9,725 | 8,947 | ||||||
Third party commodity purchases | 4,478 | 5,785 | 7,820 | ||||||
Net foreign exchange losses/(gains) | 112 | (324 | ) | 243 | |||||
Research and development costs before crediting related grants | 65 | 156 | 244 | ||||||
Fair value change on derivatives(a) | 259 | (560 | ) | 433 | |||||
Impairment of available for sale financial assets | 2 | 71 | — | ||||||
Government royalties paid and payable | 1,653 | 1,905 | 1,369 | ||||||
Depreciation and amortisation expense | 4,759 | 3,871 | 3,612 | ||||||
Exploration and evaluation expenditure incurred and expensed in the current period | 1,030 | 1,009 | 859 | ||||||
Exploration and evaluation expenditure previously capitalised, written off as unsuccessful or abandoned(b) | 256 | 96 | 47 | ||||||
Impairment of property, plant and equipment(b) | 89 | 4,439 | 90 | ||||||
Reversal of previously written off capitalised exploration and evaluation expenditure | (1 | ) | — | — | |||||
Reversal of previously impaired property, plant and equipment(b) | (630 | ) | — | — | |||||
Impairment of goodwill and other intangible assets | — | 34 | — | ||||||
Reduction of previously recognised goodwill | — | — | 137 | ||||||
Operating lease rentals | 390 | 409 | 451 | ||||||
All other operating expenses | 288 | 1,661 | 674 | ||||||
Total expenses | 33,295 | 38,640 | 35,976 | ||||||
Notes to Financial Statements continued
5 Expenses continued
2012 | 2011 | 2010 | ||||||||||||||||
US$M | US$M | US$M | ||||||||||||||||
Changes in inventories of finished goods and work in progress | 91 | (394 | ) | (501 | ) | |||||||||||||
Raw materials and consumables used | 8,483 | 8,148 | 6,371 | |||||||||||||||
Employee benefits expense | 6,663 | 5,299 | 4,661 | |||||||||||||||
External services (including transportation) | 14,716 | 11,705 | 9,538 | |||||||||||||||
Third party commodity purchases | 3,381 | 3,758 | 4,478 | |||||||||||||||
Net foreign exchange (gains)/losses | (355 | ) | 1,074 | 112 | ||||||||||||||
Research and development costs before crediting related grants | 75 | 74 | 65 | |||||||||||||||
Fair value change on derivatives(a) | (307 | ) | 63 | 259 | ||||||||||||||
Impairment of available for sale financial assets | 1 | – | 2 | |||||||||||||||
Government royalties paid and payable | 3,051 | 2,887 | 1,653 | |||||||||||||||
Depreciation and amortisation expense | 6,408 | 5,039 | 4,759 | |||||||||||||||
Exploration and evaluation expenditure incurred and expensed in the current period | 1,602 | 981 | 1,030 | |||||||||||||||
Exploration and evaluation expenditure previously capitalised, written off as unsuccessful or abandoned (b) | 144 | 73 | 256 | |||||||||||||||
Impairment of property, plant and equipment(c) | 3,114 | 11 | 89 | |||||||||||||||
Reversal of previously written off capitalised exploration and evaluation expenditure | – | – | (1 | ) | ||||||||||||||
Reversal of previously impaired property, plant and equipment(d) | (71 | ) | (10 | ) | (630 | ) | ||||||||||||
Impairment of goodwill and other intangible assets(e) | 575 | – | – | |||||||||||||||
Operating lease rentals | 635 | 451 | 390 | |||||||||||||||
All other operating expenses | 1,174 | 1,295 | 764 | |||||||||||||||
|
|
| ||||||||||||||||
Total expenses | 49,380 | 40,454 | 33,295 | |||||||||||||||
|
|
| ||||||||||||||||
2012 | 2011 | 2010 | ||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | US$M | US$M | US$M | |||||||||||||
Aggregate employee benefits expense | ||||||||||||||||||
Wages, salaries and redundancies | 4,271 | 3,877 | 3,949 | 6,218 | 4,834 | 4,271 | ||||||||||||
Employee share awards(c) | 210 | 164 | 138 | |||||||||||||||
Employee share awards (f) | 256 | 199 | 210 | |||||||||||||||
Social security costs | 13 | 15 | 14 | 12 | 18 | 13 | ||||||||||||
Pensions and other post-retirement obligations costs – refer to note 29 | 336 | 289 | 259 | 429 | 406 | 336 | ||||||||||||
|
|
| ||||||||||||||||
4,830 | 4,345 | 4,360 | 6,915 | 5,457 | 4,830 | |||||||||||||
|
|
| ||||||||||||||||
Less employee benefits expense classified as exploration and evaluation expenditure above | 169 | 198 | 89 | 252 | 158 | 169 | ||||||||||||
|
|
| ||||||||||||||||
Employee benefits expense | 4,661 | 4,147 | 4,271 | 6,663 | 5,299 | 4,661 | ||||||||||||
|
|
|
(a) | Fair value change on derivatives includes realised |
(b) | Includes exceptional items of US$ |
(c) | Includes exceptional items of US$3,088 million |
(d) | Includes exceptional items of US$ nil (2011: US$ nil; 2010: US$611 million). Refer to note 3. |
(e) | Includes exceptional items of US$575 million (2011: US$ nil; 2010: US$ nil). Refer to note 3. |
Employee share awards expense is US$ |
Notes to Financial Statements continued
2012 | 2011 | 2010 | |||||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | US$M | US$M | US$M | ||||||||||||||||
Financial expenses | |||||||||||||||||||||
Interest on bank loans and overdrafts(a) | 24 | 47 | 52 | 22 | 19 | 24 | |||||||||||||||
Interest on all other borrowings(a) | 460 | 527 | 670 | 696 | 471 | 460 | |||||||||||||||
Finance lease and hire purchase interest | 14 | 15 | 14 | 37 | 12 | 14 | |||||||||||||||
Dividends on redeemable preference shares | — | 1 | 1 | – | – | – | |||||||||||||||
Discounting on provisions and other liabilities | 359 | 315 | 310 | 481 | 411 | 359 | |||||||||||||||
Discounting on post-retirement employee benefits | 130 | 132 | 138 | 129 | 128 | 130 | |||||||||||||||
Interest capitalised(b) | (301 | ) | (149 | ) | (204 | ) | |||||||||||||||
Interest capitalised (b) | (314 | ) | (256 | ) | (301 | ) | |||||||||||||||
Fair value change on hedged loans | 131 | 390 | 259 | 345 | (140 | ) | 131 | ||||||||||||||
Fair value change on hedging derivatives | (138 | ) | (377 | ) | (257 | ) | (376 | ) | 110 | (138 | ) | ||||||||||
Exchange variations on net debt | (5 | ) | (49 | ) | (28 | ) | (65 | ) | 51 | (5 | ) | ||||||||||
|
|
| |||||||||||||||||||
674 | 852 | 955 | 955 | 806 | 674 | ||||||||||||||||
|
|
| |||||||||||||||||||
Financial income | |||||||||||||||||||||
Interest income(c) | (117 | ) | (198 | ) | (168 | ) | |||||||||||||||
Interest income (c) | (122 | ) | (141 | ) | (117 | ) | |||||||||||||||
Expected return on pension scheme assets | (98 | ) | (111 | ) | (125 | ) | (103 | ) | (104 | ) | (98 | ) | |||||||||
|
|
| |||||||||||||||||||
(215 | ) | (309 | ) | (293 | ) | (225 | ) | (245 | ) | (215 | ) | ||||||||||
|
|
| |||||||||||||||||||
Net finance costs | 459 | 543 | 662 | 730 | 561 | 459 | |||||||||||||||
|
|
|
(a) |
|
(b) | Interest has been capitalised at the rate of interest applicable to the specific borrowings financing the assets under construction or, where financed through general borrowings, at a capitalisation rate representing the average interest rate on such borrowings. For the year ended 30 June |
(c) |
|
2012 | 2011 | 2010 | ||||||||||
US$M | US$M | US$M | ||||||||||
Total taxation expense comprises: | ||||||||||||
Current tax expense | 8,303 | 8,845 | 5,395 | |||||||||
Deferred tax (benefit)/expense | (813 | ) | (1,536 | ) | 1,168 | |||||||
|
|
|
|
|
| |||||||
7,490 | 7,309 | 6,563 | ||||||||||
|
|
|
|
|
| |||||||
Total taxation expense attributed to geographical jurisdiction | ||||||||||||
UK | (21 | ) | 21 | 178 | ||||||||
Australia | 6,043 | 3,503 | 3,798 | |||||||||
Rest of world | 1,468 | 3,785 | 2,587 | |||||||||
|
|
|
|
|
| |||||||
7,490 | 7,309 | 6,563 | ||||||||||
|
|
|
|
|
|
2010 US$M | 2009 US$M | 2008 US$M | |||||
Total taxation expense comprises: | |||||||
Current tax expense | 5,395 | 6,078 | 7,103 | ||||
Deferred tax expense | 1,168 | (799 | ) | 418 | |||
6,563 | 5,279 | 7,521 | |||||
Total taxation expense attributed to geographical jurisdiction | |||||||
UK | 178 | 319 | 217 | ||||
Australia | 3,798 | 3,158 | 3,397 | ||||
Rest of world | 2,587 | 1,802 | 3,907 | ||||
6,563 | 5,279 | 7,521 | |||||
2012 | 2011 | 2010 | ||||||||||||||||||||||
% | US$M | % | US$M | % | US$M | |||||||||||||||||||
Factors affecting income tax expense for the period | ||||||||||||||||||||||||
Income tax expense differs to the standard rate of corporation tax as follows: | ||||||||||||||||||||||||
Profit before taxation | 23,022 | 31,255 | 19,572 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Tax on profit at standard rate of 30 per cent | 30.0 | 6,907 | 30.0 | 9,377 | 30.0 | 5,872 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Investment and development allowance | (1.2 | ) | (283 | ) | (1.0 | ) | (298 | ) | (1.4 | ) | (279 | ) | ||||||||||||
Amounts under/(over) provided in prior years(a) | 0.3 | 70 | (1.3 | ) | (397 | ) | (1.0 | ) | (181 | ) | ||||||||||||||
Initial recognition of tax assets | (0.6 | ) | (136 | ) | – | (13 | ) | (0.2 | ) | (42 | ) | |||||||||||||
Non-deductible depreciation, amortisation and exploration expenditure | 0.7 | 150 | 0.4 | 109 | 0.5 | 92 | ||||||||||||||||||
Tax rate differential on foreign income | (1.0 | ) | (219 | ) | (0.1 | ) | (32 | ) | 0.5 | 94 | ||||||||||||||
Tax on remitted and unremitted foreign earnings | 0.8 | 182 | 0.8 | 251 | 1.1 | 221 | ||||||||||||||||||
Non tax-effected operating losses and capital gains | 0.7 | 168 | 0.3 | 108 | 0.8 | 152 | ||||||||||||||||||
Exchange variations and other translation adjustments | 1.1 | 250 | (4.7 | ) | (1,473 | ) | 0.5 | 106 | ||||||||||||||||
Tax rate changes | – | – | 0.1 | 17 | 0.1 | 17 | ||||||||||||||||||
Other(b) | 0.6 | 149 | (3.7 | ) | (1,168 | ) | 0.3 | 60 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income tax expense | 31.4 | 7,238 | 20.8 | 6,481 | 31.2 | 6,112 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Royalty-related taxation (net of income tax benefit) (c) | 1.1 | 252 | 2.6 | 828 | 2.3 | 451 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total taxation expense | 32.5 | 7,490 | 23.4 | 7,309 | 33.5 | 6,563 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(a) | ||
Includes exceptional items of US$ nil (2011: US$718 million; 2010: US$128 million) for the release of tax provisions following the Group’s position being confirmed with respect to ATO amended assessments. Refer to note 3. |
Notes to Financial Statements continued
Includes exceptional items of US$ nil (2011: US$1,455 million; 2010: US$ nil) for the reversal of deferred tax liabilities following the election of eligible Australian entities to adopt a USD tax functional currency. Refer to note 3. Factors affecting income tax expense for the period Income tax expense differs to the standard rate of corporation tax as follows: Profit before taxation Tax on profit at standard rate of 30 per cent Investment and development allowance Amounts (over)/under provided in prior years (Initial recognition)/derecognition of tax assets Non-deductible depreciation, amortisation and exploration expenditure Tax rate differential on foreign income Tax on remitted and unremitted foreign earnings Non tax-effected operating losses and capital gains Exchange variations and other translation adjustments Tax rate changes Other Income tax expense Royalty related taxation (net of income tax benefits) Total taxation expense Includes exceptional items of US$637 million (2011: US$ nil; 2010: US$ nil) for the recognition of tax benefit on enactment of the MRRT and PRRT extension legislation in Australia. Refer to note 3. Income tax Actuarial losses on pension and medical schemes Available for sale investments: Net valuation gains/(losses) taken to equity Net valuation losses transferred to the income statement Cash flow hedges: (Losses)/gains taken to equity Realised losses transferred to the income statement Unrealised gain transferred to the income statement Gains transferred to the initial carrying amount of hedged items Exchange fluctuations on translation of foreign operations taken to equity Exchange fluctuations on translation of foreign operations transferred to the income statement Employee entitlements taken directly to retained earnings on exercise Accrued employee entitlements for unexercised awards Total income tax relating to components of other comprehensive income(a) Income tax effect of: Actuarial losses on pension and medical schemes Available for sale investments: Net valuation losses/gains taken to equity Net valuation gains/losses transferred to the income statement Cash flow hedges: Losses taken to equity Unrealised losses transferred to the income statement Exchange fluctuations on translation of foreign operations taken to equity Exchange fluctuations on translation of foreign operations transferred to the income statement Employee share awards taken directly to retained earnings on exercise Accrued employee entitlements for unexercised awards Total income tax credit relating to components of other comprehensive income(a) Included within total income tax relating to components of other comprehensive income is US$7 Income tax and deferred tax continued(b) 2010 2009 2008 % US$M % US$M % US$M 19,572 11,617 23,483 30.0 5,872 30.0 3,485 30.0 7,045 (1.4 ) (279 ) (1.2 ) (142 ) (1.6 ) (386 ) (1.0 ) (181 ) 0.1 16 (0.3 ) (61 ) (0.2 ) (42 ) 2.5 290 (0.8 ) (183 ) 0.5 92 0.7 91 0.6 147 0.5 94 (0.2 ) (26 ) 0.7 166 1.1 221 1.7 196 0.7 158 0.8 152 2.9 338 0.2 54 0.5 106 3.8 444 (1.0 ) (229 ) 0.1 17 — — — (9 ) 0.3 60 0.8 92 0.4 96 31.2 6,112 41.1 4,784 28.9 6,798 2.3 451 4.3 495 3.1 723 33.5 6,563 45.4 5,279 32.0 7,521 (c) relating to components ofrecognised in other comprehensive income is as follows: 2010
US$M 2009
US$M 2008
US$M 15 62 20 (16 ) (21 ) 8 — — — 5 (245 ) 147 (1 ) (7 ) (26 ) — 15 — — 5 49 — — — — — — 39 27 57 69 (89 ) 51 111 (253 ) 306 2012 2011 2010 US$M US$M US$M 76 26 15 (12 ) 37 (16 ) – – – 96 – 5 (61 ) – (1 ) – – – – – – 46 70 39 (56 ) (13 ) 69 89 120 111 (a) 7543 million relating to deferred taxes and US$3646 million relating to current taxes (2009:(2011: US$(297)47 million and US$4473 million; 2008:2010: US$23475 million and US$7236 million).BHP BILLITON 2010 FINANCIAL STATEMENTSF–33
Notes to Financial Statements continued
7 Income tax and deferred tax continued
The movement for the year in the Group’s net deferred tax position is as follows:
2012 | 2011 | 2010 | |||||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | US$M | US$M | US$M | ||||||||||||||||
Net deferred tax (liability)/asset | |||||||||||||||||||||
At the beginning of the financial year | 872 | 370 | 572 | 1,310 | (267 | ) | 872 | ||||||||||||||
Income tax (charge)/credit recorded in the income statement | (1,151 | ) | 799 | (427 | ) | ||||||||||||||||
Effect of change in tax rates recorded in the income statement | (17 | ) | — | 9 | |||||||||||||||||
Income tax credit/(charge) recorded in the income statement | 813 | 1,536 | (1,168 | ) | |||||||||||||||||
Income tax credit/(charge) recorded directly in equity | 75 | (297 | ) | 234 | 43 | 47 | 75 | ||||||||||||||
Acquisitions and disposals of subsidiaries and operations | (49 | ) | 6 | — | (2,995 | ) | – | (49 | ) | ||||||||||||
Transferred to liabilities held for sale | 66 | – | – | ||||||||||||||||||
Exchange variations and other movements | 3 | (6 | ) | (18 | ) | 1 | (6 | ) | 3 | ||||||||||||
|
|
| |||||||||||||||||||
At the end of the financial year | (267 | ) | 872 | 370 | (762 | ) | 1,310 | (267 | ) | ||||||||||||
|
|
|
The composition of the Group’s net deferred tax asset and liability recognised in the balance sheet and the deferred tax expense charged/(credited)/charged to the income statement is as follows:
Deferred tax assets | Deferred tax liabilities | Charged/(credited) to the income statement | |||||||||||||||||||
2010 US$M | 2009 US$M | 2010 US$M | 2009 US$M | 2010 US$M | 2009 US$M | 2008 US$M | |||||||||||||||
Type of temporary difference | |||||||||||||||||||||
Depreciation | (805 | ) | (156 | ) | 2,661 | 2,451 | 938 | 692 | 98 | ||||||||||||
Exploration expenditure | 555 | 446 | (15 | ) | (12 | ) | (112 | ) | (95 | ) | (26 | ) | |||||||||
Employee benefits | 216 | 210 | (232 | ) | (284 | ) | 49 | 39 | (66 | ) | |||||||||||
Closure and rehabilitation | 401 | 448 | (1,123 | ) | (964 | ) | (119 | ) | (128 | ) | (113 | ) | |||||||||
Resource rent tax | 223 | 21 | 657 | 281 | 175 | (256 | ) | 291 | |||||||||||||
Other provisions | 94 | 108 | (76 | ) | (83 | ) | 14 | (28 | ) | (115 | ) | ||||||||||
Deferred income | 69 | (2 | ) | (49 | ) | (62 | ) | (60 | ) | (293 | ) | 298 | |||||||||
Deferred charges | (36 | ) | (53 | ) | 421 | 415 | (11 | ) | 47 | 209 | |||||||||||
Investments, including foreign tax credits | 1,592 | 1,425 | 612 | 527 | (69 | ) | (179 | ) | (75 | ) | |||||||||||
Foreign exchange gains and losses | 29 | (124 | ) | 1,026 | 518 | 353 | (316 | ) | 332 | ||||||||||||
Non tax-depreciable fair value adjustments, revaluations and mineral rights | (23 | ) | (24 | ) | 179 | 345 | (148 | ) | 119 | (54 | ) | ||||||||||
Tax-effected losses | 1,600 | 1,510 | (17 | ) | (5 | ) | (242 | ) | (378 | ) | (21 | ) | |||||||||
Other | 138 | 101 | 276 | (89 | ) | 400 | (23 | ) | (340 | ) | |||||||||||
Total | 4,053 | 3,910 | 4,320 | 3,038 | 1,168 | (799 | ) | 418 | |||||||||||||
2010 US$M | 2009 US$M | |||
Unrecognised deferred tax assets | ||||
Tax losses and tax credits | 652 | 784 | ||
Investments in subsidiaries and jointly controlled entities | 6 | 379 | ||
Other deductible temporary differences | 2,189 | 2,143 | ||
Total unrecognised deferred tax assets | 2,847 | 3,306 | ||
Unrecognised deferred tax liabilities | ||||
Investments in subsidiaries and jointly controlled entities | 1,782 | 1,421 | ||
Total unrecognised deferred tax liabilities | 1,782 | 1,421 | ||
|
Deferred tax assets | Deferred tax liabilities | (Credited)/charged to the income statement | ||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2010 | ||||||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | US$M | ||||||||||||||||||||||
Type of temporary difference | ||||||||||||||||||||||||||||
Depreciation | (344 | ) | (679 | ) | 5,629 | 1,429 | (109 | ) | (1,364 | ) | 938 | |||||||||||||||||
Exploration expenditure | 633 | 657 | (125 | ) | 2 | (101 | ) | (84 | ) | (112 | ) | |||||||||||||||||
Employee benefits | 66 | 228 | (519 | ) | (292 | ) | 30 | (59 | ) | 49 | ||||||||||||||||||
Closure and rehabilitation | 544 | 715 | (1,561 | ) | (1,351 | ) | (28 | ) | (544 | ) | (119 | ) | ||||||||||||||||
Resource rent tax | 984 | 459 | 1,377 | 1,187 | (335 | ) | 294 | 175 | ||||||||||||||||||||
Other provisions | 79 | 123 | (97 | ) | (97 | ) | 47 | (43 | ) | 14 | ||||||||||||||||||
Deferred income | (22 | ) | 80 | 71 | (6 | ) | 179 | 32 | (60 | ) | ||||||||||||||||||
Deferred charges | (166 | ) | (134 | ) | 633 | 491 | 174 | 169 | (11 | ) | ||||||||||||||||||
Investments, including foreign tax credits | 1,774 | 1,607 | 1,092 | 773 | 152 | 146 | (69 | ) | ||||||||||||||||||||
Foreign exchange gains and losses | (22 | ) | (93 | ) | 698 | 669 | (42 | ) | (234 | ) | 353 | |||||||||||||||||
Non tax-depreciable fair value adjustments, revaluations and mineral rights | (23 | ) | (30 | ) | 57 | 122 | (64 | ) | (51 | ) | (148 | ) | ||||||||||||||||
Tax-effected losses | 878 | 964 | (1,517 | ) | – | (764 | ) | 666 | (242 | ) | ||||||||||||||||||
Other | 144 | 96 | (451 | ) | (244 | ) | 48 | (464 | ) | 400 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 4,525 | 3,993 | 5,287 | 2,683 | (813 | ) | (1,536 | ) | 1,168 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 | 2011 | |||||||
US$M | US$M | |||||||
Unrecognised deferred tax assets | ||||||||
Tax losses and tax credits | 1,545 | 1,598 | ||||||
Investments in subsidiaries and jointly controlled entities | 7 | 7 | ||||||
Deductible temporary differences relating to MRRT and PRRT | 19,338 | – | ||||||
Other deductible temporary differences | 3,185 | 3,112 | ||||||
|
|
|
| |||||
Total unrecognised deferred tax assets | 24,075 | 4,717 | ||||||
|
|
|
| |||||
Unrecognised deferred tax liabilities | ||||||||
Taxable temporary differences relating to unrecognised deferred tax asset for MRRT and PRRT | 5,801 | – | ||||||
Investments in subsidiaries and jointly controlled entities | 1,997 | 2,096 | ||||||
|
|
|
| |||||
Total unrecognised deferred tax liabilities | 7,798 | 2,096 | ||||||
|
|
|
|
Notes to Financial Statements continued
7 Income tax and deferred tax continued
Tax losses
At 30 June 2010,2012, the Group had income and capital tax losses with a tax benefit of US$4371,148 million (2009:(2011: US$5521,254 million) which are not recognised as deferred tax assets. The Group recognises the benefit of tax losses only to the extent of anticipated future taxable income or gains in relevant jurisdictions. The gross amount of tax losses carried forward that have not been tax effected expire as follows:
Year of expiry | Australia US$M | UK US$M | Rest of world US$M | Total losses US$M | Australia | UK | Rest of world | Total losses | ||||||||||||||||
US$M | US$M | US$M | US$M | |||||||||||||||||||||
Income tax losses | ||||||||||||||||||||||||
Not later than one year | — | — | 17 | 17 | – | – | 2 | 2 | ||||||||||||||||
Later than one year and not later than two years | — | — | 12 | 12 | – | – | 2 | 2 | ||||||||||||||||
Later than two years and not later than five years | — | — | 69 | 69 | – | – | 1,553 | 1,553 | ||||||||||||||||
Later than five years and not later than ten years | — | — | 7 | 7 | – | – | 149 | 149 | ||||||||||||||||
Later than ten years and not later than twenty years | — | — | 314 | 314 | – | – | 187 | 187 | ||||||||||||||||
Unlimited | — | 394 | 76 | 470 | – | 88 | 52 | 140 | ||||||||||||||||
|
|
|
| |||||||||||||||||||||
— | 394 | 495 | 889 | – | 88 | 1,945 | 2,033 | |||||||||||||||||
|
|
|
| |||||||||||||||||||||
Capital tax losses | ||||||||||||||||||||||||
Later than two years and not later than five years | – | – | 7 | 7 | ||||||||||||||||||||
Unlimited | 559 | 2 | 29 | 590 | 2,893 | 6 | 24 | 2,923 | ||||||||||||||||
|
|
|
| |||||||||||||||||||||
Gross amount of tax losses not recognised | 559 | 396 | 524 | 1,479 | 2,893 | 94 | 1,976 | 4,963 | ||||||||||||||||
|
|
|
| |||||||||||||||||||||
Tax effect of total losses not recognised | 168 | 111 | 158 | 437 | 868 | 22 | 258 | 1,148 | ||||||||||||||||
|
|
|
|
Tax credits
At 30 June 2010,2012, the Group had US$215397 million of tax credits that have not been recognised (2009:(2011: US$232344 million).
Deductible temporaryTemporary differences relating to MRRT and PRRT
At 30 June 2012, the Group had US$19,338 million of unrecognised deductible temporary differences (2011: US$ nil) that arose due to the enactment of the Australian MRRT and PRRT extension legislation in March 2012. Recognition of a deferred tax asset for MRRT and PRRT depends on benefits expected to be obtained from deduction against MRRT and PRRT liabilities based on the 1 May 2010 market value of Australian coal, iron ore
and petroleum assets. Recognition of a deferred tax asset associated with MRRT and PRRT of US$19,338 million (2011: US$ nil) would result in a corresponding additional deferred tax liability for income tax purposes of US$5,801 million (2011: US$ nil).
Other deductible temporary differences
At 30 June 2012, the Group had deductible temporary differences for which deferred tax assets of US$2,1953,192 million (2009:(2011: US$2,5223,119 million) have not been recognised because it is not probable that future taxable profits will be available against which the Group can utilise the benefits. The deductible temporary differences do not expire under current tax legislation.
Temporary differences associated with investments in subsidiaries and jointly controlled entities
At 30 June 2010,2012, deferred tax liabilities of US$1,7821,997 million (2009:(2011: US$1,4212,096 million) associated with undistributed earnings of subsidiaries and jointly controlled entities have not been recognised because the Group is able to control the timing of the reversal of the temporary differences and it is not probable that such differences will reverse in the foreseeable future.
Other factors affecting taxation
The Australian Taxation Office (ATO) has issued amended assessments during the period from 2005 to 2008 denying bad debt deductions arising from the investments in Hartley, Beenup and Boodarie Iron and the denial of capital allowance claims made on the Boodarie Iron project. BHP Billiton lodged objections against all the amended assessments. An amount of US$686 million was paid to the ATO pursuant to ATO disputed assessment guidelines, which require that taxpayers generally must pay half of the tax in dispute to defer recovery proceedings.
Notes to Financial Statements continued
7 Income tax and deferred tax continued
The Boodarie Iron and Beenup bad debt disallowance matters and the Boodarie Iron capital allowance matter were heard concurrently in the Federal Court in January 2009. BHP Billiton was successful on all counts. The ATO appealed and the matter was heard in the Full Federal Court in November 2009. BHP Billiton was again successful on all counts. The ATO sought special leave to appeal to the High Court only in relation to the Beenup bad debt disallowance and the denial of the capital allowance claims on the Boodarie Iron project. The High Court has granted special leave only in relation to the denial of the capital allowance claims on the Boodarie Iron project. A date for the appeal has not yet been set. As a result of the ATO not seeking to challenge the Boodarie Iron project bad debt disallowance, the ATO has refunded US$552 million to BHP Billiton including interest. BHP Billiton also expects that as a result of the High Court not granting special leave for the Beenup bad debt disallowance, the ATO will refund the amount paid in relation to this dispute of US$62 million plus interest. BHP Billiton settled the Hartley matter with the ATO in September 2009.
The amount remaining in dispute following the decision of the High Court for the denial of capital allowance claims on the Boodarie Iron project is approximately US$435 million, being primary tax of US$328 million and US$107 million of interest (after tax).
2010 | 2009 | 2008 | 2012 | 2011 | 2010 | |||||||||||||
Basic earnings per ordinary share (US cents) | 228.6 | 105.6 | 275.3 | 289.6 | 429.1 | 228.6 | ||||||||||||
Diluted earnings per ordinary share (US cents) | 227.8 | 105.4 | 274.8 | 288.4 | 426.9 | 227.8 | ||||||||||||
Basic earnings per American Depositary Share (ADS) (US cents)(a) | 457.2 | 211.2 | 550.6 | |||||||||||||||
Diluted earnings per American Depositary Share (ADS) (US cents)(a) | 455.6 | 210.8 | 549.6 | |||||||||||||||
Basic earnings per American Depositary Share (US cents)(a) | 579.2 | 858.2 | 457.2 | |||||||||||||||
Diluted earnings per American Depositary Share (US cents)(a) | 576.8 | 853.8 | 455.6 | |||||||||||||||
Basic earnings (US$M) | 12,722 | 5,877 | 15,390 | 15,417 | 23,648 | 12,722 | ||||||||||||
Diluted earnings (US$M)(b) | 12,743 | 5,899 | 15,402 | 15,417 | 23,648 | 12,743 | ||||||||||||
The weighted average number of shares used for the purposes of calculating diluted earnings per share reconciles to the number used to calculate basic earnings per share as follows:
Weighted average number of shares | 2010 Million | 2009 Million | 2008 Million | 2012 | 2011 | 2010 | ||||||||||||
Million | Million | Million | ||||||||||||||||
Basic earnings per ordinary share denominator | 5,565 | 5,565 | 5,590 | 5,323 | 5,511 | 5,565 | ||||||||||||
Shares and options contingently issuable under employee share ownership plans (c) | 30 | 33 | 15 | 23 | 29 | 30 | ||||||||||||
|
|
| ||||||||||||||||
Diluted earnings per ordinary share denominator(d) | 5,595 | 5,598 | 5,605 | 5,346 | 5,540 | 5,595 | ||||||||||||
|
|
|
(a) | Each American Depositary Share (ADS) represents two ordinary shares. |
(b) | Diluted earnings are calculated after adding back dividend equivalent payments of US$ nil (2011: US$ nil; 2010: US$21 |
(c) | The calculation of the number of ordinary shares used in the computation of basic earnings per share is the aggregate of the weighted average number of ordinary shares of BHP Billiton Limited and BHP Billiton Plc outstanding during the period after deduction of the number of shares held by the Billiton share |
repurchase scheme, the Billiton Employee Share Ownership Plan Trust, and the BHP Bonus Equity Plan Trust and adjusting for the BHP Billiton Limited bonus share issue. Included in the calculation of fully diluted earnings per share are shares contingently issuable under Employee Share Ownership Plans. |
(d) | Diluted earnings per share calculation excludes |
Notes to Financial Statements continued
2010 US$M | 2009 US$M | 2008 US$M | 2012 | 2011 | 2010 | |||||||||||||
Dividends paid during the period | ||||||||||||||||||
US$M | US$M | US$M | ||||||||||||||||
Dividends paid/payable during the period | ||||||||||||||||||
BHP Billiton Limited | 2,787 | 2,754 | 1,881 | 3,559 | 3,076 | 2,787 | ||||||||||||
BHP Billiton Plc – Ordinary shares | 1,831 | 1,809 | 1,252 | 2,335 | 2,003 | 1,831 | ||||||||||||
– Preference shares(a) | — | — | — | – | – | – | ||||||||||||
|
|
| ||||||||||||||||
4,618 | 4,563 | 3,133 | 5,894 | 5,079 | 4,618 | |||||||||||||
|
|
| ||||||||||||||||
Dividends declared in respect of the period | ||||||||||||||||||
BHP Billiton Limited | 2,921 | 2,754 | 2,351 | 3,621 | 3,331 | 2,921 | ||||||||||||
BHP Billiton Plc – Ordinary shares | 1,920 | 1,809 | 1,545 | 2,376 | 2,183 | 1,920 | ||||||||||||
– Preference shares(a) | — | — | — | – | – | – | ||||||||||||
|
|
| ||||||||||||||||
5,997 | 5,514 | 4,841 | ||||||||||||||||
4,841 | 4,563 | 3,896 |
|
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| |||||||||||||
2012 | 2011 | 2010 | ||||||||||||||||
2010 US cents | 2009 US cents | 2008 US cents | US cents | US cents | US cents | |||||||||||||
Dividends paid during the period (per share) | ||||||||||||||||||
Prior year final dividend | 41.0 | 41.0 | 27.0 | 55.0 | 45.0 | 41.0 | ||||||||||||
Interim dividend | 42.0 | 41.0 | 29.0 | 55.0 | 46.0 | 42.0 | ||||||||||||
|
|
| ||||||||||||||||
83.0 | 82.0 | 56.0 | 110.0 | 91.0 | 83.0 | |||||||||||||
|
|
| ||||||||||||||||
Dividends declared in respect of the period (per share) | ||||||||||||||||||
Interim dividend | 42.0 | 41.0 | 29.0 | 55.0 | 46.0 | 42.0 | ||||||||||||
Final dividend | 45.0 | 41.0 | 41.0 | 57.0 | 55.0 | 45.0 | ||||||||||||
|
|
| ||||||||||||||||
87.0 | 82.0 | 70.0 | 112.0 | 101.0 | 87.0 | |||||||||||||
|
|
|
Dividends are declared after period end in the announcement of the results for the period. Interim dividends are declared in February and paid in March. Final dividends are declared in August and paid in September. Dividends declared are not recorded as a liability at the end of the period to which they relate. Subsequent to year end,year-end, on 2522 August 2010,2012, BHP Billiton declared a final dividend of 45.057.0 US cents per share (US$2,5043,049 million), which will be paid on 3028 September 2010 (2009: 41.02012 (2011: 55.0 US cents per share – US$2,2812,943 million; 2008: 41.02010: 45.0 US cents per share – US$2,2822,504 million).
Each American Depositary Share (ADS) represents two ordinary shares of BHP Billiton Limited or BHP Billiton Plc. Dividends declared on each ADS represent twice the dividend declared on BHP Billiton ordinary shares.
BHP Billiton Limited dividends for all periods presented are, or will be, fully franked based on a tax rate of 30 per cent.
2012 | 2011 | 2010 | ||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | US$M | US$M | US$M | |||||||||||||
Franking credits as at 30 June | 3,861 | 2,506 | 1,623 | 7,494 | 3,971 | 3,861 | ||||||||||||
Franking credits arising from the payment of current tax payable | 818 | 1,265 | 818 | 2,547 | 3,218 | 818 | ||||||||||||
|
|
| ||||||||||||||||
Total franking credits available(b) | 4,679 | 3,771 | 2,441 | 10,041 | 7,189 | 4,679 | ||||||||||||
|
|
|
(a) | 5.5 per cent dividend on 50,000 preference shares of £1 each declared and paid annually |
(b) | The payment of the final |
Notes to Financial Statements continued
10 Trade and other receivables
2012 | 2011 | |||||||
US$M | US$M | |||||||
Current | ||||||||
Trade receivables | 4,844 | 6,219 | ||||||
Provision for doubtful debts | (121 | ) | (151 | ) | ||||
|
|
|
| |||||
Total trade receivables | 4,723 | 6,068 | ||||||
Employee Share Plan loans (a) | 3 | 3 | ||||||
Interest bearing loans receivable | 72 | – | ||||||
Other receivables | 2,906 | 2,126 | ||||||
|
|
|
| |||||
Total current receivables(b) | 7,704 | 8,197 | ||||||
|
|
|
| |||||
Non-current | ||||||||
Employee Share Plan loans(a) | 15 | 21 | ||||||
Interest bearing loans receivable | 1,030 | 1,044 | ||||||
Other receivables | 430 | 1,028 | ||||||
|
|
|
| |||||
Total non-current receivables(b) | 1,475 | 2,093 | ||||||
|
|
|
|
2010 US$M | 2009 US$M | |||||
Current | ||||||
Trade receivables | 5,092 | 3,881 | ||||
Provision for doubtful debts | (147 | ) | (176 | ) | ||
Total trade receivables | 4,945 | 3,705 | ||||
Employee Share Plan loans(a) | 3 | 4 | ||||
Other receivables | 1,595 | 1,444 | ||||
Total current receivables(b) | 6,543 | 5,153 | ||||
Non-current | ||||||
Employee Share Plan loans(a) | 21 | 24 | ||||
Interest bearing loans receivable | 683 | — | ||||
Other receivables | 677 | 738 | ||||
Total non-current receivables(b) | 1,381 | 762 | ||||
2010 US$M | 2009 US$M | |||||
Movement in provision for doubtful debts | ||||||
At the beginning of the financial year | 176 | 49 | ||||
Charge/(credit) for the year: | ||||||
Underlying charge in the income statement | 4 | 189 | ||||
Released to the income statement | (19 | ) | (1 | ) | ||
Utilised | (14 | ) | (61 | ) | ||
At the end of the financial year | 147 | 176 | ||||
2012 | 2011 | |||||||
US$M | US$M | |||||||
Movement in provision for doubtful debts | ||||||||
At the beginning of the financial year | 151 | 147 | ||||||
Charge/(credit) for the year: | ||||||||
Underlying charge to the income statement | 43 | 5 | ||||||
Released to the income statement | – | (1 | ) | |||||
Utilisation | (73 | ) | – | |||||
|
|
|
| |||||
At the end of the financial year | 121 | 151 | ||||||
|
|
|
|
(a) | Under the terms of the BHP Billiton Limited Employee Share Plan, shares have been issued to employees for subscription at the weighted average market price less a discount not exceeding |
(b) | Disclosures relating to receivables from related parties are set out in note 31. |
Notes to Financial Statements continued
2012 | 2011 | |||||||||||
2010 US$M | 2009 US$M | US$M | US$M | |||||||||
Current | ||||||||||||
At fair value | ||||||||||||
Cross currency and interest rate swaps | 23 | 79 | 51 | 49 | ||||||||
Forward exchange contracts | 28 | 13 | 14 | 26 | ||||||||
Commodity contracts | 240 | 657 | 180 | 173 | ||||||||
Other derivative contracts | 1 | 14 | 37 | 16 | ||||||||
|
| |||||||||||
Total current other financial assets | 292 | 763 | 282 | 264 | ||||||||
|
| |||||||||||
Non-current | ||||||||||||
At fair value | ||||||||||||
Cross currency and interest rate swaps | 595 | 690 | 808 | 705 | ||||||||
Commodity contracts | 42 | 121 | 71 | 41 | ||||||||
Other derivative contracts | 111 | 283 | 254 | 114 | ||||||||
Shares – fair value through profit or loss | — | 35 | ||||||||||
Shares – available for sale | 657 | 321 | 602 | 580 | ||||||||
Other investments – available for sale(a) | 105 | 93 | 146 | 162 | ||||||||
|
| |||||||||||
Total non-current other financial assets | 1,510 | 1,543 | 1,881 | 1,602 | ||||||||
|
|
(a) | Includes investments held by BHP Billiton Energy Coal South Africa Rehabilitation |
2012 | 2011 | |||||||||||||||
2010 US$M | 2009 US$M | US$M | US$M | |||||||||||||
Current | ||||||||||||||||
Raw materials and consumables | – at net realisable value(a) | — | 1 | – at net realisable value(a) | 76 | 4 | ||||||||||
– at cost | 1,518 | 1,402 | – at cost | 2,095 | 1,960 | |||||||||||
|
| |||||||||||||||
1,518 | 1,403 | 2,171 | 1,964 | |||||||||||||
|
| |||||||||||||||
Work in progress | – at net realisable value(a) | 18 | 23 | – at net realisable value(a) | 301 | 4 | ||||||||||
– at cost | 2,129 | 1,847 | – at cost | 2,094 | 2,315 | |||||||||||
|
| |||||||||||||||
2,147 | 1,870 | 2,395 | 2,319 | |||||||||||||
|
| |||||||||||||||
Finished goods | – at net realisable value(a) | 300 | 66 | – at net realisable value(a) | 569 | 136 | ||||||||||
– at cost | 1,369 | 1,482 | – at cost | 1,098 | 1,735 | |||||||||||
|
| |||||||||||||||
1,669 | 1,548 | 1,667 | 1,871 | |||||||||||||
|
| |||||||||||||||
Total current inventories | 5,334 | 4,821 | Total current inventories | 6,233 | 6,154 | |||||||||||
|
| |||||||||||||||
Non-current | ||||||||||||||||
Raw materials and consumables | – at cost | 124 | 54 | – at net realisable value(a) | 33 | 19 | ||||||||||
– at cost | 234 | 123 | ||||||||||||||
|
| |||||||||||||||
267 | 142 | |||||||||||||||
|
| |||||||||||||||
Work in progress | – at cost | 209 | 141 | – at net realisable value(a) | 67 | 25 | ||||||||||
– at cost | 74 | 184 | ||||||||||||||
|
| |||||||||||||||
141 | 209 | |||||||||||||||
|
| |||||||||||||||
Finished goods | – at cost | 10 | 5 | – at net realisable value(a) | – | – | ||||||||||
– at cost | 16 | 12 | ||||||||||||||
|
| |||||||||||||||
16 | 12 | |||||||||||||||
|
| |||||||||||||||
Total non-current inventories | 343 | 200 | Total non-current inventories | 424 | 363 | |||||||||||
|
|
(a) | US$ |
Notes to Financial Statements continued
13 Property, plant and equipment
Year ended 30 June 2010 | Land and buildings US$M | Plant and equipment US$M | Other mineral assets US$M | Assets under construction US$M | Exploration and evaluation US$M | Total US$M | ||||||||||||
Cost | ||||||||||||||||||
At the beginning of the financial year | 5,708 | 47,533 | 14,812 | 8,298 | 1,444 | 77,795 | ||||||||||||
Additions | 53 | 975 | 622 | 9,452 | 314 | 11,416 | ||||||||||||
Acquisitions of subsidiaries and operations | — | — | 508 | — | — | 508 | ||||||||||||
Disposals | (117 | ) | (870 | ) | (6 | ) | — | (24 | ) | (1,017 | ) | |||||||
Disposals of subsidiaries and operations | (352 | ) | (2,348 | ) | (109 | ) | (5 | ) | — | (2,814 | ) | |||||||
Exchange variations taken to reserves | (1 | ) | (179 | ) | (38 | ) | 2 | (1 | ) | (217 | ) | |||||||
Transfers and other movements | 857 | 5,449 | (39 | ) | (7,028 | ) | 235 | (526 | ) | |||||||||
At the end of the financial year | 6,148 | 50,560 | 15,750 | 10,719 | 1,968 | 85,145 | ||||||||||||
Accumulated depreciation | ||||||||||||||||||
At the beginning of the financial year | 2,168 | 22,141 | 4,113 | — | 341 | 28,763 | ||||||||||||
Charge for the year | 235 | 3,813 | 618 | — | 66 | 4,732 | ||||||||||||
Impairments for the year | 3 | 86 | — | — | 256 | 345 | ||||||||||||
Reversals of impairments | (121 | ) | (426 | ) | (83 | ) | — | (1 | ) | (631 | ) | |||||||
Disposals | (85 | ) | (770 | ) | (6 | ) | — | (24 | ) | (885 | ) | |||||||
Disposals of subsidiaries and operations | (239 | ) | (1,925 | ) | (26 | ) | — | — | (2,190 | ) | ||||||||
Exchange variations taken to reserves | — | (166 | ) | (35 | ) | — | — | (201 | ) | |||||||||
Transfers and other movements | 4 | (233 | ) | (159 | ) | — | 24 | (364 | ) | |||||||||
At the end of the financial year | 1,965 | 22,520 | 4,422 | — | 662 | 29,569 | ||||||||||||
Net book value at 30 June 2010 | 4,183 | 28,040 | 11,328 | 10,719 | 1,306 | 55,576 | ||||||||||||
Year ended 30 June 2009 | Land and buildings US$M | Plant and equipment US$M | Other mineral assets US$M | Assets under construction US$M | Exploration and evaluation US$M | Total US$M | ||||||||||||
Cost | ||||||||||||||||||
At the beginning of the financial year | 5,114 | 44,293 | 13,069 | 6,703 | 1,253 | 70,432 | ||||||||||||
Additions | 103 | 521 | 1,457 | 7,717 | 231 | 10,029 | ||||||||||||
Acquisitions of subsidiaries and operations | — | — | 286 | — | — | 286 | ||||||||||||
Disposals | (55 | ) | (296 | ) | (36 | ) | (2 | ) | (64 | ) | (453 | ) | ||||||
Disposals of subsidiaries and operations | (8 | ) | (2 | ) | (27 | ) | — | — | (37 | ) | ||||||||
Transfer to assets held for sale | (131 | ) | (1,708 | ) | (5 | ) | (90 | ) | — | (1,934 | ) | |||||||
Exchange variations taken to reserves | (10 | ) | (565 | ) | (87 | ) | — | — | (662 | ) | ||||||||
Transfers and other movements | 695 | 5,290 | 155 | (6,030 | ) | 24 | 134 | |||||||||||
At the end of the financial year | 5,708 | 47,533 | 14,812 | 8,298 | 1,444 | 77,795 | ||||||||||||
Accumulated depreciation | ||||||||||||||||||
At the beginning of the financial year | 1,659 | 17,678 | 3,547 | 3 | 213 | 23,100 | ||||||||||||
Charge for the year | 245 | 3,022 | 522 | — | 63 | 3,852 | ||||||||||||
Impairments for the year | 392 | 3,847 | 200 | — | 96 | 4,535 | ||||||||||||
Disposals | (19 | ) | (255 | ) | (35 | ) | — | (28 | ) | (337 | ) | |||||||
Disposals of subsidiaries and operations | — | (2 | ) | — | — | — | (2 | ) | ||||||||||
Transfer to assets held for sale | (110 | ) | (1,764 | ) | (5 | ) | — | — | (1,879 | ) | ||||||||
Exchange variations taken to reserves | (8 | ) | (480 | ) | (77 | ) | — | — | (565 | ) | ||||||||
Transfers and other movements | 9 | 95 | (39 | ) | (3 | ) | (3 | ) | 59 | |||||||||
At the end of the financial year | 2,168 | 22,141 | 4,113 | — | 341 | 28,763 | ||||||||||||
Net book value at 30 June 2009 | 3,540 | 25,392 | 10,699 | 8,298 | 1,103 | 49,032 | ||||||||||||
Year ended 30 June 2012 | Land and buildings | Plant and equipment | Other mineral assets | Assets under construction | Exploration and evaluation | Total | ||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||
Cost | ||||||||||||||||||||||||
At the beginning of the financial year | 7,901 | 59,661 | 19,754 | 12,521 | 2,131 | 101,968 | ||||||||||||||||||
Additions | 142 | 403 | 722 | 19,365 | 968 | 21,600 | ||||||||||||||||||
Acquisitions of subsidiaries and operations | 34 | 811 | 14,459 | – | 515 | 15,819 | ||||||||||||||||||
Disposals | (88 | ) | (1,869 | ) | (482 | ) | (6 | ) | (84 | ) | (2,529 | ) | ||||||||||||
Disposals of subsidiaries and operations | – | (106 | ) | (35 | ) | – | – | (141 | ) | |||||||||||||||
Transferred to assets held for sale | (25 | ) | (319 | ) | (31 | ) | (117 | ) | – | (492 | ) | |||||||||||||
Exchange variations taken to reserve | (1 | ) | (81 | ) | (15 | ) | – | (1 | ) | (98 | ) | |||||||||||||
Transfers and other movements | 1,326 | 9,587 | (173 | ) | (10,587 | ) | (447 | ) | (294 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
At the end of the financial year | 9,289 | 68,087 | 34,199 | 21,176 | 3,082 | 135,833 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Accumulated depreciation and impairments | ||||||||||||||||||||||||
At the beginning of the financial year | 2,274 | 26,028 | 5,033 | – | 688 | 34,023 | ||||||||||||||||||
Charge for the year | 378 | 4,104 | 1,577 | – | 245 | 6,304 | ||||||||||||||||||
Impairments for the year | 127 | 1,269 | 1,718 | – | 144 | 3,258 | ||||||||||||||||||
Reversals of impairments | – | (71 | ) | – | – | – | (71 | ) | ||||||||||||||||
Disposals | (83 | ) | (1,770 | ) | (481 | ) | – | (49 | ) | (2,383 | ) | |||||||||||||
Disposals of subsidiaries and operations | – | (105 | ) | (35 | ) | – | – | (140 | ) | |||||||||||||||
Transferred to assets held for sale | (6 | ) | (115 | ) | (2 | ) | – | – | (123 | ) | ||||||||||||||
Exchange variations taken to reserve | – | (70 | ) | (13 | ) | – | – | (83 | ) | |||||||||||||||
Transfers and other movements | 48 | (73 | ) | (176 | ) | 58 | (56 | ) | (199 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
At the end of the financial year | 2,738 | 29,197 | 7,621 | 58 | 972 | 40,586 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net book value at 30 June 2012 | 6,551 | 38,890 | 26,578 | 21,118 | 2,110 | 95,247 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2011 Cost At the beginning of the financial year Additions Acquisitions of subsidiaries and operations Disposals Exchange variations taken to reserve Transfers and other movements At the end of the financial year Accumulated depreciation and impairments At the beginning of the financial year Charge for the year Impairments for the year Reversals of impairments Disposals Exchange variations taken to reserve Transfers and other movements At the end of the financial year Net book value at 30 June 2011 Notes to Financial Statements continued Land and
buildings Plant
and
equipment Other
mineral
assets Assets
under
construction Exploration
and
evaluation Total US$M US$M US$M US$M US$M US$M 6,148 50,560 15,750 10,719 1,968 85,145 38 1,596 499 11,003 281 13,417 5 671 3,604 – – 4,280 (35 ) (694 ) (51 ) (7 ) (114 ) (901 ) 2 199 30 – – 231 1,743 7,329 (78 ) (9,194 ) (4 ) (204 ) 7,901 59,661 19,754 12,521 2,131 101,968 1,965 22,520 4,422 – 662 29,569 321 3,991 625 – 66 5,003 – 11 – – 73 84 – (10 ) – – – (10 ) (26 ) (619 ) (51 ) – (113 ) (809 ) – 167 26 – – 193 14 (32 ) 11 – – (7 ) 2,274 26,028 5,033 – 688 34,023 5,627 33,633 14,721 12,521 1,443 67,945
2012 | 2011 | |||||||||||||||||||||||
Goodwill | Other intangibles | Total | Goodwill | Other intangibles | Total | |||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||
Cost | ||||||||||||||||||||||||
At the beginning of the financial year | 922 | 744 | 1,666 | 370 | 497 | 867 | ||||||||||||||||||
Additions | 3,778 | 578 | 4,356 | 552 | 211 | 763 | ||||||||||||||||||
Disposals | – | (1 | ) | (1 | ) | – | (3 | ) | (3 | ) | ||||||||||||||
Impairments of goodwill for the year | (575 | ) | – | (575 | ) | – | – | – | ||||||||||||||||
Transferred to assets held for sale | (20 | ) | – | (20 | ) | – | – | – | ||||||||||||||||
Exchange variations taken to reserve | – | (1 | ) | (1 | ) | – | 2 | 2 | ||||||||||||||||
Transfers and other movements | – | 7 | 7 | – | 37 | 37 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
At the end of the financial year | 4,105 | 1,327 | 5,432 | 922 | 744 | 1,666 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Accumulated amortisation and impairments | ||||||||||||||||||||||||
At the beginning of the financial year | – | 210 | 210 | – | 180 | 180 | ||||||||||||||||||
Disposals | – | (1 | ) | (1 | ) | – | (2 | ) | (2 | ) | ||||||||||||||
Charge for the year | – | 104 | 104 | – | 36 | 36 | ||||||||||||||||||
Impairments for the year | – | – | – | – | – | – | ||||||||||||||||||
Exchange variations taken to reserve | – | – | – | – | 1 | 1 | ||||||||||||||||||
Transfers and other movements | – | 7 | 7 | – | (5 | ) | (5 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
At the end of the financial year | – | 320 | 320 | – | 210 | 210 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total intangible assets | 4,105 | 1,007 | 5,112 | 922 | 534 | 1,456 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The carrying amount of goodwill has been allocated to CGUs, or groups of CGUs, as follows:
2010 | 2009 | |||||||||||||||||
Goodwill US$M | Other intangibles US$M | Total US$M | Goodwill US$M | Other intangibles US$M | Total US$M | |||||||||||||
Cost | ||||||||||||||||||
At the beginning of the financial year | 398 | 426 | 824 | 442 | 418 | 860 | ||||||||||||
Additions | — | 85 | 85 | — | 141 | 141 | ||||||||||||
Disposals | — | (8 | ) | (8 | ) | — | (22 | ) | (22 | ) | ||||||||
Exchange variations taken to reserves | — | (1 | ) | (1 | ) | — | (3 | ) | (3 | ) | ||||||||
Transfer to assets held for sale | — | — | — | (27 | ) | — | (27 | ) | ||||||||||
Transfers and other movements | (28 | ) | (5 | ) | (33 | ) | (17 | ) | (108 | ) | (125 | ) | ||||||
At the end of the financial year | 370 | 497 | 867 | 398 | 426 | 824 | ||||||||||||
Accumulated amortisation and impairments | ||||||||||||||||||
At the beginning of the financial year | — | 163 | 163 | — | 235 | 235 | ||||||||||||
Disposals | — | (8 | ) | (8 | ) | — | (16 | ) | (16 | ) | ||||||||
Charge for the year | — | 27 | 27 | — | 19 | 19 | ||||||||||||
Impairments for the year | — | — | — | 27 | 7 | 34 | ||||||||||||
Exchange variations taken to reserves | — | (1 | ) | (1 | ) | — | (2 | ) | (2 | ) | ||||||||
Transfer to assets held for sale | — | — | — | (27 | ) | — | (27 | ) | ||||||||||
Transfers and other movements | — | (1 | ) | (1 | ) | — | (80 | ) | (80 | ) | ||||||||
At the end of the financial year | — | 180 | 180 | — | 163 | 163 | ||||||||||||
Total intangible assets(a) | 370 | 317 | 687 | 398 | 263 | 661 | ||||||||||||
Cash-generating units | 2012 | 2011 | ||||||
US$M | US$M | |||||||
Onshore US | 3,591 | – | ||||||
Fayetteville | – | 552 | ||||||
Other | 514 | 370 | ||||||
|
|
|
| |||||
4,105 | 922 | |||||||
|
|
|
|
Impairment testing of goodwill
For the purpose of impairment testing, goodwill has been allocated to the cash-generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the business combination and which represent the level at which management will monitor and manage the goodwill.
The recoverable amounts of the Fayetteville CGU and the Onshore US group of CGUs were determined based on fair value less costs to sell (FVLCS). FVLCS was determined as the present value of the estimated future cash flows (expressed in real terms) expected to arise from the continued use of the assets (life of asset), including any expansion prospects, and its eventual disposal, using assumptions that an independent market participant may take into account. These cash flows were discounted using a real after-tax discount rate that reflected current market assessments of the time value of money and the risks specific to the CGU.
The determination of FVLCS was most sensitive to the following assumptions:
Production volumes Crude oil prices Natural gas prices Discount rate Production volumes – estimated production volumes were based on detailed data for the fields and took into account development plans for the fields established by management as part of the long-term planning process. Production volumes are dependent on variables, such as the recoverable quantities of hydrocarbons, the production profile of the hydrocarbons, the cost of the development of the infrastructure necessary to recover the hydrocarbons, the production costs, the contractual duration of the production leases and the selling price of the hydrocarbons produced. As each producing field has specific reservoir characteristics and economic circumstances, the cash flows of the fields were computed using appropriate individual economic models and key assumptions established by management. The production profiles used were consistent with the resource volumes approved as part of the Group’s process for the estimation of proved reserves and total resources. Crude oil and natural gas prices – key assumptions for oil and gas prices were derived from forward price curves and long-term views of global supply and demand, building upon past experience of the industry and consistent with external sources. These prices were adjusted to arrive at appropriate consistent price assumptions for different qualities of oil and gas, or where appropriate, contracted oil and gas prices were applied. The crude oil prices used in the Onshore US FVLCS were within the range of prices published by market commentators of US$75.82/boe – US$101.93/boe. The natural gas prices used in the Fayetteville Shale FVLCS and the Onshore US FVLCS were within the range of prices published by market commentators of US$2.74/MMBtu – US$6.21/MMBtu. Discount rate – in arriving at the FVLCS, a real post-tax discount rate of 5.9 per cent was applied to the post-tax cash flows expressed in real terms. This discount rate was derived from the Group’s post-tax weighted average cost of capital (WACC), with appropriate adjustments made to reflect the risks specific to the CGU. Fayetteville The goodwill of US$552 million that arose from the acquisition of the Fayetteville gas business in March 2011 has been allocated to the Fayetteville CGU. The Fayetteville CGU comprises the Fayetteville natural gas reserves and resource; gas production wells and associated facilities; and the gas gathering system located in Arkansas, US. For the interim period ended 31 December 2011, impairment testing indicated that the Fayetteville CGU was not impaired. However, since December 2011 there has been a significant fall in US domestic gas prices which prompted the Group to adjust its development plans. Consequently, a further impairment test was performed as at 30 June 2012 and resulted in a total impairment charge of US$2,835 million being recognised for the year ended 30 June 2012, including impairment of the Fayetteville goodwill of US$552 million and property, plant and equipment of US$2,283 million. The total impairment charge is included in ‘Expenses excluding net finance costs’ in the Consolidated Income Statement – refer to note 5. Onshore US The goodwill of US$3,591 million that arose from the acquisition of Petrohawk Energy Corporation has been allocated to the Onshore US group of CGUs which comprises the Fayetteville CGU as well as the Eagleford, Haynesville and Permian Basin CGUs. The Onshore US group of CGUs comprises the natural gas and liquid reserves and resources, gas production wells and associated facilities, and gas gathering systems in the Eagleford, Haynesville and Permian fields in Texas and Louisiana, US, in addition to the Fayetteville CGU. The Onshore US group of CGUs is part of the Petroleum reportable segment. The Onshore US group of CGUs was tested for impairment after testing each of the individual CGUs that it comprises. The impairment tests for the Eagleford, Haynesville and Permian Basin CGUs indicated that no impairments were required. As indicated above, an impairment was recognised in relation to the Fayetteville CGU. The impairment test of the Onshore US group of CGUs was therefore performed after the Fayetteville assets were written down to their recoverable amount. The result indicated that the recoverable amount of the Onshore US group of CGUs exceeded its carrying amount and no further impairment was required. With regard to the assessment of FVLCS for the Onshore US group of CGUs, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the group of CGUs to exceed its recoverable amount. Other Goodwill held by other CGUs is US$514 million (2011: US$370 million), representing less than one per cent of net assets at 30 June 2012 (2011: less than one per cent). The goodwill has been allocated across a number of CGUs in different reportable segments, with no CGU accounting for more than US$200 million of total goodwill. |
2010 US$M | 2009 US$M | |||
Current | ||||
Trade creditors | 4,470 | 3,760 | ||
Other creditors | 1,997 | 1,859 | ||
Total current payables | 6,467 | 5,619 | ||
Non-current | ||||
Other creditors | 469 | 187 | ||
Total non-current payables | 469 | 187 | ||
2012 | 2011 | |||||||
US$M | US$M | |||||||
Current | ||||||||
Trade creditors | 8,727 | 6,667 | ||||||
Other creditors | 3,297 | 3,056 | ||||||
|
|
|
| |||||
Total current payables | 12,024 | 9,723 | ||||||
|
|
|
| |||||
Non-current | ||||||||
Other creditors | 509 | 555 | ||||||
|
|
|
| |||||
Total non-current payables | 509 | 555 | ||||||
|
|
|
|
Notes to Financial Statements continued
16 Interest bearing liabilities
2012 | 2011 | |||||||||||
2010 US$M | 2009 US$M | US$M | US$M | |||||||||
Current | ||||||||||||
Unsecured bank loans | 393 | 721 | 537 | 484 | ||||||||
Notes and debentures | 1,424 | — | 1,645 | 2,458 | ||||||||
Secured bank loans | 184 | 109 | ||||||||||
Commercial paper | 995 | – | ||||||||||
Secured bank loans(a) | 122 | 160 | ||||||||||
Finance leases | 63 | 60 | 82 | 63 | ||||||||
Secured other | – | 18 | ||||||||||
Unsecured other | 126 | 202 | 130 | 332 | ||||||||
Unsecured bank overdrafts and short-term borrowings | 1 | 2 | 20 | 4 | ||||||||
|
| |||||||||||
Total current interest bearing liabilities | 2,191 | 1,094 | 3,531 | 3,519 | ||||||||
|
| |||||||||||
Non-current | ||||||||||||
Unsecured bank loans | 361 | 535 | 290 | 526 | ||||||||
Notes and debentures | 12,012 | 13,946 | 22,740 | 10,122 | ||||||||
Secured bank loans (a) | 424 | 509 | ||||||||||
Redeemable preference shares(b) | 15 | 15 | ||||||||||
Secured bank loans(a) | 626 | 580 | ||||||||||
Redeemable preference shares(b) | 15 | 15 | ||||||||||
Finance leases | 162 | 163 | 155 | 129 | ||||||||
Unsecured other(a) | 250 | 157 | ||||||||||
Secured other(a) | 349 | — | ||||||||||
Unsecured other(a) | 429 | 448 | ||||||||||
Secured other(a) | 544 | 568 | ||||||||||
|
| |||||||||||
Total non-current interest bearing liabilities | 13,573 | 15,325 | 24,799 | 12,388 | ||||||||
|
|
(a) | Includes US$ |
(b) | Comprises 150 |
17 Other financial liabilities
2010 US$M | 2009 US$M | |||
Current | ||||
Cross currency and interest rate swaps | 282 | — | ||
Forward exchange contracts | 6 | 18 | ||
Commodity contracts | 194 | 683 | ||
Other derivative contracts | 29 | 4 | ||
Total current other financial liabilities | 511 | 705 | ||
Non-current | ||||
Cross currency and interest rate swaps | 174 | — | ||
Commodity contracts | 41 | 111 | ||
Other derivative contracts | 51 | 31 | ||
Total non-current other financial liabilities | 266 | 142 | ||
Notes to Financial Statements continued
2012 | 2011 | |||||||
US$M | US$M | |||||||
Current | ||||||||
Cross currency and interest rate swaps | – | 53 | ||||||
Forward exchange contracts | 6 | 3 | ||||||
Commodity contracts | 154 | 196 | ||||||
Other derivative contracts | 40 | 36 | ||||||
|
|
|
| |||||
Total current other financial liabilities | 200 | 288 | ||||||
|
|
|
| |||||
Non-current | ||||||||
Cross currency and interest rate swaps | 256 | – | ||||||
Commodity contracts | 24 | 23 | ||||||
Other derivative contracts | 37 | 56 | ||||||
|
|
|
| |||||
Total non-current other financial liabilities | 317 | 79 | ||||||
|
|
|
|
2012 | 2011 | |||||||||||
2010 US$M | 2009 US$M | US$M | US$M | |||||||||
Current | ||||||||||||
Employee benefits(a) | 1,054 | 990 | 1,592 | 1,334 | ||||||||
Restructuring(b) | 55 | 240 | 100 | 40 | ||||||||
Closure and rehabilitation(c) | 378 | 427 | 406 | 378 | ||||||||
Post-retirement employee benefits(d) | 18 | 10 | 28 | 21 | ||||||||
Other | 394 | 220 | 658 | 483 | ||||||||
|
| |||||||||||
Total current provisions | 1,899 | 1,887 | 2,784 | 2,256 | ||||||||
|
| |||||||||||
Non-current | ||||||||||||
Employee benefits(a) | 257 | 266 | 208 | 209 | ||||||||
Restructuring(b) | 49 | 69 | 12 | 38 | ||||||||
Closure and rehabilitation(c) | 6,264 | 5,729 | 7,645 | 7,639 | ||||||||
Post-retirement employee benefits(d) | 621 | 681 | 771 | 694 | ||||||||
Other | 242 | 287 | 278 | 713 | ||||||||
|
| |||||||||||
Total non-current provisions | 7,433 | 7,032 | 8,914 | 9,293 | ||||||||
|
|
(a) | The expenditure associated with total employee benefits will occur in a |
(b) | Total restructuring provisions include provision for business terminations of US$ |
(c) | Total closure and rehabilitation provisions include provision for closed sites of US$ |
(d) | The provision for post-retirement employee benefits includes pension liabilities of US$ |
Employee benefits US$M | Restructuring US$M | Closure and rehabilitation US$M | Post-retirement employee benefits US$M | Other US$M | Total US$M | |||||||||||||
At the beginning of the financial year | 1,256 | 309 | 6,156 | 691 | 507 | 8,919 | ||||||||||||
Amounts capitalised | — | — | 697 | — | — | 697 | ||||||||||||
Charge/(credit) for the year: | ||||||||||||||||||
Underlying | 843 | 14 | 230 | 60 | 546 | 1,693 | ||||||||||||
Discounting | — | 6 | 348 | 130 | — | 484 | ||||||||||||
Expected return on pension scheme assets | — | — | — | (98 | ) | — | (98 | ) | ||||||||||
Exchange variations | 29 | 16 | 85 | 14 | 6 | 150 | ||||||||||||
Released during the year | (65 | ) | (69 | ) | (282 | ) | — | (131 | ) | (547 | ) | |||||||
Actuarial loss taken to retained earnings | — | — | — | 38 | — | 38 | ||||||||||||
Exchange variations taken to reserves | — | — | (12 | ) | (6 | ) | — | (18 | ) | |||||||||
Utilisation | (749 | ) | (152 | ) | (319 | ) | (180 | ) | (289 | ) | (1,689 | ) | ||||||
Disposals of subsidiaries and operations | (1 | ) | (20 | ) | (261 | ) | (7 | ) | — | (289 | ) | |||||||
Transfers and other movements | (2 | ) | — | — | (3 | ) | (3 | ) | (8 | ) | ||||||||
At the end of the financial year | 1,311 | 104 | 6,642 | 639 | 636 | 9,332 | ||||||||||||
Employee benefits | Restructuring | Closure and rehabilitation | Post-retirement employee benefits | Other | Total | |||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||
At the beginning of the financial year | 1,543 | 78 | 8,017 | 715 | 1,196 | 11,549 | ||||||||||||||||||
Amounts capitalised | – | – | 251 | – | – | 251 | ||||||||||||||||||
Acquisition of subsidiaries and operations | 75 | – | 43 | – | 1 | 119 | ||||||||||||||||||
Charge/(credit) for the year: | ||||||||||||||||||||||||
Underlying | 1,626 | 95 | 68 | 68 | 409 | 2,266 | ||||||||||||||||||
Discounting | 9 | 3 | 469 | 129 | – | 610 | ||||||||||||||||||
Expected return on pension scheme assets | – | – | – | (103 | ) | – | (103 | ) | ||||||||||||||||
Exchange variations | (85 | ) | (4 | ) | (97 | ) | (51 | ) | (25 | ) | (262 | ) | ||||||||||||
Released during the year | (76 | ) | (27 | ) | (247 | ) | – | (255 | ) | (605 | ) | |||||||||||||
Actuarial loss taken to retained earnings | – | – | – | 250 | – | 250 | ||||||||||||||||||
Exchange variations taken to reserve | – | – | (7 | ) | – | – | (7 | ) | ||||||||||||||||
Utilisation | (1,297 | ) | (32 | ) | (415 | ) | (193 | ) | (385 | ) | (2,322 | ) | ||||||||||||
Disposals of subsidiaries and operations | – | – | (14 | ) | – | – | (14 | ) | ||||||||||||||||
Transferred to liabilities held for sale | – | – | (15 | ) | (13 | ) | (7 | ) | (35 | ) | ||||||||||||||
Transfers and other movements | 5 | (1 | ) | (2 | ) | (3 | ) | 2 | 1 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
At the end of the financial year | 1,800 | 112 | 8,051 | 799 | 936 | 11,698 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Financial Statements continued
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | |||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||
Share capital | ||||||||||||||||||||||||
Balance at the beginning of the financial year | 1,183 | 1,227 | 1,227 | 1,070 | 1,116 | 1,116 | ||||||||||||||||||
Shares bought back and cancelled(a) | – | (44 | ) | – | (1 | ) | (46 | ) | – | |||||||||||||||
Proceeds from the issue of shares | 3 | – | – | – | – | – | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at the end of the financial year | 1,186 | 1,183 | 1,227 | 1,069 | 1,070 | 1,116 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Treasury shares | ||||||||||||||||||||||||
Balance at the beginning of the financial year | (1 | ) | (1 | ) | (1 | ) | (622 | ) | (524 | ) | (524 | ) | ||||||||||||
Purchase of shares by ESOP Trusts | (318 | ) | (351 | ) | (216 | ) | (106 | ) | (118 | ) | (58 | ) | ||||||||||||
Employee share awards exercised following vesting | 311 | 351 | 216 | 120 | 103 | 58 | ||||||||||||||||||
Shares bought back(a) | – | – | – | – | (3,678 | ) | – | |||||||||||||||||
Shares cancelled(a) | – | – | – | 83 | 3,595 | – | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at the end of the financial year | (8 | ) | (1 | ) | (1 | ) | (525 | ) | (622 | ) | (524 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
BHP Billiton Limited | BHP Billiton Plc(b) | |||||||||||||||||||||||
2012 Shares(c) | 2011 Shares(c) | 2010 Shares(c) | 2012 Shares(c) | 2011 Shares(c) | 2010 Shares(c) | |||||||||||||||||||
Share capital issued | ||||||||||||||||||||||||
Ordinary shares fully paid | 3,211,691,105 | 3,211,654,687 | 3,358,444,496 | 2,136,185,454 | 2,138,367,191 | 2,231,121,202 | ||||||||||||||||||
Comprising | ||||||||||||||||||||||||
– Shares held by the public | 3,211,448,985 | 3,211,607,567 | 3,358,397,376 | 2,111,273,967 | 2,110,963,849 | 2,206,076,344 | ||||||||||||||||||
– Treasury shares | 242,120 | 47,120 | 47,120 | 24,911,487 | 27,403,342 | 25,044,858 | ||||||||||||||||||
Ordinary shares paid to A$1.36 | – | – | 110,000 | |||||||||||||||||||||
Special Voting Share of no par value(d) | 1 | 1 | 1 | |||||||||||||||||||||
5.5% Preference shares of £1 each(e) | 50,000 | 50,000 | 50,000 | |||||||||||||||||||||
Special Voting Share of US$0.50 par value (d) | 1 | 1 | 1 | |||||||||||||||||||||
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||
2012 Shares | 2011 Shares | 2010 Shares | 2012 Shares | 2011 Shares | 2010 Shares | |||||||||||||||||||
Movement in shares held by the public | ||||||||||||||||||||||||
Opening number of shares | 3,211,607,567 | 3,358,397,376 | 3,358,397,376 | 2,110,963,849 | 2,206,076,344 | 2,206,130,916 | ||||||||||||||||||
Shares issued on the exercise of Group Incentive Scheme awards | 36,418 | – | – | – | – | – | ||||||||||||||||||
Partly paid shares becoming fully paid(f) | – | 110,000 | – | – | – | – | ||||||||||||||||||
Purchase of shares by ESOP Trusts | (8,077,647 | ) | (8,997,229 | ) | (6,304,733 | ) | (3,055,030 | ) | (3,664,620 | ) | (2,081,566 | ) | ||||||||||||
Employee share awards exercised following vesting | 7,882,647 | 8,997,229 | 6,304,733 | 3,365,148 | 3,487,873 | 2,026,994 | ||||||||||||||||||
Shares bought back(a) | – | (146,899,809 | ) | – | – | (94,935,748 | ) | – | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Closing number of shares(g) | 3,211,448,985 | 3,211,607,567 | 3,358,397,376 | 2,111,273,967 | 2,110,963,849 | 2,206,076,344 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Movement in Treasury shares Opening number of shares Purchase of shares by ESOP Trusts Employee share awards exercised following vesting Shares bought back(a) Shares cancelled(a) Closing number of shares BHP Billiton Limited BHP Billiton Plc 2012
Shares 2011
Shares 2010
Shares 2012
Shares 2011
Shares 2010
Shares 47,120 47,120 47,120 27,403,342 25,044,858 24,990,286 8,077,647 8,997,229 6,304,733 3,055,030 3,664,620 2,081,566 (7,882,647 ) (8,997,229 ) (6,304,733 ) (3,365,148 ) (3,487,873 ) (2,026,994 ) – – – – 94,935,748 – – – – (2,181,737 ) (92,754,011 ) – 242,120 47,120 47,120 24,911,487 27,403,342 25,044,858
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | 2010 US$M | 2009 US$M | 2008 US$M | |||||||||||||
Share capital | ||||||||||||||||||
Balance at the beginning of the financial year | 1,227 | 1,227 | 1,221 | 1,116 | 1,116 | 1,183 | ||||||||||||
Exercise of Employee Share Plan Options | — | — | 6 | — | — | — | ||||||||||||
Shares bought back and cancelled(a) | — | — | — | — | — | (67 | ) | |||||||||||
Balance at the end of the financial year | 1,227 | 1,227 | 1,227 | 1,116 | 1,116 | 1,116 | ||||||||||||
Treasury shares | ||||||||||||||||||
Balance at the beginning of the financial year | (1 | ) | (1 | ) | (2 | ) | (524 | ) | (513 | ) | (1,455 | ) | ||||||
Purchase of shares by ESOP Trusts | (216 | ) | (132 | ) | (230 | ) | (58 | ) | (37 | ) | (20 | ) | ||||||
Employee share awards exercised following vesting | 216 | 132 | 231 | 58 | 26 | 29 | ||||||||||||
Shares bought back(a) | — | — | — | — | — | (3,075 | ) | |||||||||||
Shares cancelled(a) | — | — | — | — | — | 4,008 | ||||||||||||
Balance at the end of the financial year | (1 | ) | (1 | ) | (1 | ) | (524 | ) | (524 | ) | (513 | ) | ||||||
BHP Billiton Limited | BHP Billiton Plc | |||||||||||
2010 Shares(d) | 2009 Shares(d) | 2008 Shares(d) | 2010 Shares(c) (d) | 2009 Shares(c) (d) | 2008 Shares(c) (d) | |||||||
Share capital issued | ||||||||||||
Ordinary shares fully paid | 3,358,359,496 | 3,358,359,496 | 3,358,359,496 | 2,231,121,202 | 2,231,121,202 | 2,231,121,202 | ||||||
Comprising | ||||||||||||
– Shares held by the public | 3,358,312,376 | 3,358,312,376 | 3,358,260,180 | 2,206,076,344 | 2,206,130,916 | 2,206,662,027 | ||||||
– Treasury shares | 47,120 | 47,120 | 99,316 | 25,044,858 | 24,990,286 | 24,459,175 | ||||||
Ordinary shares paid to A$1.36 | 110,000 | 110,000 | 195,000 | |||||||||
Special Voting Share of no par value(e) | 1 | 1 | 1 | |||||||||
5.5% Preference shares of £1 each(f) | 50,000 | 50,000 | 50,000 | |||||||||
Special Voting Share of US$0.50 par value(e) | 1 | 1 | 1 | |||||||||
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||
2010 Shares | 2009 Shares | 2008 Shares | 2010 Shares | 2009 Shares | 2008 Shares | |||||||||||||
Movement in shares held by the public | ||||||||||||||||||
Opening number of shares | 3,358,312,376 | 3,358,260,180 | 3,357,372,156 | 2,206,130,916 | 2,206,662,027 | 2,302,854,320 | ||||||||||||
Shares issued on exercise of Employee Share Plan Options | — | — | 855,923 | — | — | — | ||||||||||||
Purchase of shares by ESOP Trusts | (6,304,733 | ) | (5,274,136 | ) | (6,550,854 | ) | (2,081,566 | ) | (1,447,706 | ) | (589,802 | ) | ||||||
Employee share awards exercised following vesting | 6,304,733 | 5,326,332 | 6,582,955 | 2,026,994 | 916,595 | 1,301,595 | ||||||||||||
Shares bought back(a) | — | — | — | — | — | (96,904,086 | ) | |||||||||||
Closing number of shares(g) | 3,358,312,376 | 3,358,312,376 | 3,358,260,180 | 2,206,076,344 | 2,206,130,916 | 2,206,662,027 | ||||||||||||
Notes to Financial Statements continued
19 Share capital continued
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||
Shares | Shares | Shares | Shares | Shares | Shares | |||||||||||||
Movement in treasury shares | ||||||||||||||||||
Opening number of shares | 47,120 | 99,316 | 131,417 | 24,990,286 | 24,459,175 | 63,607,682 | ||||||||||||
Purchase of shares by ESOP Trusts | 6,304,733 | 5,274,136 | 6,550,854 | 2,081,566 | 1,447,706 | 589,802 | ||||||||||||
Employee share awards exercised following vesting | (6,304,733 | ) | (5,326,332 | ) | (6,582,955 | ) | (2,026,994 | ) | (916,595 | ) | (1,301,595 | ) | ||||||
Shares bought back(a) | — | — | — | — | — | 96,904,086 | ||||||||||||
Shares cancelled(a) | — | — | — | — | — | (135,340,800 | ) | |||||||||||
Closing number of shares | 47,120 | 47,120 | 99,316 | 25,044,858 | 24,990,286 | 24,459,175 | ||||||||||||
BHP Billiton Limited | |||||||||||||||||||
2010 | 2009 | 2008 | BHP Billiton Limited | ||||||||||||||||
Shares | Shares | Shares | 2012 Shares | 2011 Shares | 2010 Shares | ||||||||||||||
Movement in shares partly paid to A$1.36 | |||||||||||||||||||
Opening number of shares | 110,000 | 195,000 | 195,000 | – | 110,000 | 110,000 | |||||||||||||
Partly paid shares converted to fully paid(h) | — | (85,000 | ) | — | |||||||||||||||
Partly paid shares becoming fully paid(f) | – | (110,000 | ) | – | |||||||||||||||
|
|
| |||||||||||||||||
Closing number of shares(i) | 110,000 | 110,000 | 195,000 | ||||||||||||||||
Closing number of shares | – | – | 110,000 | ||||||||||||||||
|
|
|
(a) | On |
Year ended | Shares purchased | Number | Cost per share | Total cost US$M | Purchased by: | |||||||||||||||||||||||||
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||||||||
Shares | US$M | Shares | US$M | |||||||||||||||||||||||||||
30 June 2011 | BHP Billiton Plc | 94,935,748 | £23.96 | (i) | 3,678 | 94,935,748 | 3,678 | – | – | |||||||||||||||||||||
BHP Billiton Limited | 146,899,809 | A$40.85 | 6,345 | 146,899,809 | 6,345 | – | – |
(i) | Cost per share represents the average cost per share paid on-market by BHP Billiton Limited |
Year ended | Shares purchased | Number | Cost per share and discount | Total cost US$M | Purchased by: | |||||||||||||
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||
Shares | US$M | Shares | US$M | |||||||||||||||
30 June 2008 | BHP Billiton Plc | 96,904,086 | £ | 12.37 | 3,075 | 96,904,086 | 3,075 | — | — | |||||||||
8.7 per cent | (i) | |||||||||||||||||
As at 30 June 2010, shares in BHP Billiton Plc bought back as part of the above program but not cancelled are held as Treasury shares. On 14 December 2007, the share buy-back program was suspended in light of the Group’s offers for Rio Tinto plc and Rio Tinto Limited. On 27 November 2008, the offers lapsed. No shares were bought back under the program in the year ended 30 June 2010.
(b) | An Equalisation Share (US$0.50 par value) has been authorised to be issued to enable a distribution to be made by BHP Billiton Plc Group to the BHP Billiton Limited Group should this be required under the terms of the DLC merger. The Directors have the ability to issue the Equalisation Share if required under those terms. The Constitution of BHP Billiton Limited allows the Directors of that Company to issue a similar Equalisation Share. There has been no movement in this class of share. |
(c) |
|
The total number of BHP Billiton Limited shares of all classes is |
total number of BHP Billiton Plc shares of all classes is |
Notes to Financial Statements continued
19 Share capital continued
Each of BHP Billiton Limited and BHP Billiton Plc issued one Special Voting Share to facilitate joint voting by shareholders of BHP Billiton Limited and BHP Billiton Plc on Joint Electorate Actions. There has been no movement in these shares. |
Preference shares have the right to repayment of the amount paid up on the nominal value and any unpaid dividends in priority to the holders of any other class of shares in BHP Billiton Plc on a return of capital or winding up. The holders of preference shares have limited voting rights if payment of the preference dividends are six months or more in arrears or a resolution is passed changing the rights of the preference shareholders. There has been no movement in these shares, all of which are held by JP Morgan plc. |
(f) | During the year ended 30 June 2011, 110,000 partly paid shares were paid up and became fully paid shares. 70,000 of these partly paid shares were also entitled to 79,928 bonus shares which were satisfied via on-market purchase. |
(g) | During the period 1 July |
|
|
Notes to Financial Statements continued
2010 | 2009 | 2008 | |||||||
US$M | US$M | US$M | |||||||
Reserves | |||||||||
Share premium account(a) | |||||||||
Balance at the beginning of the financial year | 518 | 518 | 518 | ||||||
Balance at the end of the financial year | 518 | 518 | 518 | ||||||
Foreign currency translation reserve (b) | |||||||||
Balance at the beginning of the financial year | 24 | (3 | ) | 18 | |||||
Exchange fluctuations on translation of foreign operations taken to equity | 1 | 27 | (21 | ) | |||||
Exchange fluctuations on translation of foreign operations taken to the income statement | (10 | ) | — | — | |||||
Total other comprehensive income | (9 | ) | 27 | (21 | ) | ||||
Balance at the end of the financial year | 15 | 24 | (3 | ) | |||||
Employee share awards reserve(c) | |||||||||
Balance at the beginning of the financial year | 434 | 372 | 261 | ||||||
Deferred tax arising on accrued employee entitlement for unexercised awards | 69 | (89 | ) | 51 | |||||
Total other comprehensive income | 69 | (89 | ) | 51 | |||||
Accrued employee entitlement for unvested awards | 170 | 185 | 97 | ||||||
Employee share awards exercised following vesting | (88 | ) | (34 | ) | (37 | ) | |||
Employee share awards lapsed | (28 | ) | — | — | |||||
Balance at the end of the financial year | 557 | 434 | 372 | ||||||
Hedging reserve – cash flow hedges(d) | |||||||||
Balance at the beginning of the financial year | 9 | (417 | ) | (87 | ) | ||||
Net (loss)/gain on cash flow hedges taken to equity | (15 | ) | 710 | (383 | ) | ||||
Net realised loss on cash flow hedges transferred to the income statement | 2 | 22 | 73 | ||||||
Net unrealised gain on cash flow hedges transferred to the income statement | — | (48 | ) | — | |||||
Net gains on cash flow hedges transferred to initial carrying amount of hedged items | — | (26 | ) | (190 | ) | ||||
Deferred tax relating to cash flow hedges | 4 | (232 | ) | 170 | |||||
Total other comprehensive income | (9 | ) | 426 | (330 | ) | ||||
Balance at the end of the financial year | — | 9 | (417 | ) | |||||
Financial assets reserve(e) | |||||||||
Balance at the beginning of the financial year | 202 | 162 | 230 | ||||||
Net valuation gain/(loss) taken to equity | 160 | 3 | (76 | ) | |||||
Net valuation losses transferred to the income statement | 2 | 58 | – | ||||||
Deferred tax relating to revaluations | (16 | ) | (21 | ) | 8 | ||||
Total other comprehensive income | 146 | 40 | (68 | ) | |||||
Balance at the end of the financial year | 348 | 202 | 162 | ||||||
Share buy-back reserve(f) | |||||||||
Balance at the beginning of the financial year | 118 | 118 | 51 | ||||||
BHP Billiton Plc shares cancelled | — | — | 67 | ||||||
Balance at the end of the financial year | 118 | 118 | 118 | ||||||
Non-controlling interest contribution reserve(g) | |||||||||
Balance at the beginning of the financial year | — | — | — | ||||||
Issue of share options to non-controlling interests | 43 | — | — | ||||||
Distribution to option holders | (10 | ) | — | — | |||||
Transactions with owners – contributed equity | 317 | — | — | ||||||
Balance at the end of the financial year | 350 | — | — | ||||||
Total reserves | 1,906 | 1,305 | 750 | ||||||
2012 | 2011 | 2010 | ||||||||||
US$M | US$M | US$M | ||||||||||
Reserves | ||||||||||||
Share premium account(a) | ||||||||||||
Balance at the beginning of the financial year | 518 | 518 | 518 | |||||||||
|
|
|
|
|
| |||||||
Balance at the end of the financial year | 518 | 518 | 518 | |||||||||
|
|
|
|
|
| |||||||
Foreign currency translation reserve(b) | ||||||||||||
Balance at the beginning of the financial year | 34 | 15 | 24 | |||||||||
Exchange fluctuations on translation of foreign operations taken to equity | 19 | 19 | 1 | |||||||||
Exchange fluctuations on translation of foreign operations transferred to the income statement | – | – | (10 | ) | ||||||||
|
|
|
|
|
| |||||||
Total other comprehensive income | 19 | 19 | (9 | ) | ||||||||
|
|
|
|
|
| |||||||
Balance at the end of the financial year | 53 | 34 | 15 | |||||||||
|
|
|
|
|
| |||||||
Employee share awards reserve(c) | ||||||||||||
Balance at the beginning of the financial year | 680 | 557 | 434 | |||||||||
Deferred tax arising on accrued employee entitlement for unexercised awards | (56 | ) | (13 | ) | 69 | |||||||
|
|
|
|
|
| |||||||
Total other comprehensive income | (56 | ) | (13 | ) | 69 | |||||||
Accrued employee entitlement for unexercised awards | 270 | 266 | 170 | |||||||||
Employee share awards exercised | (189 | ) | (121 | ) | (88 | ) | ||||||
Employee share awards forfeited | (8 | ) | (9 | ) | (28 | ) | ||||||
|
|
|
|
|
| |||||||
Balance at the end of the financial year | 697 | 680 | 557 | |||||||||
|
|
|
|
|
| |||||||
Hedging reserve – cash flow hedges(d) | ||||||||||||
Balance at the beginning of the financial year | – | – | 9 | |||||||||
Losses on cash flow hedges taken to equity | (320 | ) | – | (15 | ) | |||||||
Realised losses on cash flow hedges transferred to the income statement | – | – | 2 | |||||||||
Unrealised losses on cash flow hedges transferred to the income statement | 205 | – | – | |||||||||
Deferred tax relating to cash flow hedges | 35 | – | 4 | |||||||||
|
|
|
|
|
| |||||||
Total other comprehensive income | (80 | ) | – | (9 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at the end of the financial year | (80 | ) | – | – | ||||||||
|
|
|
|
|
| |||||||
Financial assets reserve(e) | ||||||||||||
Balance at the beginning of the financial year | 276 | 348 | 202 | |||||||||
Net valuation (losses)/gains on available for sale investments taken to equity | (32 | ) | (71 | ) | 160 | |||||||
Net valuation (gains)/losses on available for sale investments transferred to the income statement | (2 | ) | (38 | ) | 2 | |||||||
Deferred tax relating to revaluations | (12 | ) | 37 | (16 | ) | |||||||
|
|
|
|
|
| |||||||
Total other comprehensive income | (46 | ) | (72 | ) | 146 | |||||||
|
|
|
|
|
| |||||||
Balance at the end of the financial year | 230 | 276 | 348 | |||||||||
|
|
|
|
|
| |||||||
Share buy-back reserve(f) | ||||||||||||
Balance at the beginning of the financial year | 164 | 118 | 118 | |||||||||
BHP Billiton Plc shares cancelled | 1 | 46 | – | |||||||||
|
|
|
|
|
| |||||||
Balance at the end of the financial year | 165 | 164 | 118 | |||||||||
|
|
|
|
|
| |||||||
Non-controlling interest contribution reserve(g) | ||||||||||||
Balance at the beginning of the financial year | 329 | 350 | – | |||||||||
Issue of share options to non-controlling interests | – | – | 43 | |||||||||
Distribution to option holders | – | (21 | ) | (10 | ) | |||||||
Equity contributed | – | – | 317 | |||||||||
|
|
|
|
|
| |||||||
Balance at the end of the financial year | 329 | 329 | 350 | |||||||||
|
|
|
|
|
| |||||||
Total reserves | 1,912 | 2,001 | 1,906 | |||||||||
|
|
|
|
|
|
Notes to Financial Statements continued
20 Other equity continued
2010 | 2009 | 2008 | |||||||
US$M | US$M | US$M | |||||||
Retained earnings | |||||||||
Balance at the beginning of the financial year | 36,831 | 35,756 | 27,729 | ||||||
Profit for the year | 12,722 | 5,877 | 15,390 | ||||||
Actuarial losses | (38 | ) | (224 | ) | (95 | ) | |||
Tax recognised directly in other comprehensive income | 54 | 89 | 77 | ||||||
Total comprehensive income | 12,738 | 5,742 | 15,372 | ||||||
Dividends paid | (4,618 | ) | (4,563 | ) | (3,133 | ) | |||
BHP Billiton Plc share buy-back – refer to note 19 | — | — | (4,008 | ) | |||||
Employee share awards exercised following vesting, net of employee contributions and lapses | (150 | ) | (104 | ) | (204 | ) | |||
Balance at the end of the financial year | 44,801 | 36,831 | 35,756 | ||||||
2012 | 2011 | 2010 | |||||||||||||||||||
US$M | US$M | US$M | |||||||||||||||||||
Retained earnings | |||||||||||||||||||||
Balance at the beginning of the financial year | 53,131 | 44,801 | 36,831 | ||||||||||||||||||
Profit after taxation | 15,417 | 23,648 | 12,722 | ||||||||||||||||||
Actuarial losses on pension and medical schemes | (253 | ) | (105 | ) | (38 | ) | |||||||||||||||
Tax recognised within other comprehensive income | 123 | 94 | 54 | ||||||||||||||||||
|
|
| |||||||||||||||||||
Total comprehensive income | 15,287 | 23,637 | 12,738 | ||||||||||||||||||
Dividends | (5,894 | ) | (5,126 | ) | (4,618 | ) | |||||||||||||||
BHP Billiton Limited shares cancelled – refer to note 19 | – | (6,301 | ) | – | |||||||||||||||||
BHP Billiton Plc shares cancelled – refer to note 19 | (83 | ) | (3,595 | ) | – | ||||||||||||||||
Employee share awards exercised, net of employee contributions and forfeitures | (205 | ) | (285 | ) | (150 | ) | |||||||||||||||
|
|
| |||||||||||||||||||
Balance at the end of the financial year | 62,236 | 53,131 | 44,801 | ||||||||||||||||||
|
|
| |||||||||||||||||||
2012 | 2011 | 2010 | |||||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | US$M | US$M | US$M | ||||||||||||||||
Non-controlling interests | |||||||||||||||||||||
Balance at the beginning of the financial year | 757 | 708 | 251 | 993 | 804 | 757 | |||||||||||||||
Profit for the year | 287 | 461 | 572 | ||||||||||||||||||
Actuarial losses on pension and medical schemes | — | (3 | ) | (1 | ) | ||||||||||||||||
Net valuation gains taken to equity | 7 | — | — | ||||||||||||||||||
Tax recognised directly in other comprehensive income | — | — | — | ||||||||||||||||||
Profit after taxation | 115 | 298 | 287 | ||||||||||||||||||
Actuarial gains/(losses) on pension and medical schemes | 3 | (8 | ) | – | |||||||||||||||||
Net valuation gains on available for sale investments taken to equity | – | 1 | 7 | ||||||||||||||||||
Net valuation gains on available for sale investments transferred to the income statement | – | (9 | ) | – | |||||||||||||||||
Tax recognised within other comprehensive income | (1 | ) | 2 | – | |||||||||||||||||
|
|
| |||||||||||||||||||
Total comprehensive income | 294 | 458 | 571 | 117 | 284 | 294 | |||||||||||||||
Issue of share options to non-controlling interests | 16 | — | — | – | – | 16 | |||||||||||||||
Distribution to option holders | (6 | ) | — | — | – | (17 | ) | (6 | ) | ||||||||||||
Transactions with owners – contributed equity | 20 | (3 | ) | (1 | ) | ||||||||||||||||
Dividends paid | (277 | ) | (406 | ) | (113 | ) | |||||||||||||||
Dividends | (56 | ) | (90 | ) | (277 | ) | |||||||||||||||
Equity contributed | 161 | 12 | 20 | ||||||||||||||||||
|
|
| |||||||||||||||||||
Balance at the end of the financial year | 804 | 757 | 708 | 1,215 | 993 | 804 | |||||||||||||||
|
|
|
(a) | The share premium account represents the premium paid on the issue of BHP Billiton Plc shares recognised in accordance with the UK Companies Act 2006. |
(b) | The foreign currency translation reserve represents exchange differences arising on the translation of non-US dollar functional currency operations within the Group into US dollars. |
(c) | The employee share awards reserve represents the accrued employee entitlements to share awards that have been charged to the income statement and have not yet been exercised. |
(d) | The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge is recognised in the income statement when the hedged transaction impacts the income statement, or is recognised as an adjustment to the cost of non-financial hedged items. |
(e) | The financial assets reserve represents the revaluation of available for sale financial assets. Where a revalued financial asset is sold or impaired, the relevant portion of the reserve is transferred to the income statement. |
(f) | The share buy-back reserve represents the par value of BHP Billiton Plc shares which were purchased and subsequently cancelled. The cancellation of the shares creates a non-distributable reserve. |
(g) | The non-controlling interest contribution reserve represents the excess of consideration received over the book value of net assets attributable to the equity instruments held by non-controlling interests. |
Notes to Financial Statements continued
Contingent liabilities at balance date, not otherwise provided for in the financial statements, are categorised as arising from:
2012 | 2011 | |||||||||||
2010 US$M | 2009 US$M | US$M | US$M | |||||||||
Jointly controlled entities | ||||||||||||
Bank guarantees(a) | 7 | — | ||||||||||
Actual or potential litigation(b) | 878 | 724 | ||||||||||
Bank guarantees(a) | 1 | 12 | ||||||||||
Actual or potential litigation(b) | 1,260 | 1,384 | ||||||||||
Other | 8 | 1 | ||||||||||
|
| |||||||||||
885 | 724 | 1,269 | 1,397 | |||||||||
|
| |||||||||||
Subsidiaries and jointly controlled assets (including guarantees) | ||||||||||||
Bank guarantees(a) | 1 | 1 | ||||||||||
Actual or potential litigation(b) | 455 | 217 | ||||||||||
Bank guarantees(a) | 30 | 28 | ||||||||||
Actual or potential litigation(b) | 836 | 693 | ||||||||||
Other | 3 | 9 | 3 | 4 | ||||||||
|
| |||||||||||
459 | 227 | 869 | 725 | |||||||||
|
| |||||||||||
Total contingent liabilities | 1,344 | 951 | 2,138 | 2,122 | ||||||||
|
|
(a) | The Group has entered into various counter-indemnities of bank and performance guarantees related to its own future performance in the normal course of business. |
(b) | Actual or potential litigation amounts relate to a number of actions against the Group, none of which are individually significant and where the liability is not probable and therefore the Group has not provided for such amounts in these financial statements. Additionally, there are a number of legal claims or potential claims against the Group, the outcome of which cannot be foreseen at present, and for which no amounts have been included in the table above. |
2010 US$M | 2009 US$M | |||||
Capital expenditure commitments not provided for in the financial statements | ||||||
Due not later than one year | 4,311 | 3,716 | ||||
Due later than one year and not later than two years | 491 | 895 | ||||
Due later than two years and not later than three years | 171 | 126 | ||||
Due later than three years and not later than four years | 16 | 35 | ||||
Total capital expenditure commitments | 4,989 | 4,772 | ||||
Lease expenditure commitments | ||||||
Finance leases | ||||||
Due not later than one year | 95 | 89 | ||||
Due later than one year and not later than two years | 60 | 57 | ||||
Due later than two years and not later than three years | 51 | 59 | ||||
Due later than three years and not later than four years | 49 | 46 | ||||
Due later than four years and not later than five years | 49 | 46 | ||||
Due later than five years | 140 | 179 | ||||
Total commitments under finance leases | 444 | 476 | ||||
Future financing charges | (111 | ) | (133 | ) | ||
Right to reimbursement from joint venture partner | (108 | ) | (120 | ) | ||
Finance lease liability | 225 | 223 | ||||
Operating leases(a) | ||||||
Due not later than one year | 695 | 576 | ||||
Due later than one year and not later than two years | 580 | 659 | ||||
Due later than two years and not later than three years | 601 | 450 | ||||
Due later than three years and not later than four years | 255 | 316 | ||||
Due later than four years and not later than five years | 98 | 91 | ||||
Due later than five years | 830 | 200 | ||||
Total commitments under operating leases | 3,059 | 2,292 | ||||
Other expenditure commitments(b) | ||||||
Due not later than one year | 2,793 | 2,626 | ||||
Due later than one year and not later than two years | 1,291 | 1,486 | ||||
Due later than two years and not later than three years | 1,111 | 877 | ||||
Due later than three years and not later than four years | 768 | 971 | ||||
Due later than four years and not later than five years | 444 | 657 | ||||
Due later than five years | 1,923 | 1,803 | ||||
Total commitments for other expenditure | 8,330 | 8,420 | ||||
Notes to Financial Statements continued
22 Commitments continued
2012 | 2011 | |||||||
US$M | US$M | |||||||
Capital expenditure commitments | ||||||||
Due not later than one year | 7,749 | 5,029 | ||||||
Due later than one year and not later than two years | 2,023 | 1,368 | ||||||
Due later than two years and not later than three years | 444 | 434 | ||||||
Due later than three years and not later than four years | 112 | 14 | ||||||
Due later than four years and not later than five years | 36 | 1 | ||||||
|
|
|
| |||||
Total capital expenditure commitments | 10,364 | 6,846 | ||||||
|
|
|
| |||||
Lease expenditure commitments | ||||||||
Finance leases | ||||||||
Due not later than one year | 113 | 88 | ||||||
Due later than one year and not later than two years | 64 | 54 | ||||||
Due later than two years and not later than three years | 65 | 50 | ||||||
Due later than three years and not later than four years | 49 | 51 | ||||||
Due later than four years and not later than five years | 76 | 46 | ||||||
Due later than five years | 32 | 93 | ||||||
|
|
|
| |||||
Total commitments under finance leases | 399 | 382 | ||||||
Future financing charges | (76 | ) | (93 | ) | ||||
Right to reimbursement from joint venture partner | (86 | ) | (97 | ) | ||||
|
|
|
| |||||
Finance lease liability | 237 | 192 | ||||||
|
|
|
| |||||
Operating leases(a) | ||||||||
Due not later than one year | 925 | 861 | ||||||
Due later than one year and not later than two years | 700 | 640 | ||||||
Due later than two years and not later than three years | 516 | 453 | ||||||
Due later than three years and not later than four years | 347 | 208 | ||||||
Due later than four years and not later than five years | 275 | 192 | ||||||
Due later than five years | 1,126 | 1,197 | ||||||
|
|
|
| |||||
Total commitments under operating leases | 3,889 | 3,551 | ||||||
|
|
|
| |||||
Other expenditure commitments(b) | ||||||||
Due not later than one year | 4,061 | 3,473 | ||||||
Due later than one year and not later than two years | 2,199 | 1,486 | ||||||
Due later than two years and not later than three years | 1,468 | 947 | ||||||
Due later than three years and not later than four years | 957 | 564 | ||||||
Due later than four years and not later than five years | 910 | 546 | ||||||
Due later than five years | 3,841 | 2,059 | ||||||
|
|
|
| |||||
Total commitments for other expenditure | 13,436 | 9,075 | ||||||
|
|
|
|
(a) | Operating leases are entered into as a means of acquiring property, plant and equipment. Rental payments are generally fixed, but with inflation escalation clauses on which contingent rentals are determined. Certain leases contain extension and renewal options. |
(b) | Other expenditure commitments include the supply of goods and services, royalties, exploration expenditure and chartering costs. |
Other Commitments
On 5 June 2009, BHP Billiton signed a framework agreement, including non-binding core principles, with Rio Tinto to form a 50-50 production joint venture combining the economic interests of both companies' current and future iron ore assets in Western Australia. On 5 December 2009, BHP Billiton and Rio Tinto signed binding agreements that set out the terms that will regulate the establishment of the joint venture and its ongoing operation. To equalise the net value of the parties' asset contributions to the joint venture, at completion BHP Billiton will pay US$5.8 billion to Rio Tinto, adjusted to reflect equalisation of net cash flows from 1 July 2009 to completion. There is a US$275.5 million break fee associated with this transaction which is payable by either party under certain circumstances.
Notes to Financial Statements continued
23 Notes to the consolidated cash flow statement
Cash and cash equivalents
For the purpose of the consolidated cash flow statement, cash equivalents include highly liquid investments that are readily convertible to cash and with a maturity of less than 90 days, bank overdrafts and interest bearing liabilities at call.
2012 | 2011 | 2010 | |||||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | US$M | US$M | US$M | ||||||||||||||||
Cash and cash equivalents comprise: | |||||||||||||||||||||
Cash | 1,369 | 1,156 | 1,734 | 1,521 | 1,361 | 1,369 | |||||||||||||||
Short-term deposits | 11,087 | 9,677 | 2,503 | 3,260 | 8,723 | 11,087 | |||||||||||||||
|
|
| |||||||||||||||||||
Total cash and cash equivalents(a) | 12,456 | 10,833 | 4,237 | 4,781 | 10,084 | 12,456 | |||||||||||||||
Bank overdrafts and short- term borrowings – refer to note 16 | (1 | ) | (2 | ) | (64 | ) | |||||||||||||||
Bank overdrafts and short-term borrowings – refer to note 16 | (20 | ) | (4 | ) | (1 | ) | |||||||||||||||
Transferred to assets held for sale – refer to note 26 | 120 | – | – | ||||||||||||||||||
|
|
| |||||||||||||||||||
Total cash and cash equivalents, net of overdrafts | 12,455 | 10,831 | 4,173 | 4,881 | 10,080 | 12,455 | |||||||||||||||
|
|
|
(a) | Cash and cash equivalents include US$ |
Exploration and evaluation expenditure
Exploration and evaluation expenditure (excluding impairments) is classified as an investing activity as described in IAS 7/AASB 107 ‘Cash Flow Statements’ and is therefore a reconciling item between profit after taxation and net operating cash flows.
Exploration and evaluation expenditure classified as investing activities in the cash flow statement is reconciled as follows:
2010 US$M | 2009 US$M | 2008 US$M | ||||
Expensed in the income statement (excluding impairments) | 1,030 | 1,009 | 859 | |||
Capitalised in property, plant and equipment | 303 | 234 | 491 | |||
Cash outflow from investing activities | 1,333 | 1,243 | 1,350 | |||
Significant non-cash investing and financing transactions
Property, plant and equipment of US$5629 million (2009:(2011: US$592 million; 2008:2010: US$21156 million) was acquired under finance leases.
Property, plant and equipment of US$236 million (2009: nil (2011: US$ nil; 2008:2010: US$ nil)236 million) was acquired under vendor financing arrangements.
Disposal of subsidiaries and operations
The Group disposed of the following subsidiaries and operations during the year ended:
30 June 2012
Gulf of Mexico assets – West Cameron, Starlifter and Mustang.
30 June 2011
There were no disposals of subsidiaries or operations.
30 June 2010
Esidulini game reserve
Kendilo coal operation
Manganese Metal Company (Pty) Ltd
Pering mine
Ravensthorpe nickel operations
Suriname Bauxite Mines and the Paranam Refinery
Yabulu nickel refinery
Notes to Financial Statements continued
23 Notes toDetails of the consolidated cash flow statement continued
30 June 2009
BHP Asia Pacific Nickel Pty Ltd
Mayaniquel SA
Minera Geleen SA
PT Gag Nickel
Sociedad Contractual Minera Otway
30 June 2008
Elouera coal mine
Optimum Collierydisposal of subsidiaries and operations
The carrying amount of assets and liabilities disposed are as follows:
2010 US$M | 2009 US$M | 2008 US$M | 2012 | 2011 | 2010 | ||||||||||||||||
US$M | US$M | US$M | |||||||||||||||||||
Assets | |||||||||||||||||||||
Cash and cash equivalents | 137 | — | — | – | – | 137 | |||||||||||||||
Trade and other receivables | 11 | 1 | 14 | – | – | 11 | |||||||||||||||
Inventories | 169 | — | 20 | – | – | 169 | |||||||||||||||
Current tax assets | 9 | — | — | – | – | 9 | |||||||||||||||
Other current assets | 11 | 6 | — | – | – | 11 | |||||||||||||||
Property, plant and equipment | 682 | 35 | 223 | 1 | – | 682 | |||||||||||||||
|
|
| |||||||||||||||||||
Total assets | 1 | – | 1,019 | ||||||||||||||||||
|
|
| |||||||||||||||||||
Liabilities | |||||||||||||||||||||
Trade and other payables | (66 | ) | (1 | ) | (107 | ) | – | – | (66 | ) | |||||||||||
Interest bearing liabilities | (27 | ) | — | — | – | – | (27 | ) | |||||||||||||
Current tax payable | (1 | ) | — | — | – | – | (1 | ) | |||||||||||||
Provisions | (590 | ) | — | (304 | ) | (14 | ) | – | (590 | ) | |||||||||||
|
|
| |||||||||||||||||||
Net identifiable assets/(liabilities)(a) | 335 | 41 | (154 | ) | |||||||||||||||||
Total liabilities | (14 | ) | – | (684 | ) | ||||||||||||||||
|
|
| |||||||||||||||||||
Gross consideration | 351 | 23 | (88 | ) | |||||||||||||||||
Less cash balances disposed of | (137 | ) | — | — | |||||||||||||||||
Net (liabilities)/assets disposed(a) | (13 | ) | – | 335 | |||||||||||||||||
|
|
| |||||||||||||||||||
Net consideration | 214 | 23 | (88 | ) | |||||||||||||||||
Gross cash consideration | 6 | – | 351 | ||||||||||||||||||
Less cash and cash equivalents disposed | – | – | (137 | ) | |||||||||||||||||
|
|
| |||||||||||||||||||
Comprising of: | |||||||||||||||||||||
– Cash | 214 | 17 | 38 | ||||||||||||||||||
– Deferred consideration/(payable) | — | 6 | (126 | ) | |||||||||||||||||
Net cash consideration received | 6 | – | 214 | ||||||||||||||||||
|
|
| |||||||||||||||||||
Total net consideration received/(paid) | 214 | 23 | (88 | ) | |||||||||||||||||
Gains on sale of subsidiaries and operations | 19 | – | 16 | ||||||||||||||||||
|
|
| |||||||||||||||||||
Gains/(losses) on sale of subsidiaries and operations | 16 | (18 | ) | 66 | |||||||||||||||||
(a) | Net |
Acquisition of subsidiaries and operations
TheIn addition to the business combinations described in note 24, the Group acquired the following subsidiaries and operations during the year ended:
30 June 2012
CEU Hawkeville LLC
30 June 2011
There were no acquisitions of subsidiaries or operations.
30 June 2010
100 per cent of Athabasca Potash Inc.
100 per cent of United Minerals Corporations NL
30 June 2009
100 per centDetails of Anglo Potash Limited
Notesthe acquisitions of subsidiaries and operations, excluding those acquired through business combinations (refer to Financial Statements continued
23 Notes to the consolidated cash flow statement continued
30 June 2008
A 33.3 per cent interest in Guinea Alumina Corporation Ltd
The fair values of assets and liabilities acquirednote 24), are as follows:
2010 US$M | 2009 US$M | 2008 US$M | ||||
Property, plant and equipment | 508 | 270 | 30 | |||
Net identifiable assets | 508 | 270 | 30 | |||
Net consideration paid | 508 | 270 | 30 | |||
2012 | 2011 | 2010 | ||||||||||
US$M | US$M | US$M | ||||||||||
Assets | ||||||||||||
Trade and other receivables | 3 | – | – | |||||||||
Other current assets | 3 | – | – | |||||||||
Property, plant and equipment | 89 | – | 508 | |||||||||
|
|
|
|
|
| |||||||
Assets acquired | 95 | – | 508 | |||||||||
|
|
|
|
|
| |||||||
Cash consideration paid | 95 | – | 508 | |||||||||
|
|
|
|
|
|
Major business combinations completed during the year ended 30 June 2012
30 June 2010Petrohawk Energy Corporation
There were no business combinationsOn 14 July 2011, the Group announced it had entered into a definitive agreement to acquire Petrohawk Energy Corporation Inc. (Petrohawk) by means of an all-cash tender offer for all of the issued and outstanding shares of Petrohawk. The acquisition date of Petrohawk was 20 August 2011.
Petrohawk is an oil and natural gas company based in the United States. It owns a number of shale gas assets in Texas and Louisiana and associated midstream pipeline systems. This acquisition provides the Group with operated positions in the current or previous financial year.resource areas of the Eagle Ford, Haynesville and Permian fields.
Petrohawk was purchased for total consideration of US$12,005 million consisting of US$11,690 million for existing shares and US$315 million for settlement of outstanding options, restricted stock and stock appreciation rights (collectively referred to as employee awards). The vesting of the employee awards was accelerated at the acquisition date pursuant to a change of control clause in the original employee award plans. As a result, all of the consideration for settlement of such awards was included in purchase consideration. The terms of the acquisition agreement did not include any contingent consideration.
Acquisition related costs of US$46 million have been expensed and included in other operating expenses in the Consolidated Income Statement.
Details of the business combination are as follows:
Provisional fair value reported at 31 December 2011 | Adjustments to provisional fair value | Final fair value | ||||||||||
US$M | US$M | US$M | ||||||||||
Assets | ||||||||||||
Cash and cash equivalents | 10 | – | 10 | |||||||||
Trade and other receivables(a) | 322 | 5 | 327 | |||||||||
Other financial assets | 240 | – | 240 | |||||||||
Inventories | 59 | 1 | 60 | |||||||||
Property, plant and equipment(b) | 21,017 | (5,667 | ) | 15,350 | ||||||||
Intangibles – Goodwill(c) | – | 3,591 | 3,591 | |||||||||
Other assets | 68 | – | 68 | |||||||||
|
|
|
|
|
| |||||||
Total assets | 21,716 | (2,070 | ) | 19,646 | ||||||||
|
|
|
|
|
| |||||||
Liabilities | ||||||||||||
Trade and other payables | 645 | (4 | ) | 641 | ||||||||
Interest bearing liabilities | 3,800 | – | 3,800 | |||||||||
Other financial liabilities | 7 | – | 7 | |||||||||
Current tax payable | 62 | (5 | ) | 57 | ||||||||
Deferred tax liabilities(d) | 5,049 | (2,061 | ) | 2,988 | ||||||||
Provisions | 88 | – | 88 | |||||||||
|
|
|
|
|
| |||||||
Total liabilities | 9,651 | (2,070 | ) | 7,581 | ||||||||
|
|
|
|
|
| |||||||
Net assets | 12,065 | – | 12,065 | |||||||||
less non-controlling interest share of net assets | (60 | ) | – | (60 | ) | |||||||
|
|
|
|
|
| |||||||
Net assets acquired | 12,005 | – | 12,005 | |||||||||
|
|
|
|
|
| |||||||
Gross consideration | 12,005 | – | 12,005 | |||||||||
Cash and cash equivalents acquired | (10 | ) | – | (10 | ) | |||||||
|
|
|
|
|
| |||||||
Net consideration paid | 11,995 | – | 11,995 | |||||||||
|
|
|
|
|
|
(a) | The gross contractual amount for trade and other receivables was US$330 million of which US$3 million was not expected to be collected at acquisition date. |
(b) | The fair values were provisional at 31 December 2011 due to the complexity of the valuation process, particularly in relation to the valuation of the oil and gas properties and the accounting for the corresponding deferred tax liability. As a result, the provisional accounting did not separate any goodwill from the value of property, plant and equipment. Subsequent to 31 December 2011, management has obtained a final independent fair valuation of the oil and gas properties and adjusted the provisional value accordingly. |
Goodwill is calculated as a residual amount and the net impact of the above adjustments results in the recognition of goodwill of US$3,591 million. |
(d) | The difference between the allocated fair values of the oil and gas properties acquired and the corresponding tax base gives rise to a deferred tax liability (DTL). The reduction in the valuation of the oil and gas properties gives rise to a corresponding reduction in the DTL. |
The goodwill of US$3,591 million is attributable to the expected synergies to be realised through managing the portfolio of both the acquired assets and the Group’s existing assets, and to the measurement of deferred income taxes based on nominal amounts rather than fair value. None of the goodwill recognised is expected to be deductible for tax purposes.
The Group has entered into certain retention arrangements with the employees of Petrohawk. Pursuant to these arrangements, the Group will make retention payments at different intervals, subject to mandatory service requirements, and grant restricted share awards in BHP Billiton Limited with vesting dates ranging from 31 December 2012 to 22 August 2014. All retention benefits paid to employees will be accounted for as a post-combination employee benefits expense in the Consolidated Income Statement, of which US$56 million has been expensed since the acquisition date.
From the date of the acquisition to 30 June 2012, revenue of US$1,740 million and a loss after taxation of US$136 million were included in the Consolidated Income Statement with regard to Petrohawk.
HWE Mining
On 30 September 2011, the Group finalised the purchase of the HWE mining services business (HWE Mining), comprising three entities and other property, plant and equipment, which provide contract mining services to the Group’s Western Australian Iron Ore (WAIO) joint ventures, from Leighton Holdings Limited (Leighton Holdings). The acquisition was funded by the Group’s available cash and control was obtained through the purchase of all the issued share capital of the acquired entities.
The acquisition relates to the mining equipment and related assets that service the Area C, Yandi and Orebody 23/25 operations and is consistent with the Group’s previously stated intention to move the WAIO business from contract mining to owner-operator mining.
Acquisition related costs of US$17 million have been expensed and included in other operating expenses in the Consolidated Income Statement.
Details of the business combination are as follows:
Provisional fair value reported at 31 December 2011 | Adjustments to provisional fair value | Final fair value | ||||||||||
US$M | US$M | US$M | ||||||||||
Assets | ||||||||||||
Trade and other receivables (a) | 7 | – | 7 | |||||||||
Inventories | 44 | – | 44 | |||||||||
Property, plant and equipment | 380 | – | 380 | |||||||||
Intangibles – Goodwill | 171 | 16 | 187 | |||||||||
Deferred tax assets | 9 | – | 9 | |||||||||
|
|
|
|
|
| |||||||
Total assets | 611 | 16 | 627 | |||||||||
|
|
|
|
|
| |||||||
Liabilities | ||||||||||||
Interest bearing liabilities | 109 | – | 109 | |||||||||
Deferred tax liabilities | – | 16 | 16 | |||||||||
Provisions | 31 | – | 31 | |||||||||
Deferred income | 22 | – | 22 | |||||||||
|
|
|
|
|
| |||||||
Total liabilities | 162 | 16 | 178 | |||||||||
|
|
|
|
|
| |||||||
Net assets acquired | 449 | – | 449 | |||||||||
|
|
|
|
|
| |||||||
Consideration paid | 449 | – | 449 | |||||||||
|
|
|
|
|
|
(a) | This represents the gross contractual amount for trade and other receivables all of which is expected to be collected. |
The consideration paid was in excess of the fair value of the identifiable assets and liabilities and therefore goodwill of US$187 million has been recognised in respect of the acquisition. The goodwill is attributable to the skilled workforce and the expected synergies to result from an in-house mining workforce, improved safety and the management of costs. None of the goodwill recognised is expected to be deductible for tax purposes.
Prior to the acquisition, the Group and HWE Mining were parties to a contract under which HWE Mining supplied contract mining services to the Group. At the time of acquisition, the Group, as manager of the WAIO joint ventures, agreed to settle outstanding claims which amounted to US$241 million. This resulted in US$120 million being recognised in other operating expenses in the Consolidated Income Statement during the year ended 30 June 2012, with the remaining balance having been accrued for in prior periods. The settlement amount was based on mutually agreed claims using commercial rates and extinguished any right for Leighton Holdings to make retrospective claims for work performed prior to the acquisition date.
A payment of US$20 million was made to Leighton Holdings for transitional services to be provided post acquisition. This payment was treated as a prepayment, included within other current assets in the Consolidated Balance Sheet and was amortised over its period of use.
From the date of the acquisition to 30 June 2012, revenue of US$1,064 million, which includes US$870 million of intercompany revenues, and a profit after taxation of US$101 million were included in the Consolidated Income Statement with regard to HWE Mining.
NotesNotional financial information
The revenue and profit after taxation of the combined Group for the year ended 30 June 2012 as though the acquisition date for all business combinations that occurred during the year had been as of 1 July 2011 are US$72.6 billion and US$15.6 billion respectively.
Business combination during the year ended 30 June 2011
Fayetteville Shale gas
The financial statements for the year ended 30 June 2011 included disclosure of the provisional fair values of the identifiable assets and liabilities of the Fayetteville Shale gas business acquired in March 2011. The fair values were provisional at 30 June 2011 due to Financial Statements continuedthe complexity of the valuation process. The provisional fair values of the assets and liabilities acquired approximated the consideration paid (US$4,819 million) and therefore no goodwill or bargain purchase gain was recognised at 30 June 2011. Subsequent to 30 June 2011, management has made the following adjustments to the business combination accounting:
Provisional fair value reported at 30 June 2011 | Adjustments to provisional fair value | Final fair value | ||||||||||
US$M | US$M | US$M | ||||||||||
Assets | ||||||||||||
Trade and other receivables | 38 | – | 38 | |||||||||
Inventories | 3 | – | 3 | |||||||||
Property, plant and equipment(a) | 4,803 | (523 | ) | 4,280 | ||||||||
Intangibles – Goodwill | – | 552 | 552 | |||||||||
|
|
|
|
|
| |||||||
Total assets | 4,844 | 29 | 4,873 | |||||||||
|
|
|
|
|
| |||||||
Liabilities | ||||||||||||
Trade and other payables | 21 | – | 21 | |||||||||
Provisions | 4 | 24 | 28 | |||||||||
|
|
|
|
|
| |||||||
Total liabilities | 25 | 24 | 49 | |||||||||
|
|
|
|
|
| |||||||
Net assets acquired | 4,819 | 5 | 4,824 | |||||||||
|
|
|
|
|
| |||||||
Consideration paid | 4,819 | 5 | 4,824 | |||||||||
|
|
|
|
|
|
(a) | US$523 million adjustment to fair value of oil and gas properties is based on additional information relating to the condition of the properties at acquisition date. In particular, information about the minimum level of development activity required to retain the acreage. |
The adjustments to the provisional fair values, which have been recognised by restating the 2011 comparative information, have resulted in recognition of goodwill of US$552 million. The goodwill of US$552 million was attributable to the synergies expected to be derived from market access and an assembled workforce at the field level. Goodwill recognised that is expected to be deductible for tax purposes is US$552 million. During the year ended 30 June 2012 goodwill and property, plant and equipment recognised as part of the Fayetteville business combination has been impaired – refer to note 3.
Significant subsidiaries of the Group, which are those with the most significant contribution to the Group’s net profit or net assets, are as follows:
The Group’s effective interest | ||||||||
Name | Country of | Principal activity | 2010 % | 2009 % | ||||
Anglo Potash Limited | Canada | Potash exploration | 100 | 100 | ||||
Athabasca Potash Inc. | Canada | Potash exploration | 100 | — | ||||
BHP Billiton Aluminium Australia Pty Ltd | Australia | Bauxite mining and alumina refining | 100 | 100 | ||||
BHP Billiton Aluminium (RAA) Pty Ltd | Australia | Bauxite mining and alumina refining | 100 | 100 | ||||
BHP Billiton Aluminium (Worsley) Pty Ltd | Australia | Bauxite mining and alumina refining | 100 | 100 | ||||
BHP Billiton Canada Inc. | Canada | Diamond mining | 100 | 100 | ||||
BHP Billiton Direct Reduced Iron Pty Ltd | Australia | Hot briquette iron plant (closed) | 100 | 100 | ||||
BHP Billiton Energy Coal South Africa Limited | South Africa | Coal mining | 100 | 100 | ||||
BHP Billiton Finance BV | Netherlands | Finance | 100 | 100 | ||||
BHP Billiton Finance Ltd | Australia | Finance | 100 | 100 | ||||
BHP Billiton Finance (USA) Ltd(a) | Australia | Finance | 100 | 100 | ||||
BHP Billiton Foreign Holdings Inc. | US | Holding company | 100 | 100 | ||||
BHP Billiton Group Operations Pty Ltd | Australia | Administrative services | 100 | 100 | ||||
BHP Billiton International Services Limited | UK | Service company | 100 | 100 | ||||
BHP Billiton Iron Ore Pty Limited | Australia | Service company | 100 | 100 | ||||
BHP Billiton Marketing AG | Switzerland | Marketing and trading | 100 | 100 | ||||
BHP Billiton Marketing Inc. | US | Marketing and trading | 100 | 100 | ||||
BHP Billiton Metais SA | Brazil | Alumina refining and aluminium smelting | 100 | 100 | ||||
BHP Billiton Minerals Pty Ltd | Australia | Iron ore, coal, silver, lead and zinc mining | 100 | 100 | ||||
BHP Billiton Nickel Operations Pty Ltd | Australia | Holding company | 100 | 100 | ||||
BHP Billiton Nickel West Pty Ltd | Australia | Nickel mining, smelting, refining and administrative services | 100 | 100 | ||||
BHP Billiton Olympic Dam Corporation Pty Ltd | Australia | Copper and uranium mining | 100 | 100 | ||||
BHP Billiton Petroleum (Americas) Inc. | US | Hydrocarbons exploration and production | 100 | 100 | ||||
BHP Billiton Petroleum (Australia) Pty Ltd | Australia | Hydrocarbons production | 100 | 100 | ||||
BHP Billiton Petroleum (Bass Strait) Pty Ltd | Australia | Hydrocarbons production | 100 | 100 | ||||
BHP Billiton Petroleum (Colombia) Corporation | Canada | Hydrocarbons exploration and production | 100 | 100 | ||||
BHP Billiton Petroleum (Deepwater) Inc. | US | Hydrocarbons exploration, development and production | 100 | 100 | ||||
BHP Billiton Petroleum (GOM) Inc. | US | Hydrocarbons exploration | 100 | 100 | ||||
BHP Billiton Petroleum (North West Shelf) Pty Ltd | Australia | Hydrocarbons production | 100 | 100 | ||||
BHP Billiton Petroleum Great Britain Limited | UK | Hydrocarbons production | 100 | 100 | ||||
BHP Billiton Petroleum (International Exploration) Pty Ltd | Australia | Hydrocarbons development and production | 100 | 100 | ||||
BHP Billiton Petroleum (New Ventures) Corporation | Canada | Hydrocarbons exploration and production | 100 | 100 | ||||
BHP Billiton Petroleum (Sabah) Corporation | Canada | Hydrocarbons exploration and production | 100 | 100 | ||||
BHP Billiton Petroleum Pty Ltd | Australia | Hydrocarbons exploration and production | 100 | 100 | ||||
BHP Billiton Petroleum (Victoria) Pty Ltd | Australia | Hydrocarbons development | 100 | 100 | ||||
BHP Billiton SA Limited | South Africa | Holding and service company | 100 | 100 | ||||
BHP Billiton Shared Business Services Pty Ltd | Australia | Service company | 100 | 100 | ||||
BHP Billiton Shared Services Malaysia Sdn. Bhd. | Malaysia | Service company | 100 | 100 | ||||
BHP Billiton SSM Development Pty Ltd | Australia | Holding company | 100 | 100 | ||||
BHP Billiton (Trinidad – 2c) Limited | Canada | Hydrocarbons development | 100 | 100 | ||||
BHP Billiton World Exploration Inc. | Canada | Minerals exploration | 100 | 100 | ||||
BHP Canadian Diamonds Company | Canada | Diamond mining | 100 | 100 | ||||
BHP Chile Inc. | US | Service company | 100 | 100 | ||||
BHP Coal Pty Limited | Australia | Holding company and coal mining | 100 | 100 | ||||
BHP Copper Inc. | US | Holding company and copper mining | 100 | 100 | ||||
BHP Escondida Inc. | US | Holding company | 100 | 100 | ||||
BHP Iron Ore (Jimblebar) Pty Ltd | Australia | Iron ore mining | 100 | 100 | ||||
BHP Mitsui Coal Pty Limited | Australia | Holding company and coal mining | 80 | 80 | ||||
BHP Navajo Coal Company | US | Coal mining | 100 | 100 | ||||
BHP Petroleum (Laurentian) Corporation | Canada | Hydrocarbons exploration and production | 100 | 100 | ||||
BHP Petroleum (Pakistan) Pty Ltd | Australia | Hydrocarbons production | 100 | 100 | ||||
BHP Queensland Coal Investments Pty Ltd | Australia | Holding company and coal mining | 100 | 100 | ||||
BHPB Freight Pty Ltd | Australia | Transport services | 100 | 100 | ||||
Billiton Aluminium SA Limited | South Africa | Aluminium smelting | 100 | 100 | ||||
Billiton Marketing Holding BV | Netherlands | Holding company | 100 | 100 | ||||
Billiton Nickel (Ravensthorpe) Pty Ltd | Australia | Holding company | 100 | 100 | ||||
Broken Hill Proprietary (USA) Inc. | US | Service company | 100 | 100 | ||||
Cerro Matoso SA | Colombia | Nickel mining and ferro-nickel smelting | 99.9 | 99.9 |
The Group’s effective interest | ||||||||||||
Name | Country of incorporation | Principal activity | 2012 % | 2011 % | ||||||||
BHP Billiton Aluminium Australia Pty Ltd | Australia | Bauxite mining and alumina refining | 100 | 100 | ||||||||
BHP Billiton Aluminium (RAA) Pty Ltd | Australia | Bauxite mining and alumina refining | 100 | 100 | ||||||||
BHP Billiton Aluminium (Worsley) Pty Ltd | Australia | Bauxite mining and alumina refining | 100 | 100 | ||||||||
BHP Billiton Canada Inc. | Canada | Diamond mining | 100 | 100 | ||||||||
BHP Billiton Direct Reduced Iron Pty Ltd | Australia | Hot briquette iron plant (closed) | 100 | 100 | ||||||||
BHP Billiton Energy Coal Australia Pty Ltd | Australia | Holding company | 100 | 100 | ||||||||
BHP Billiton Energy Coal South Africa Proprietary Limited | South Africa | Coal mining | 100 | 100 | ||||||||
BHP Billiton Finance BV | Netherlands | Finance | 100 | 100 | ||||||||
BHP Billiton Finance Ltd | Australia | Finance | 100 | 100 | ||||||||
BHP Billiton Finance (USA) Ltd (a) | Australia | Finance | 100 | 100 | ||||||||
BHP Billiton Foreign Holdings Inc. | US | Holding company | 100 | 100 | ||||||||
BHP Billiton Group Operations Pty Ltd | Australia | Administrative services | 100 | 100 | ||||||||
BHP Billiton International Services Limited | UK | Service company | 100 | 100 | ||||||||
BHP Billiton Iron Ore Pty Limited | Australia | Service company | 100 | 100 | ||||||||
BHP Billiton IO Mining Pty Ltd | Australia | Holding company | 100 | – | ||||||||
BHP Billiton Marketing AG | Switzerland | Marketing and trading | 100 | 100 | ||||||||
BHP Billiton Marketing Inc. | US | Marketing and trading | 100 | 100 | ||||||||
BHP Billiton Metcoal Holdings Pty Ltd | Australia | Holding company | 100 | 100 | ||||||||
BHP Billiton Metais SA | Brazil | Alumina refining and aluminium smelting | 100 | 100 | ||||||||
BHP Billiton Minerals Pty Ltd | Australia | Iron ore, coal, silver, lead and zinc mining | 100 | 100 | ||||||||
BHP Billiton Mitsui Coal Pty Ltd | Australia | Coal mining | 80 | 80 | ||||||||
BHP Billiton Nickel West Pty Ltd | Australia | Nickel mining, smelting, refining and administrative services | 100 | 100 | ||||||||
BHP Billiton Olympic Dam Corporation Pty Ltd | Australia | Copper and uranium mining | 100 | 100 | ||||||||
BHP Billiton Petroleum (Americas) Inc. | US | Hydrocarbons exploration and production | 100 | 100 | ||||||||
BHP Billiton Petroleum (Arkansas) Inc. | US | Hydrocarbons production | 100 | 100 | ||||||||
BHP Billiton Petroleum (Australia) Pty Ltd | Australia | Hydrocarbons production | 100 | 100 | ||||||||
BHP Billiton Petroleum (Bass Strait) Pty Ltd | Australia | Hydrocarbons production | 100 | 100 | ||||||||
BHP Billiton Petroleum (Deepwater) Inc. | US | Hydrocarbons exploration, development and production | 100 | 100 | ||||||||
BHP Billiton Petroleum (Fayetteville) LLC | US | Hydrocarbons exploration and production | 100 | 100 | ||||||||
BHP Billiton Petroleum (North West Shelf) Pty Ltd | Australia | Hydrocarbons production | 100 | 100 | ||||||||
BHP Billiton Petroleum Great Britain Limited | UK | Hydrocarbons production | 100 | 100 |
Name Principal activity BHP Billiton Petroleum (International Exploration) Pty Ltd BHP Billiton Petroleum (New Ventures) Corporation BHP Billiton Petroleum (Philippines) Corporation BHP Billiton Petroleum (Sabah) Corporation BHP Billiton Petroleum Pty Ltd BHP Billiton Petroleum (Victoria) Pty Ltd BHP Billiton SA Holdings Limited BHP Billiton SA Limited BHP Billiton Shared Business Services Pty Ltd BHP Billiton Shared Services Malaysia Sdn. Bhd. BHP Billiton SSM Development Pty Ltd BHP Billiton (Trinidad – 2c) Limited BHP Billiton World Exploration Inc. BHP Canadian Diamonds Company BHP Chile Inc. BHP Coal Holdings Pty Ltd BHP Coal Pty Ltd BHP Copper Inc. BHP Escondida Inc. BHP Iron Ore (Jimblebar) Pty Ltd BHP Navajo Coal Company BHP Petroleum (Pakistan) Pty Ltd BHP Queensland Coal Investments Pty Ltd Billiton Aluminium SA Limited Billiton Marketing Holding BV Broken Hill Proprietary (USA) Inc. Cerro Matoso SA Coal Mines Australia Pty Ltd Compañia Minera Cerro Colorado Limitada Dendrobium Coal Pty Ltd EagleHawk Field Services LLC Endeavour Coal Pty Ltd Groote Eylandt Mining Company Pty Ltd Hawk Field Services LLC Hillside Aluminium Limited Hotazel Manganese Mines (Proprietary) Limited(b) Hunter Valley Energy Coal Pty Ltd Illawarra Coal Holdings Pty Ltd Illawarra Services Pty Ltd KCS Resources LLC Minera Spence SA One Tec Operating LLC Petrohawk Energy Corporation Petrohawk Properties LP PT Lahai Coal PT Juloi Coal Rio Algom Limited Samancor AG Samancor Manganese (Proprietary) Limited San Juan Coal CompanyNotes to Financial Statements continued The Group’s
effective
interest Country of
incorporation 2012
% 2011
% Australia Hydrocarbons development and production 100 100 Canada Hydrocarbons exploration and production 100 100 Canada Hydrocarbons exploration and production 100 100 Canada Hydrocarbons exploration and production 100 100 Australia Hydrocarbons exploration and production 100 100 Australia Hydrocarbons development 100 100 South Africa Holding company 100 100 South Africa Holding and service company 100 100 Australia Service company 100 100 Malaysia Service company 100 100 Australia Holding company 100 100 Canada Hydrocarbons development 100 100 Canada Minerals exploration 100 100 Canada Diamond mining 100 100 US Service company 100 100 Australia Holding company 100 100 Australia Holding company and coal mining 100 100 US Holding company and copper mining 100 100 US Holding company 100 100 Australia Iron ore mining 100 100 US Coal mining 100 100 Australia Hydrocarbons production 100 100 Australia Holding company and coal mining 100 100 South Africa Aluminium smelting 100 100 Netherlands Holding company 100 100 US Service company 100 100 Colombia Nickel mining and ferro-nickel smelting 99.9 99.9 Australia Coal exploration 100 100 Chile Copper mining 100 100 Australia Coal mining 100 100 US Hydrocarbons exploration and production 100 – Australia Coal mining 100 100 Australia Manganese mining 60 60 US Hydrocarbons exploration and production 100 – South Africa Aluminium smelting 100 100 South Africa Manganese ore mining and processing 54.6 54.6 Australia Coal mining 100 100 Australia Coal mining 100 100 Australia Coal mining 100 100 US Hydrocarbons exploration and production 100 – Chile Copper mining 100 100 US Hydrocarbons exploration and production 100 – US Hydrocarbons exploration and production 100 – US Hydrocarbons exploration and production 100 – Indonesia Coal exploration 75 75 Indonesia Coal exploration 75 75 Canada Holding company 100 100 Switzerland Marketing 60 60 South Africa Manganese mining and manganese alloys 60 60 US Coal mining 100 100
25 Subsidiaries continued
The Group’s effective interest | ||||||||
Name | Country of | Principal activity | 2010 % | 2009 % | ||||
Compañia Minera Cerro Colorado Limitada | Chile | Copper mining | 100 | 100 | ||||
Dendrobium Coal Pty Ltd | Australia | Coal mining | 100 | 100 | ||||
Endeavour Coal Pty Ltd | Australia | Coal mining | 100 | 100 | ||||
Groote Eylandt Mining Company Pty Ltd | Australia | Manganese mining | 60 | 60 | ||||
Hillside Aluminium Limited | South Africa | Aluminium smelting | 100 | 100 | ||||
Hotazel Manganese Mines (Proprietary) Limited | South Africa | Manganese ore mining and processing | 54.6 | — | ||||
Hunter Valley Energy Coal Pty Ltd | Australia | Coal mining | 100 | 100 | ||||
Illawarra Coal Holdings Pty Ltd | Australia | Coal mining | 100 | 100 | ||||
Illawarra Services Pty Ltd | Australia | Coal mining | 100 | 100 | ||||
Minera Spence SA | Chile | Copper mining | 100 | 100 | ||||
QNI Western Australia Pty Limited | Australia | Holding company | 100 | 100 | ||||
Rio Algom Limited | Canada | Holding company | 100 | 100 | ||||
Samancor AG | Switzerland | Marketing | 60 | 60 | ||||
Samancor Manganese Proprietary Limited | South Africa | Manganese mining and manganese alloys | 60 | 60 | ||||
San Juan Coal Company | US | Coal mining | 100 | 100 | ||||
Tasmanian Electro Metallurgical Company Pty Ltd | Australia | Manganese alloys | 60 | 60 | ||||
UMAL Consolidated Pty Ltd | Australia | Holding company and coal mining | 100 | 100 | ||||
United Iron Pty Ltd | Australia | Iron ore exploration | 100 | — | ||||
WMC Finance (USA) Limited | Australia | Finance | 100 | 100 |
The Group’s effective interest | ||||||||||||
Name | Country of incorporation | Principal activity | 2012 % | 2011 % | ||||||||
Tasmanian Electro Metallurgical Company Pty Ltd | Australia | Manganese alloys | 60 | 60 | ||||||||
UMAL Consolidated Pty Ltd | Australia | Holding company and coal mining | 100 | 100 | ||||||||
WMC Finance (USA) Limited | Australia | Finance | 100 | 100 |
(a) | BHP Billiton Finance (USA) Ltd is 100 per cent owned by BHP Billiton Limited. BHP Billiton Limited and BHP Billiton Plc have each fully and unconditionally guaranteed BHP Billiton Finance (USA) Ltd’s debt securities. |
(b) | The Group’s effective interest in Hotazel Manganese Mines (Proprietary) Limited will reduce to 44.4 per cent pursuant to a Broad Based Black Economic Empowerment transaction in South Africa. |
(c) | A complete list of the Group’s subsidiaries and jointly controlled entities will be attached to BHP Billiton Plc’s annual return made to the UK Registrar of Companies. |
26 Interests in jointly controlled entities
The Group’s significant interests in jointly controlled entities, which are those with the most significant contribution to the Group’s net profit or net assets, are listed below. All entities included below are subject to joint control as a result of governing contractual arrangements.
Ownership interest (a) | Ownership interest (b) | |||||||||||||||||||||||
Major shareholdings in jointly controlled entities | Country of incorporation | Principal activity | Reporting date(a) | 2010 % | 2009 % | |||||||||||||||||||
Major shareholdings in | Country of | Principal activity | Reporting | 2012 % | 2011 % | |||||||||||||||||||
Caesar Oil Pipeline Company LLC | US | Hydrocarbons transportation | 31 May | 25 | 25 | US | Hydrocarbons transportation | 31 May | 25 | 25 | ||||||||||||||
Cleopatra Gas Gathering Company LLC | US | Hydrocarbons transportation | 31 May | 22 | 22 | US | Hydrocarbons transportation | 31 May | 22 | 22 | ||||||||||||||
Guinea Alumina Corporation Ltd | British Virgin Islands | Bauxite mine and alumina refinery development | 31 Dec | 33.3 | 33.3 | British Virgin Islands | Bauxite mine and alumina refinery prospect | 31 Dec | 33.33 | 33.33 | ||||||||||||||
Mozal SARL | Mozambique | Aluminium smelting | 30 June | 47.1 | 47.1 | Mozambique | Aluminium smelting | 30 June | 47.1 | 47.1 | ||||||||||||||
Compañia Minera Antamina SA | Peru | Copper and zinc mining | 30 June | 33.75 | 33.75 | |||||||||||||||||||
Minera Escondida Limitada(b) | Chile | Copper mining | 30 June | 57.5 | 57.5 | |||||||||||||||||||
Compañía Minera Antamina SA | Peru | Copper and zinc mining | 30 June | 33.75 | 33.75 | |||||||||||||||||||
Minera Escondida Limitada(c) | Chile | Copper mining | 30 June | 57.5 | 57.5 | |||||||||||||||||||
Phola Coal Processing Plant (Pty) Ltd | South Africa | Coal handling and processing plant | 30 June | 50 | 50 | South Africa | Coal handling and processing plant | 30 June | 50 | 50 | ||||||||||||||
Richards Bay Minerals(c) | South Africa | Mineral sands mining and processing | 31 Dec | 37.76 | 50 | |||||||||||||||||||
Samarco Mineracao SA | Brazil | Iron ore mining | 31 Dec | 50 | 50 | |||||||||||||||||||
Richards Bay Minerals(d) | South Africa | Mineral sands mining and processing | 31 Dec | 37.76 | 37.76 | |||||||||||||||||||
Samarco Mineração SA | Brazil | Iron ore mining | 31 Dec | 50 | 50 | |||||||||||||||||||
Carbones del Cerrejón LLC | Anguilla | Coal mining in Colombia | 31 Dec | 33.33 | 33.33 | Anguilla | Coal mining in Colombia | 31 Dec | 33.33 | 33.33 | ||||||||||||||
Newcastle Coal Infrastructure Group Pty Limited | Australia | Coal export terminal | 30 June | 35.5 | 35.5 | Australia | Coal export terminal | 30 June | 35.5 | 35.5 |
Group share | ||||||
2010 US$M | 2009 US$M | |||||
Net assets of jointly controlled entities | ||||||
Current assets | 3,352 | 2,813 | ||||
Non-current assets | 7,212 | 7,275 | ||||
Current liabilities | (2,162 | ) | (2,092 | ) | ||
Non-current liabilities | (2,388 | ) | (2,029 | ) | ||
Net assets | 6,014 | 5,967 | ||||
Net assets of jointly controlled entities Current assets Non-current assets Current liabilities Non-current liabilities Net assets Group share 2012 2011 US$M US$M 4,718 3,743 10,259 8,232 (3,188 ) (2,560 ) (3,534 ) (3,409 ) 8,255 6,006
Notes to Financial Statements continued
Group share | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
US$M | US$M | US$M | ||||||||||
Share of jointly controlled entities’ profit | ||||||||||||
Revenue | 10,150 | 11,600 | 8,642 | |||||||||
Net operating costs | (5,742 | ) | (5,443 | ) | (4,597 | ) | ||||||
|
|
|
|
|
| |||||||
Operating profit | 4,408 | 6,157 | 4,045 | |||||||||
Net finance costs | (196 | ) | (368 | ) | (68 | ) | ||||||
Income tax expense | (949 | ) | (1,462 | ) | (903 | ) | ||||||
|
|
|
|
|
| |||||||
Profit after taxation | 3,263 | 4,327 | 3,074 | |||||||||
|
|
|
|
|
|
26 Interests in jointly controlled entities continued
Group share | |||||||||
2010 US$M | 2009 US$M | 2008 US$M | |||||||
Share of jointly controlled entities’ profit | |||||||||
Revenue | 8,642 | 6,130 | 10,728 | ||||||
Net operating costs | (4,597 | ) | (4,103 | ) | (3,912 | ) | |||
Operating profit | 4,045 | 2,027 | 6,816 | ||||||
Net finance costs | (68 | ) | (129 | ) | (94 | ) | |||
Income tax expense | (903 | ) | (465 | ) | (1,418 | ) | |||
Profit after taxation | 3,074 | 1,433 | 5,304 | ||||||
Group share | ||||
2010 US$M | 2009 US$M | |||
Share of contingent liabilities and expenditure commitments of jointly controlled entities | ||||
Contingent liabilities | 885 | 724 | ||
Capital expenditure commitments | 274 | 152 | ||
Other expenditure commitments | 1,455 | 1,537 | ||
Group share | ||||||||
2012 | 2011 | |||||||
US$M | US$M | |||||||
Share of contingent liabilities and expenditure commitments relating to jointly controlled entities | ||||||||
Contingent liabilities | 1,269 | 1,397 | ||||||
Capital expenditure commitments | 2,098 | 1,156 | ||||||
Other expenditure commitments | 2,011 | 867 |
(a) | A complete list of investments in subsidiaries and jointly controlled entities will be attached to BHP Billiton Plc’s annual return made to the UK Registrar of Companies. |
(b) | The ownership interest at the Group’s and the jointly controlled entity’s reporting date are the same. |
While the Group holds a 57.5 per cent interest in Minera Escondida Limitada, the entity is subject to effective joint control due to participant and management agreements which |
Richards Bay Minerals comprises two legal entities, Richards Bay Mining (Proprietary) Limited and Richards Bay Titanium (Proprietary) Limited, in each of which the Group has a 50 per cent interest and which function as a single economic entity. After deducting non-controlling interests in subsidiaries of Richards Bay Minerals, the Group’s economic interest in the operations of Richards Bay Minerals is 37.76 per cent. |
Assets and liabilities held for sale:
In February 2012, the Group announced it had exercised an option to sell its non-operated interest in Richards Bay Minerals to Rio Tinto. On 7 September 2012, the Group announced the sale was completed – refer to note 35. The remaining assets and liabilities of the Richards Bay Minerals joint venture were classified as current assets and liabilities held for sale as presented in the table below:
US$M | ||||
Assets | ||||
Cash and cash equivalents | 120 | |||
Trade and other receivables | 196 | |||
Inventories | 128 | |||
Property, plant and equipment | 369 | |||
Intangible assets | 20 | |||
Other | 15 | |||
Total assets | 848 | |||
Liabilities | ||||
Trade and other payables | 153 | |||
Interest bearing liabilities | 178 | |||
Current tax payable | 1 | |||
Deferred tax liabilities | 66 | |||
Provisions | 35 | |||
Total liabilities | 433 | |||
Net assets | 415 | |||
Notes to Financial Statements continued
27 Interests in jointly controlled assets
The principal jointly controlled assets in which the Group has an interest and which are proportionately includedconsolidated in the financial statements are as follows:
The Group's effective interest | The Group’s effective interest | |||||||||||||||||||
Name | Country of operation | Principal activity | 2010 % | 2009 % | Country of operation | Principal activity | 2012 % | 2011 % | ||||||||||||
Atlantis | US | Hydrocarbons exploration and production | 44 | 44 | US | Hydrocarbons exploration and production | 44 | 44 | ||||||||||||
Bass Strait | Australia | Hydrocarbons exploration and production | 50 | 50 | Australia | Hydrocarbons production | 50 | 50 | ||||||||||||
Onshore US – refer to note 24 | US | Hydrocarbons exploration and production | <0.1 – 100 | <0.1 – 100 | ||||||||||||||||
Liverpool Bay | UK | Hydrocarbons exploration and production | 46.1 | 46.1 | UK | Hydrocarbons production | 46.1 | 46.1 | ||||||||||||
Mad Dog | US | Hydrocarbons exploration and production | 23.9 | 23.9 | US | Hydrocarbons exploration and production | 23.9 | 23.9 | ||||||||||||
Minerva | Australia | Hydrocarbons exploration and production | 90 | 90 | Australia | Hydrocarbons exploration and production | 90 | 90 | ||||||||||||
Neptune | US | Hydrocarbons exploration and production | 35 | 35 | US | Hydrocarbons exploration and production | 35 | 35 | ||||||||||||
North West Shelf | Australia | Hydrocarbons exploration and production | 8-17 | 8-17 | Australia | Hydrocarbons production | 8.33 – 16.67 | 8.33 – 16.67 | ||||||||||||
Ohanet | Algeria | Hydrocarbons exploration and production | 45 | 45 | ||||||||||||||||
Ohanet(a) | Algeria | Hydrocarbons exploration and production | – | 45 | ||||||||||||||||
Pyrenees | Australia | Hydrocarbons exploration and development | 71.43 | 71.43 | Australia | Hydrocarbons exploration and production | 40 – 71.43 | 40 – 71.43 | ||||||||||||
ROD Integrated Development | Algeria | Hydrocarbons exploration and production | 45 | 45 | Algeria | Hydrocarbons exploration and production | 38 – 45 | 38 – 45 | ||||||||||||
Shenzi | US | Hydrocarbons exploration and production | 44 | 44 | US | Hydrocarbons exploration and production | 44 | 44 | ||||||||||||
Stybarrow | Australia | Hydrocarbons exploration and production | 50 | 50 | Australia | Hydrocarbons exploration and production | 50 | 50 | ||||||||||||
Greater Angostura | Trinidad and Tobago | Hydrocarbons production | 45 | 45 | Trinidad and Tobago | Hydrocarbons production | 45 | 45 | ||||||||||||
Zamzama | Pakistan | Hydrocarbons exploration and production | 38.5 | 38.5 | Pakistan | Hydrocarbons exploration and production | 38.5 | 38.5 | ||||||||||||
Alumar | Brazil | Alumina refining | 36 | 36 | Brazil | Alumina refining | 36 | 36 | ||||||||||||
Aluminium smelting | 40 | 40 | Aluminium smelting | 40 | 40 | |||||||||||||||
Billiton Suriname(a) | Suriname | Bauxite mining and alumina refining | — | 45 | ||||||||||||||||
Worsley | Australia | Bauxite mining and alumina refining | 86 | 86 | Australia | Bauxite mining and alumina refining | 86 | 86 | ||||||||||||
Central Queensland Coal Associates | Australia | Coal mining | 50 | 50 | ||||||||||||||||
Gregory | Australia | Coal mining | 50 | 50 | ||||||||||||||||
EKATI | Canada | Diamond mining | 80 | 80 | ||||||||||||||||
Mt Goldsworthy | Australia | Iron ore mining | 85 | 85 | Australia | Iron ore mining | 85 | 85 | ||||||||||||
Mt Newman | Australia | Iron ore mining | 85 | 85 | Australia | Iron ore mining | 85 | 85 | ||||||||||||
Yandi | Australia | Iron ore mining | 85 | 85 | Australia | Iron ore mining | 85 | 85 | ||||||||||||
EKATI | Canada | Diamond mining | 80 | 80 | ||||||||||||||||
Douglas/Middelburg Mine(b) | South Africa | Coal mining | — | 84 | ||||||||||||||||
Central Queensland Coal Associates | Australia | Coal mining | 50 | 50 | ||||||||||||||||
Gregory | Australia | Coal mining | 50 | 50 |
2010 US$M | 2009 US$M | |||||||
Share of contingent liabilities and capital expenditure commitments relating to jointly controlled assets | ||||||||
Contingent liabilities – unsecured(c) | 120 | 94 | ||||||
Contracts for capital expenditure commitments not completed(c) | 4,103 | 4,282 |
2012 | 2011 | |||||||
US$M | US$M | |||||||
Share of contingent liabilities and capital expenditure commitments relating to jointly controlled assets | ||||||||
Contingent liabilities(b) | 283 | 299 | ||||||
Capital expenditure commitments(b) | 5,961 | 4,329 |
(a) |
|
(b) |
|
Included in contingent liabilities and capital expenditure commitments for the Group. Refer to notes 21 and 22 respectively. |
Notes to Financial Statements continued
The Group financial risk management strategy
The financial risks arising from the Group’s operations comprise market, liquidity and credit risk. These risks arise in the normal course of business, and the Group manages its exposure to them in accordance with the Group’s Portfolio Risk Management Strategy.portfolio risk management strategy. The objective of the strategy is to support the delivery of the Group’s financial targets while protecting its future financial security and flexibility by taking advantage of the natural diversification provided by the scale, diversity and flexibility of the Group’s operations and activities.
A Cash Flow at Risk (‘CFaR’)(CFaR) framework is used to measure the aggregate and diversified impact of financial risks upon the Group’s financial targets. The principal measurement of risk is CFaR measured on a portfolio basis – which is defined as the worst expected loss relative to projected business plan cash flows over a one-year horizon under normal market conditions at a confidence level of 95 per cent. The CFaR framework includes Board-approved limits on the quantum of the CFaR relative to the Group’s financial targets.
Market risk
The Group’s activities expose it to market risks associated with movements in interest rates, foreign currencies and commodity prices. Under the strategy outlined above, the Group seeks to achieve financing costs, currency impacts, input costs and commodity prices on a floating or index basis. This strategy gives rise to a risk of variability in earnings which is measured under the CFaR framework.
In executing the strategy, financial instruments are potentially employed in fourthree distinct but related activities. The following table summarises these activities and the key risk management processes.
Activity | Key risk management processes | |
1 Risk mitigation
|
• Execution of transactions within approved | |
2 Economic hedging of commodity sales, operating costs and debt instruments | ||
Where
Where debt is issued in a currency other than the US dollar and/or at a fixed interest rate, fair value and cash flow hedges may be executed to align the debt exposure with the Group’s functional currency of US dollars and/or to swap to a floating interest rate. As part of this strategy swaptions are also used. |
• Measuring and reporting the exposure in customer commodity contracts and issued debt
• Executing hedging derivatives to align the total group exposure to the index | |
3 Strategic financial transactions | ||
Opportunistic transactions may be executed with financial instruments to capture value from perceived market over/under valuations. | • Exposures managed within value at risk and stop loss
• Execution of transactions within approved | |
|
|
Notes to Financial Statements continued
28 Financial risk management continued
Primary responsibility for identification and control of financial risks, including authorising and monitoring the use of financial instruments for the above activities and stipulating policy thereon, rests with the Financial Risk Management Committee under authority delegated by the Group Management Committee.
Interest rate risk
The Group is exposed to interest rate risk on its outstanding borrowings and investments from the possibility that changes in interest rates will affect future cash flows or the fair value of fixed interest rate financial instruments. Interest rate risk is managed as part of the Portfolio Risk Management Strategy and within the overall CFaR limit.portfolio risk management strategy.
The majority of the Group’s debt is raised under central borrowing programs. The Group has entered into interest rate swaps and cross currency interest rate swaps to convert most of the centrally raisedmanaged debt into US dollar floating interest rate exposures. As at 30 June 2010,2012, the Group holds US$2,5774,317 million (2009:(2011: US$7,696827 million) of centrally managed fixed interest rate borrowings as well as US$4,039 million (2011: US$650 million) of other fixed interest rate borrowings that have not been swapped to floating interest rates, arising principally from debt raised during the financial year ended 30 June 20092012, debt assumed as part of the acquisition of Petrohawk Energy Corporation and debt raised prior to the DLC merger. The Group’s strategy has not changed and the remainder of the fixed rate debt raised during the year ended 30 June 2009 has been swapped to floating interest rates since 30 June 2010. The Group’s earnings are sensitive to changes in interest rates on the floating interest rate component of the Group’s net borrowings.
The fair value of interest rate swaps, cross currency interest rate swaps, currency swaps and forward exchange contracts in fair value hedge relationships used to hedge both interest rate and foreign currency risks are as follows:
Fair value | |||||||||||||
Fair value | 2012 | 2011 | |||||||||||
2010 US$M | 2009 US$M | US$M | US$M | ||||||||||
Interest rate swaps | |||||||||||||
US dollar swaps | |||||||||||||
Pay floating/receive fixed | |||||||||||||
Not later than one year | 13 | — | 51 | 49 | |||||||||
Later than one year but not later than two years | 90 | 30 | 66 | 109 | |||||||||
Later than two years but not later than five years | 200 | 156 | 428 | 248 | |||||||||
Later than five years | 288 | 180 | 297 | 172 | |||||||||
US dollar swaps | |||||||||||||
Pay fixed/receive floating | |||||||||||||
Later than five years | (31 | ) | – | ||||||||||
|
| ||||||||||||
Cross currency interest rate swaps | |||||||||||||
Euro to US dollar swaps | |||||||||||||
Pay floating/receive fixed | |||||||||||||
Not later than one year | 10 | — | |||||||||||
Later than one year but not later than two years | — | 147 | |||||||||||
Later than two years but not later than five years | 17 | 114 | 17 | 134 | |||||||||
Later than five years | (108 | ) | – | ||||||||||
Euro to US dollar swaps | |||||||||||||
Pay fixed/receive fixed | |||||||||||||
Later than five years | (174 | ) | — | ||||||||||
Later than two years but not later than five years | (117 | ) | 42 | ||||||||||
|
| ||||||||||||
Forward exchange contracts | |||||||||||||
Euro to US dollar foreign exchange contract | |||||||||||||
Pay US dollar/receive Euro | |||||||||||||
Not later than one year | (282 | ) | — | – | (53 | ) | |||||||
|
| ||||||||||||
Total fair value of derivatives | 162 | 627 | 603 | 701 | |||||||||
|
|
Included within ‘Cross currency and interest rate swaps’ in note 11 are derivatives held to hedge currency risk on Euro Bonds raised during the year ended 30 June 2009. These are discussed in ‘Currency risk’ below.
Based on the net debt position as at 30 June 2010,2012, taking into account interest rate swaps and cross currency interest rate swaps, it is estimated that a one percentage point increase in the US LIBOR interest rate will decrease the Group’s equity and profit after taxation and equity by US$2103 million (2009: increase(2011: decrease of US$2325 million). This assumes that the change in interest rates is effective from the beginning of the financial year and the fixed/floating mix and balances are constant over the year. However, interest rates and the net debt profile of the Group may not remain constant inover the coming financial year and therefore such sensitivity analysis should be used with care.
Notes to Financial Statements continued
28 Financial risk management continued
Currency risk
The US dollar is the functional currency of most operations within the Group and as a result currency exposures arise from transactions and balances in currencies other than the US dollar. The Group’s potential currency exposures comprise:
translational exposure in respect of non-functional currency monetary itemsitems;
transactional exposure in respect of non-functional currency expenditure and revenuesrevenues.
The Group’s foreign currency risk is managed as part of the Portfolio Risk Management Strategy within the overall CFaR limit.portfolio risk management strategy.
Translational exposure in respect of non-functional currency monetary items
Monetary items, including financial assets and liabilities, denominated in currencies other than the functional currency of an operation are periodically restated to US dollar equivalents, and the associated gain or loss is taken to the income statement. The exception is foreign exchange gains or losses on foreign currency provisions for closure and rehabilitation at operating sites which are capitalised in property, plant and equipment.
The following table shows the foreign currency risk arising from financial assets and liabilities which are denominated in currencies other than the functional currency of the operations.US dollar.
Net financial assets/(liabilities) | ||||||||||||||||
2010 | US$ US$M | A$ US$M | SA rand US$M | GBP US$M | Other US$M | Total US$M | ||||||||||
Functional currency of Group operation | ||||||||||||||||
US dollars | — | (1,398 | ) | 90 | 31 | (942 | ) | (2,219 | ) | |||||||
Australian dollars | (1 | ) | — | — | — | — | (1 | ) | ||||||||
UK pounds sterling | 4 | — | — | — | — | 4 | ||||||||||
3 | (1,398 | ) | 90 | 31 | (942 | ) | (2,216 | ) | ||||||||
Net financial assets/(liabilities) | ||||||||||||||||
2009 | US$ US$M | A$ US$M | SA rand US$M | GBP US$M | Other US$M | Total US$M | ||||||||||
Functional currency of Group operation | ||||||||||||||||
US dollars | — | (1,895 | ) | 306 | 87 | (248 | ) | (1,750 | ) | |||||||
Australian dollars | — | — | — | — | — | — | ||||||||||
UK pounds sterling | 3 | — | — | — | — | 3 | ||||||||||
3 | (1,895 | ) | 306 | 87 | (248 | ) | (1,747 | ) | ||||||||
In March 2009, the Group issued a two tranche Euro Bond, comprising €1,250 million of 4.75 per cent Euro Bonds due 2012 and €1,000 million of 6.375 per cent Euro Bonds due 2016. Cross currency swaps and forward exchange contracts were taken out to hedge the currency risk on these bonds. These contracts were designated as cash flow hedges of the foreign currency risk associated with the Euro Bonds. The fair value of these derivatives is as follows:
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Notes to Financial Statements continued
28 Financial risk management continued
During the year ended 30 June 2010 the cash flow hedge relationships have been de-designated. Interest rate swaps, cross currency interest rate swaps, currency swaps and forward exchange contracts were taken out and have been designated as fair value hedges for risks associated with the Euro Bonds. These are discussed in ‘Interest rate risk’ above.
Net financial assets/(liabilities) – by currency of denomination | 2012 | 2011 | ||||||
US$M | US$M | |||||||
Australian dollars | (5,564 | ) | (4,344 | ) | ||||
South African rand | 366 | 187 | ||||||
UK pound sterling | (11 | ) | 23 | |||||
Other | 493 | (342 | ) | |||||
|
|
|
| |||||
Total | (4,716 | ) | (4,476 | ) | ||||
|
|
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The principal non-functional currencies to which the Group is exposed are the Australian dollar, South African rand and UK pound sterling. Based on the Group’s net financial assets and liabilities as at 30 June 2010,2012, a weakening of the US dollar against these currencies as illustrated in the table below, with all other variables held constant, would have affected post-taxincrease/(decrease) profit after taxation and equity as follows:
Currency movement | 2010 US$M | 2009 US$M | ||||||||||||||||||||||||||
2012 US$M | 2011 US$M | |||||||||||||||||||||||||||
Currency movement | Post-tax profit | Equity | Post-tax profit | Equity | Profit after taxation | Equity | Profit after taxation | Equity | ||||||||||||||||||||
(9 | ) | (8 | ) | (11 | ) | (11 | ) | (40 | ) | (39 | ) | (33 | ) | (33 | ) | |||||||||||||
0.2 rand movement in South African rand | (2 | ) | 5 | 3 | 5 | (2 | ) | 6 | (7 | ) | 4 | |||||||||||||||||
1 pence movement in UK pound sterling | — | — | 1 | 1 | – | – | – | – | ||||||||||||||||||||
The Group’s financial asset and liability profile may not remain constant, and therefore these sensitivities should be used with care.
Transactional exposure in respect of non-functional currency expenditure and revenues
Certain operating and capital expenditure is incurred by some operations in currencies other than their functional currency. To a lesser extent, certain sales revenue is earned in currencies other than the functional currency of operations, and certain exchange control restrictions may require that funds be maintained in currencies other than the functional currency of the operation. These currency risks are managed as part of the Portfolio Risk Management Strategy and within the overall CFaR limit.portfolio risk management strategy. When required under this strategy the Group enters into forward exchange contracts.
The net fair value of forward exchange contracts outstanding to manage short-term foreign currency cash flows relating to operating activities is an asset of US$228 million (2009: a liability(2011: an asset of US$523 million).
Commodity price risk
Contracts for the sale and physical delivery of commodities are executed whenever possible on a pricing basis intended to achieve a relevant index target. Where pricing terms deviate from the index, derivative commodity contracts aremay be used when available to return realised prices to the index. Contracts for the physical delivery of commodities are not typically financial instruments and are carried in the balance sheet at cost (typically at nil); they are therefore excluded from the fair value and sensitivity tables below. Accordingly, the financial instrument exposures set out in the tables below do not represent all of the commodity price risks managed according to the Group’s objectives. Movements in the fair value of contracts included in the tables below are offset by movements in the fair value of the physical contracts, however only the former movement is recognised in the Group’s income statement prior to settlement. The risk associated with commodity prices is managed as part of the Portfolio Risk Management Strategy and within the overall CFaR limit.portfolio risk management strategy.
Financial instruments with commodity price risk included in the following tables are those entered into for the following activities:
economic hedging of prices realised on commodity contracts as described above
proprietary tradingabove;
purchases and sales of physical contracts that can be cash-settled
cash flow hedging of revenuescash-settled;
derivatives embedded within other supply contractscontracts.
All such instruments are carried in the balance sheet at fair value.
Notes to Financial Statements continued
28 Financial risk management continued
Forward commodity and other derivative contracts
2012 | 2011 | |||||||||||||||||||||||
2010 | 2009 | Fair value of asset | Fair value of liability | Fair value of asset | Fair value of liability | |||||||||||||||||||
Fair value of asset US$M | Fair value of liability US$M | Fair value of asset US$M | Fair value of liability US$M | US$M | US$M | US$M | US$M | |||||||||||||||||
Aluminium | 21 | 26 | 123 | 88 | 160 | 62 | 7 | 30 | ||||||||||||||||
Copper | 83 | 84 | 385 | 404 | 57 | 38 | 111 | 102 | ||||||||||||||||
Zinc | 29 | 19 | 13 | 16 | 3 | 5 | 2 | 2 | ||||||||||||||||
Lead | 40 | 26 | 20 | 20 | 12 | 9 | 6 | 8 | ||||||||||||||||
Silver | 4 | 9 | 12 | 10 | 24 | 24 | 18 | 27 | ||||||||||||||||
Nickel | 47 | 36 | 55 | 77 | 32 | 21 | 25 | 13 | ||||||||||||||||
Iron ore | — | 2 | 9 | — | – | 2 | 2 | 5 | ||||||||||||||||
Energy coal | 21 | 31 | 71 | 74 | 4 | 45 | 16 | 41 | ||||||||||||||||
Metallurgical coal | — | 2 | — | 1 | ||||||||||||||||||||
Petroleum | — | 33 | 5 | 46 | – | 27 | 4 | 24 | ||||||||||||||||
Electricity | — | — | 206 | 2 | ||||||||||||||||||||
Gas | 111 | 31 | 92 | 3 | 228 | 22 | 129 | 52 | ||||||||||||||||
Freight | 38 | 13 | 84 | 88 | 22 | – | 24 | 7 | ||||||||||||||||
Other | — | 3 | — | — | ||||||||||||||||||||
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Total | 394 | 315 | 1,075 | 829 | 542 | 255 | 344 | 311 | ||||||||||||||||
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Comprising: | ||||||||||||||||||||||||
Current | 241 | 223 | 671 | 687 | 217 | 194 | 189 | 232 | ||||||||||||||||
Non-current | 153 | 92 | 404 | 142 | 325 | 61 | 155 | 79 | ||||||||||||||||
The Group’s exposure at 30 June 20102012 to the impact of movements in commodity prices upon the financial instruments, other than those designated as a cash flow hedge or embedded derivatives, is set out in the following table.
2012 | 2011 | |||||||||||||||||||||||||||||||
2010 | 2009 | Units of exposure | Net exposure receive/ (deliver) | Impact on equity and profit after taxation of 10% increase in market price | Net exposure receive/ (deliver) | Impact on equity and profit after taxation of 10% increase in market price | ||||||||||||||||||||||||||
Units of exposure | Net exposure receive/(deliver) | Impact on equity and profit of 10% movement in market price (post-tax) US$M | Net exposure receive/(deliver) | Impact on equity and profit of 10% movement in market price (post-tax) US$M | US$M | US$M | ||||||||||||||||||||||||||
Aluminium | ‘000 tonnes | (8 | ) | (2 | ) | 11 | 2 | Tonnes (’000s) | (73 | ) | 15 | (74 | ) | 18 | ||||||||||||||||||
Copper | ‘000 tonnes | 20 | 18 | 17 | 7 | Tonnes (’000s) | 20 | (16 | ) | 29 | (27 | ) | ||||||||||||||||||||
Zinc | ‘000 tonnes | 4 | — | — | 2 | Tonnes (’000s) | – | – | (8 | ) | 2 | |||||||||||||||||||||
Lead | ‘000 tonnes | (13 | ) | — | 5 | 2 | Tonnes (’000s) | (8 | ) | 2 | (9 | ) | 2 | |||||||||||||||||||
Silver | Million ounces | (3 | ) | (3 | ) | 2 | 3 | Ounces (millions) | – | 3 | (1 | ) | 1 | |||||||||||||||||||
Nickel | ‘000 tonnes | (1 | ) | (2 | ) | 1 | 2 | Tonnes (’000s) | 2 | (4 | ) | (1 | ) | 3 | ||||||||||||||||||
Iron ore | ‘000 tonnes | 273 | 3 | (483 | ) | (4 | ) | Tonnes (’000s) | 508 | (7 | ) | 1,102 | (18 | ) | ||||||||||||||||||
Energy coal | ‘000 tonnes | 1,370 | 13 | (865 | ) | (9 | ) | Tonnes (’000s) | 2,045 | (19 | ) | 1,089 | (13 | ) | ||||||||||||||||||
Petroleum | ‘000 barrels | — | — | 678 | 4 | Barrels (’000s) | (1 | ) | – | 25 | (2 | ) | ||||||||||||||||||||
Electricity | ‘000 MWh | — | — | — | — | |||||||||||||||||||||||||||
Gas | ‘000 therms | — | — | (10,850 | ) | — | ||||||||||||||||||||||||||
Freight | Time charter days | (1,490 | ) | (4 | ) | (427 | ) | (2 | ) | Time charter days | (5,388 | ) | 8 | (1,823 | ) | 3 | ||||||||||||||||
‘000 voyage charter tonnes | 510 | 1 | 1,245 | 2 | Voyage charter tonnes (’000s) | – | – | 165 | – | |||||||||||||||||||||||
Provisionally priced commodity sales contracts
Not included in the above tables are provisionally priced sales volumes for which price finalisation, referenced to the relevant index, is outstanding at balance date. Provisional pricing mechanisms embedded within these sales arrangements have the character of a commodity derivative and are carried at fair value as part of trade
receivables. The Group’s exposure at 30 June 20102012 to the impact of movements in commodity prices upon provisionally invoiced sales volumes is set out in the following table.
2010 | 2009 | |||||||||||||
Units of exposure | Net exposure receive/(deliver) | Impact on equity and profit of 10% movement in market price (post-tax) US$M | Net exposure receive/(deliver) | Impact on equity and profit of 10% movement in market price (post-tax) US$M | ||||||||||
Copper | ‘000 tonnes | (237 | ) | (100 | ) | (235 | ) | (76 | ) | |||||
Notes to Financial Statements continued
28 Financial risk management continued
2012 | 2011 | |||||||||||||||||
Units of exposure | Net exposure (deliver)/ receive | Impact on equity and profit after taxation of 10% increase in market price | Net exposure receive/ (deliver) | Impact on equity and profit after taxation of 10% increase in market price | ||||||||||||||
US$M | US$M | |||||||||||||||||
Copper | Tonnes (’000s) | (279 | ) | 150 | (239 | ) | 145 |
The sensitivities in the above tables have been determined as the absolute impact on fair value of a 10 per cent increase in commodity prices at each reporting date, while holding all other variables, including foreign currency and exchange rates, constant.
The relationship between commodity prices and foreign currencies is complex and movements in foreign exchange can impact commodity prices. The sensitivities should therefore be used with care.
Liquidity risk
The Group’s liquidity risk arises from the possibility that it may not be able to settle or meet its obligations as they fall due and is managed as part of the Portfolio Risk Management Strategy and within the overall CFaR limit.portfolio risk management strategy. Operational, capital and regulatory requirements are considered in the management of liquidity risk, in conjunction with short- and long-term forecast information.
Additional liquidity risk arises on debt related derivatives due to the possibility that a market for derivatives might not exist in some circumstances. To counter this risk the Group only uses derivatives in highly liquid markets.
During the year ended 30 June 2010,2012, Moody’s Investors Service made no change to the Group’s long-term credit rating of A1 (the short-term credit rating is P-1). Standard & Poor’s made no change to the Group’s long-term credit rating of A+ (the short-term credit rating is A-1). The Group’s strong credit profile, diversified funding sources and committed credit facilities ensure that sufficient liquid funds are maintained to meet its daily cash requirements. The Group’s policy on counterparty credit exposure ensures that only counterparties of a high credit standing are used for the investment of any excess cash.
There were no defaults on loans payable during the period.
Standby arrangements and unused credit facilities
Details of major standby and support arrangements are as follows:
Facility available 2012 | Used 2012 | Unused 2012 | Facility available 2011 | Used 2011 | Unused 2011 | |||||||||||||||||||||||||||||||
Facility available 2010 US$M | Used 2010 US$M | Unused 2010 US$M | Facility available 2009 US$M | Used 2009 US$M | Unused 2009 US$M | US$M | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||||||||
Revolving credit facility(a) | 3,000 | — | 3,000 | 3,000 | — | 3,000 | 4,000 | – | 4,000 | 4,000 | – | 4,000 | ||||||||||||||||||||||||
Other facilities(b) | 58 | — | 58 | 58 | — | 58 | 60 | – | 60 | 61 | – | 61 | ||||||||||||||||||||||||
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Total financing facilities | 3,058 | — | 3,058 | 3,058 | — | 3,058 | 4,060 | – | 4,060 | 4,061 | – | 4,061 | ||||||||||||||||||||||||
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(a) | The multi-currency revolving credit facility is available for general corporate purposes and matures in |
(b) | Other bank facilities are arranged with a number of banks with the general terms and conditions agreed on a periodic basis. |
Notes to Financial Statements continued
28 Financial risk management continued
Maturity profile of financial liabilities
The maturity profile of the Group’s financial liabilities based on the contractual amounts, taking into account the derivatives related to debt, is as follows:
2010 | Bank loans, debentures and other loans US$M | Expected future interest payments US$M | Derivatives related to net debt US$M | Other derivatives US$M | Obligations under finance leases US$M | Other financial liabilities US$M | Total US$M | ||||||||||||||||||||||||||||||||||||
2012 | Bank loans, debentures and other loans (a) | Expected future interest payments | Derivatives related to net debt | Other derivatives | Obligations under finance leases | Other financial liabilities (a) | Total | ||||||||||||||||||||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||||||||||||||||||||
Due for payment: | |||||||||||||||||||||||||||||||||||||||||||
In one year or less or on demand | 2,038 | 741 | (54 | ) | 241 | 77 | 6,245 | 9,288 | 3,587 | 977 | 46 | 174 | 80 | 11,855 | 16,719 | ||||||||||||||||||||||||||||
In more than one year but not more than two years | 2,286 | 689 | 346 | 37 | 64 | 30 | 3,452 | 3,964 | 894 | 30 | 22 | 58 | 170 | 5,138 | |||||||||||||||||||||||||||||
In more than two years but not more than three years | 1,827 | 567 | 10 | 19 | 23 | 5 | 2,451 | 2,132 | 725 | 30 | 5 | 43 | 37 | 2,972 | |||||||||||||||||||||||||||||
In more than three years but not more than four years | 2,837 | 475 | 10 | 10 | 23 | 4 | 3,359 | 3,949 | 632 | 137 | 8 | 41 | 3 | 4,770 | |||||||||||||||||||||||||||||
In more than four years but not more than five years | 134 | 357 | 11 | 11 | 23 | — | 536 | 2,836 | 496 | 21 | 8 | 39 | 32 | 3,432 | |||||||||||||||||||||||||||||
In more than five years | 5,841 | 1,124 | 143 | 3 | 85 | 323 | 7,519 | 11,082 | 2,409 | 98 | 44 | 21 | 332 | 13,986 | |||||||||||||||||||||||||||||
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14,963 | 3,953 | 466 | 321 | 295 | 6,607 | 26,605 | 27,550 | 6,133 | 362 | 261 | 282 | 12,429 | 47,017 | ||||||||||||||||||||||||||||||
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Carrying amount | 15,524 | — | 456 | 321 | 225 | 6,770 | 23,296 | 28,256 | – | 256 | 261 | 237 | 12,429 | 41,439 | |||||||||||||||||||||||||||||
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(a) Includes secured debt of US$178 million and trade and other payables of US$153 million included in liabilities held for sale. Refer to note 26. |
(a) Includes secured debt of US$178 million and trade and other payables of US$153 million included in liabilities held for sale. Refer to note 26. |
|
2009 | Bank loans, debentures and other loans US$M | Expected future interest payments US$M | Derivatives related to net debt US$M | Other derivatives US$M | Obligations under finance leases US$M | Other financial liabilities US$M | Total US$M | |||||||||||||||||||||||||||||||||||
2011 | Bank loans, debentures and other loans | Expected future interest payments | Derivatives related to net debt | Other derivatives | Obligations under finance leases | Other financial liabilities | Total | |||||||||||||||||||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | US$M | ||||||||||||||||||||||||||||||||||||
Due for payment: | ||||||||||||||||||||||||||||||||||||||||||
In one year or less or on demand | 1,426 | 819 | — | 705 | 69 | 5,636 | 8,655 | 3,702 | 720 | 54 | 247 | 67 | 9,434 | 14,224 | ||||||||||||||||||||||||||||
In more than one year but not more than two years | 1,795 | 792 | — | 103 | 37 | 169 | 2,896 | 1,946 | 588 | – | 44 | 34 | 44 | 2,656 | ||||||||||||||||||||||||||||
In more than two years but not more than three years | 2,500 | 728 | — | 26 | 39 | 29 | 3,322 | 2,715 | 499 | – | 6 | 30 | 33 | 3,283 | ||||||||||||||||||||||||||||
In more than three years but not more than four years | 1,808 | 597 | — | 7 | 26 | 9 | 2,447 | 179 | 369 | – | 4 | 31 | 7 | 590 | ||||||||||||||||||||||||||||
In more than four years but not more than five years | 2,612 | 509 | — | 3 | 26 | 6 | 3,156 | 2,971 | 347 | – | 9 | 53 | 29 | 3,409 | ||||||||||||||||||||||||||||
In more than five years | 5,624 | 1,502 | — | 3 | 112 | 16 | 7,257 | 3,733 | 867 | – | 4 | 38 | 381 | 5,023 | ||||||||||||||||||||||||||||
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15,765 | 4,947 | — | 847 | 309 | 5,865 | 27,733 | 15,246 | 3,390 | 54 | 314 | 253 | 9,928 | 29,185 | |||||||||||||||||||||||||||||
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Carrying amount | 16,181 | — | — | 847 | 223 | 5,821 | 23,072 | 15,700 | – | 53 | 314 | 192 | 9,926 | 26,185 | ||||||||||||||||||||||||||||
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The amounts presented in the tables above comprise the contractual undiscounted cash flows, and therefore will not always agree with the amounts presented in the balance sheet. The Group holds derivatives related to net debt, commodities and currencies that are classified as other financial assets when they are expected to generate cash inflows (refer– refer to note 11). These contracts are excluded from the table above in 2009.11.
Credit risk
Credit risk arises from the non-performance by counterparties of their contractual financial obligations towards the Group. To manage credit risk the Group maintains Group-wide procedures covering the application for credit approvals, granting and renewal of counterparty limits and daily monitoring of exposures against these limits. As part of these processes the financial viability of all counterparties is regularly monitored and assessed. The maximum exposure to credit risk is limited to the total carrying value of relevant financial assets on the balance sheet as at the reporting date.
Notes to Financial Statements continued
28 Financial risk management continued
The Group’s credit risk exposures are categorised under the following headings:
Counterparties
The Group conducts transactions with the following major types of counterparties:
• | Receivables counterparties |
The majorityApproximately half of sales to the Group’s customers are made on open terms.
• | Payment guarantee counterparties |
A proportionApproximately half of sales to Group customers occur via secured payment mechanisms.
• | Derivative counterparties |
Counterparties to derivative contracts consist of a diverse number of financial institutions and industrial counterparties in the relevant markets.
• | Cash investment counterparties |
As part of managing cash flow and liquidity, the Group holds short-term cash investments with a range of approved financial institutions.
The Group has no significant concentration of credit risk with any single counterparty or group of counterparties.
Geographic
The Group trades in all major geographic regions. Countries in which the Group has a significant credit risk exposure include South Africa, Australia, the US, Japan and China. Where appropriate, secured payment mechanisms and other risk mitigation instruments are used to protect revenues from credit risk losses.
Industry
In line with our asset portfolio, the Group sells into a diverse range of industries and customer sectors. This diversity means that the Group is not materially exposed to any individual industry or customer.
The following table shows the Group’s receivables at the reporting date that are exposed to credit risk and the ageing and impairment profile thereon.
2012 | Gross amount | Receivables past due and impaired | Receivables neither past due nor impaired | Receivables past due but not impaired | ||||||||||||||||||||||||||||||||||||||
Less than 30 days | 31 to 60 days | 61 to 90 days | Over 90 days | |||||||||||||||||||||||||||||||||||||||
Receivables past due but not impaired | US$M | US$M | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||||||||||||||||||
2010 | Gross amount US$M | Receivables past due and impaired US$M | Receivables neither past due nor impaired US$M | Less than 30 days US$M | 31 to 60 days US$M | 61 to 90 days US$M | Over 90 days US$M | |||||||||||||||||||||||||||||||||||
Trade accounts receivables | 5,092 | 147 | 4,907 | 27 | 6 | 1 | 4 | |||||||||||||||||||||||||||||||||||
Trade receivables | 4,844 | 121 | 4,603 | 76 | 3 | – | 41 | |||||||||||||||||||||||||||||||||||
Other receivables | 2,994 | 15 | 2,864 | 32 | 10 | 3 | 70 | 4,501 | 45 | 3,713 | 342 | 85 | 56 | 260 | ||||||||||||||||||||||||||||
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Total | 8,086 | 162 | 7,771 | 59 | 16 | 4 | 74 | 9,345 | 166 | 8,316 | 418 | 88 | 56 | 301 | ||||||||||||||||||||||||||||
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Receivables past due but not impaired | ||||||||||||||||||||||||||||||||||||||||||
2009 | Gross amount US$M | Receivables past due and impaired US$M | Receivables neither past due nor impaired US$M | Less than 30 days US$M | 31 to 60 days US$M | 61 to 90 days US$M | Over 90 days US$M | |||||||||||||||||||||||||||||||||||
Trade accounts receivables | 3,881 | 176 | 3,671 | — | 4 | — | 30 | |||||||||||||||||||||||||||||||||||
Other receivables | 2,216 | 6 | 2,031 | 127 | 3 | 1 | 48 | |||||||||||||||||||||||||||||||||||
Total | 6,097 | 182 | 5,702 | 127 | 7 | 1 | 78 | |||||||||||||||||||||||||||||||||||
Notes to Financial Statements continued
28 Financial risk management continued
2011 | Gross amount | Receivables past due and impaired | Receivables neither past due nor impaired | Receivables past due but not impaired | ||||||||||||||||||||||||
Less than 30 days | 31 to 60 days | 61 to 90 days | Over 90 days | |||||||||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | US$M | ||||||||||||||||||||||
Trade receivables | 6,219 | 151 | 5,782 | 230 | 3 | 4 | 49 | |||||||||||||||||||||
Other receivables | 4,242 | 20 | 3,880 | 74 | 6 | 13 | 249 | |||||||||||||||||||||
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Total | 10,461 | 171 | 9,662 | 304 | 9 | 17 | 298 | |||||||||||||||||||||
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Receivables are deemed to be past due or impaired with reference to the Group’s normal terms and conditions of business. These terms and conditions are determined on a case-by-case basis with reference to the customer’s
credit quality and prevailing market conditions. Receivables that are classified as ‘past due’ in the above tables are those that have not been settled within the terms and conditions that have been agreed with that customer. For an analysis of movements in impaired trade receivables, refer to note 10.
The credit quality of the Group’s customers is monitored on an ongoing basis and assessed for impairment where indicators of such impairment exist. The solvency of each debtor and their ability to repay the receivable is considered in assessing receivables for impairment. In certain circumstances the Group may seek collateral as security for the receivable. Where receivables have been impaired, the Group actively seeks to recover the amounts in question and enforce compliance with credit terms.
No other financial assets were past due or impaired at 30 June 20102012 (30 June 2009:2011: nil).
Fair values
All financial assets and financial liabilities, other than derivatives, are initially recognised at the fair value of consideration paid or received, net of transaction costs as appropriate, and subsequently carried at fair value or amortised cost, as indicated in the tables below.
Derivatives are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at their fair value. This measurement of fair value is principally based on quoted market prices. Where no price information is available from a quoted market source, alternative market mechanisms or recent comparable transactions, fair value is estimated based on the Group’s views on relevant future prices, net of valuation allowances to accommodate liquidity, modelling and other risks implicit in such estimates.
The financial assets and liabilities are presented by class in the tables below at their carrying values, which generally approximate to the fair values. In the case of US$2,5774,317 million (2009:(2011: US$7,696827 million) of centrally managed fixed rate debt and other fixed interest borrowings of US$4,039 million (2011: US$650 million) not swapped to floating rate, the fair valuevalues at 30 June 2010 is2012 were US$3,0314,552 million (2009:(2011: US$8,277977 million). and US$4,034 million (2011: US$650 million) respectively.
Notes to Financial Statements continued
28 Financial risk management continued
Financial assets and liabilities
2010 | Notes | Loans and receivables US$M | Available for sale securities US$M | Held at fair value through profit or loss US$M | Cash flow hedges US$M | Other financial assets and liabilities at amortised cost US$M | Total US$M | |||||||||||||||||||||||||||||||||||
2012 | Notes | Loans and receivables | Available for sale securities | Held at fair value through profit or loss | Cash flow hedges | Other financial assets and liabilities at amortised cost | Total | |||||||||||||||||||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 23 | 12,456 | — | — | — | — | 12,456 | |||||||||||||||||||||||||||||||||||
Trade and other receivables(a) | 10 | 5,938 | — | 812 | — | — | 6,750 | |||||||||||||||||||||||||||||||||||
Cash and cash equivalents(a) | 23 | 4,901 | – | – | – | – | 4,901 | |||||||||||||||||||||||||||||||||||
Trade and other receivables (b) (c) | 10 | 6,415 | – | 1,228 | – | – | 7,643 | |||||||||||||||||||||||||||||||||||
Cross currency and interest rate swaps | 11 | — | — | 618 | — | — | 618 | 11 | – | – | 859 | – | – | 859 | ||||||||||||||||||||||||||||
Forward exchange contracts | 11 | — | — | 28 | — | — | 28 | 11 | – | – | 14 | – | – | 14 | ||||||||||||||||||||||||||||
Commodity contracts | 11 | — | — | 282 | — | — | 282 | 11 | – | – | 251 | – | – | 251 | ||||||||||||||||||||||||||||
Other derivative contracts | 11 | — | — | 112 | — | — | 112 | 11 | – | – | 291 | – | – | 291 | ||||||||||||||||||||||||||||
Interest bearing loans receivable | 10 | 683 | — | — | — | — | 683 | 10 | 1,102 | – | – | – | – | 1,102 | ||||||||||||||||||||||||||||
Shares | 11 | — | 657 | — | — | — | 657 | 11 | – | 602 | – | – | – | 602 | ||||||||||||||||||||||||||||
Other investments | 11 | — | 105 | — | — | — | 105 | 11 | – | 146 | – | – | – | 146 | ||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total financial assets | 19,077 | 762 | 1,852 | — | — | 21,691 | 12,418 | 748 | 2,643 | – | – | 15,809 | ||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Non-financial assets | 67,161 | 113,464 | ||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Total assets | 88,852 | 129,273 | ||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||||||||||||||||
Trade and other payables(b) | 15 | — | — | — | — | 6,755 | 6,755 | |||||||||||||||||||||||||||||||||||
Trade and other payables (d) (e) | 15 | – | – | – | – | 12,414 | 12,414 | |||||||||||||||||||||||||||||||||||
Cross currency and interest rate swaps | 17 | — | — | 456 | — | — | 456 | 17 | – | – | 101 | 155 | – | 256 | ||||||||||||||||||||||||||||
Forward exchange contracts | 17 | — | — | 6 | — | — | 6 | 17 | – | – | 6 | – | – | 6 | ||||||||||||||||||||||||||||
Commodity contracts | 17 | — | — | 235 | — | — | 235 | 17 | – | – | 178 | – | – | 178 | ||||||||||||||||||||||||||||
Other derivative contracts | 17 | — | — | 80 | — | — | 80 | 17 | – | – | 77 | – | – | 77 | ||||||||||||||||||||||||||||
Unsecured bank overdrafts and short-term borrowings | 16 | — | — | — | — | 1 | 1 | 16 | – | – | – | – | 20 | 20 | ||||||||||||||||||||||||||||
Unsecured bank loans | 16 | — | — | — | — | 754 | 754 | 16 | – | – | – | – | 827 | 827 | ||||||||||||||||||||||||||||
Notes and debentures(c) | 16 | — | — | — | — | 13,436 | 13,436 | |||||||||||||||||||||||||||||||||||
Secured bank loans | 16 | — | — | — | — | 957 | 957 | |||||||||||||||||||||||||||||||||||
Commercial paper | 16 | – | – | – | – | 995 | 995 | |||||||||||||||||||||||||||||||||||
Notes and debentures(f) | 16 | – | – | – | – | 24,385 | 24,385 | |||||||||||||||||||||||||||||||||||
Secured bank and other loans (g) | 16 | – | – | – | – | 1,470 | 1,470 | |||||||||||||||||||||||||||||||||||
Redeemable preference shares | 16 | — | — | — | — | 15 | 15 | 16 | – | – | – | – | 15 | 15 | ||||||||||||||||||||||||||||
Finance leases | 16 | — | — | — | — | 225 | 225 | 16 | – | – | – | – | 237 | 237 | ||||||||||||||||||||||||||||
Unsecured other | 16 | — | — | — | — | 376 | 376 | 16 | – | – | – | – | 559 | 559 | ||||||||||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total financial liabilities | — | — | 777 | — | 22,519 | 23,296 | – | – | 362 | 155 | 40,922 | 41,439 | ||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Non-financial liabilities | 16,227 | 20,749 | ||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Total liabilities | 39,523 | 62,188 | ||||||||||||||||||||||||||||||||||||||||
|
(a) | Includes cash and cash equivalents of US$120 million included in assets held for sale. Refer to note 26. |
(b) | Excludes input taxes of US$ |
Includes trade and other receivables of US$196 million included in assets held for sale. Refer to note 26. |
(d) | Excludes input taxes of US$ |
(e) | Includes trade and other payables of US$153 million included in liabilities held for sale. Refer to note 26. |
(f) | Includes US$4,317 million of centrally managed fixed rate debt not swapped to floating rate, US$3,569 million of fixed rate debt assumed as part of the acquisition of Petrohawk Energy Corporation and US$16,499 million of centrally managed debt swapped to floating rate under fair value hedges that is consistently fair valued for interest rate risk. |
(g) | Includes secured debt of US$178 million included in liabilities held for sale. Refer to note 26. |
2011 Financial assets Cash and cash equivalents Trade and other receivables(a) Cross currency and interest rate swaps Forward exchange contracts Commodity contracts Other derivative contracts Interest bearing loans receivable Shares Other investments Total financial assets Non-financial assets Total assets Financial liabilities Trade and other payables(b) Cross currency and interest rate swaps Forward exchange contracts Commodity contracts Other derivative contracts Unsecured bank overdrafts and short-term borrowings Unsecured bank loans Notes and debentures(c) Secured bank and other loans Redeemable preference shares Finance leases Unsecured other Total financial liabilities Non-financial liabilities Total liabilities Notes Loans and
receivables Available
for sale
securities Held at
fair value
through
profit
or loss Cash
flow
hedges Other
financial
assets and
liabilities
at
amortised
cost Total US$M US$M US$M US$M US$M US$M 23 10,084 – – – – 10,084 10 7,600 – 1,003 – – 8,603 11 – – 754 – – 754 11 – – 26 �� – – 26 11 – – 214 – – 214 11 – – 130 – – 130 10 1,044 – – – – 1,044 11 – 580 – – – 580 11 – 162 – – – 162 18,728 742 2,127 – – 21,597 81,323 102,920 15 – – – – 9,911 9,911 17 – – 53 – – 53 17 – – 3 – – 3 17 – – 219 – – 219 17 – – 92 – – 92 16 – – – – 4 4 16 – – – – 1,010 1,010 16 – – – – 12,580 12,580 16 – – – – 1,326 1,326 16 – – – – 15 15 16 – – – – 192 192 16 – – – – 780 780 – – 367 – 25,818 26,185 18,980 45,165
(a) | Excludes input taxes of US$643 million included in other receivables. Refer to note 10. |
(b) | Excludes input taxes of US$367 million included in other payables. Refer to note 15. |
(c) | Includes US$ |
Notes to Financial Statements continued
28 Financial risk management continued
Financial assets and liabilities continued
2009 | Notes | Loans and receivables US$M | Available for sale securities US$M | Held at fair value through profit or loss US$M | Cash flow hedges US$M | Other financial assets and liabilities at amortised cost US$M | Total US$M | |||||||
Financial assets | ||||||||||||||
Cash and cash equivalents | 23 | 10,833 | — | — | — | — | 10,833 | |||||||
Trade and other receivables(a) | 10 | 4,581 | — | 890 | — | — | 5,471 | |||||||
Cross currency and interest rate swaps | 11 | — | — | 627 | 142 | — | 769 | |||||||
Forward exchange contracts | 11 | — | — | 13 | — | — | 13 | |||||||
Commodity contracts | 11 | — | — | 778 | — | — | 778 | |||||||
Other derivative contracts | 11 | — | — | 297 | — | — | 297 | |||||||
Shares | 11 | — | 321 | 35 | — | — | 356 | |||||||
Other investments | 11 | — | 93 | — | — | — | 93 | |||||||
Total financial assets | 15,414 | 414 | 2,640 | 142 | — | 18,610 | ||||||||
Non-financial assets | 60,160 | |||||||||||||
Total assets | 78,770 | |||||||||||||
Financial liabilities | ||||||||||||||
Trade and other payables(b) | 15 | — | — | — | — | 5,666 | 5,666 | |||||||
Forward exchange contracts | 17 | — | — | 18 | — | — | 18 | |||||||
Commodity contracts | 17 | — | — | 794 | — | — | 794 | |||||||
Other derivative contracts | 17 | — | — | 35 | — | — | 35 | |||||||
Unsecured bank overdrafts and short-term borrowings | 16 | — | — | — | — | 2 | 2 | |||||||
Unsecured bank loans | 16 | — | — | — | — | 1,256 | 1,256 | |||||||
Notes and debentures(c) | 16 | — | — | — | — | 13,946 | 13,946 | |||||||
Secured bank loans | 16 | — | — | — | — | 618 | 618 | |||||||
Redeemable preference shares | 16 | — | — | — | — | 15 | 15 | |||||||
Finance leases | 16 | — | — | — | — | 223 | 223 | |||||||
Unsecured other | 16 | — | — | — | — | 359 | 359 | |||||||
Total financial liabilities | — | — | 847 | — | 22,085 | 22,932 | ||||||||
Non-financial liabilities | 15,127 | |||||||||||||
Total liabilities | 38,059 | |||||||||||||
|
|
|
Notes to Financial Statements continued
28 Financial risk management continued
Valuation hierarchy
The carrying amount of financial assets and liabilities measured at fair value is principally calculated with reference to quoted prices in active markets for identical assets or liabilities. Where no price information is available from a quoted market source, alternative market mechanisms or recent comparable transactions, fair value is estimated based on the Group’s views on relevant future prices, net of valuation allowances to accommodate liquidity, modelling and other risks implicit in such estimates. Movements in the fair value of financial assets and liabilities may be recognised through the income statement or in other comprehensive income. The following table shows the Group’s financial assets and liabilities carried at fair value with reference to the nature of valuation inputs used.
2010 | Level 1(a) US$M | Level 2 (b) US$M | Level 3 (c) US$M | Total US$M | |||||||||||||||||||||
2012 | Level 1 (a) | Level 2 (b) | Level 3 (c) | Total | |||||||||||||||||||||
US$M | US$M | US$M | US$M | ||||||||||||||||||||||
Financial assets and liabilities | |||||||||||||||||||||||||
Trade and other receivables | — | 812 | — | 812 | – | 1,228 | – | 1,228 | |||||||||||||||||
Cross currency and interest rate swaps | — | 162 | — | 162 | – | 603 | – | 603 | |||||||||||||||||
Forward exchange contracts | — | 22 | — | 22 | – | 8 | – | 8 | |||||||||||||||||
Commodity contracts | — | 47 | — | 47 | – | 73 | – | 73 | |||||||||||||||||
Other derivative contracts | — | (9 | ) | 41 | 32 | – | (16 | ) | 230 | 214 | |||||||||||||||
Investments held as available for sale | 13 | 112 | 637 | 762 | |||||||||||||||||||||
Investments – available for sale | 7 | 151 | 590 | 748 | |||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Total | 13 | 1,146 | 678 | 1,837 | 7 | 2,047 | 820 | 2,874 | |||||||||||||||||
|
|
|
|
2011 | Level 1 (a) | Level 2 (b) | Level 3 (c) | Total | ||||||||||||
US$M | US$M | US$M | US$M | |||||||||||||
Financial assets and liabilities | ||||||||||||||||
Trade and other receivables | – | 1,003 | – | 1,003 | ||||||||||||
Cross currency and interest rate swaps | – | 701 | – | 701 | ||||||||||||
Forward exchange contracts | – | 23 | – | 23 | ||||||||||||
Commodity contracts | – | (5 | ) | – | (5 | ) | ||||||||||
Other derivative contracts | – | (4 | ) | 42 | 38 | |||||||||||
Investments – available for sale | 10 | 172 | 560 | 742 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 10 | 1,890 | 602 | 2,502 | ||||||||||||
|
|
|
|
|
|
|
|
(a) | Valuation is based on unadjusted quoted prices in active markets for identical financial assets and liabilities. |
(b) | Valuation is based on inputs (other than quoted prices included in Level 1) that are observable for the financial asset or liability, either directly (i.e. as unquoted prices) or indirectly (i.e. derived from prices). |
(c) | Valuation is based on inputs that are not based on observable market data. |
Level 3 financial assets and liabilities
The following table shows the movements in the Group’s level 3 financial assets and liabilities.
| |||
| |||
| |||
| |||
| |||
| |||
| |||
| |||
| |||
2012 | 2011 | |||||||
US$M | US$M | |||||||
Balance at the beginning of the financial year | 602 | 678 | ||||||
Additions | 36 | 78 | ||||||
Disposals | – | (38 | ) | |||||
Realised gains/(losses) recognised in the income statement(a) | 33 | 12 | ||||||
Unrealised gains/(losses) recognised in the income statement(a) | 155 | (11 | ) | |||||
Unrealised (losses)/gains recognised in other comprehensive income(b) | (6 | ) | (116 | ) | ||||
Transfers to receivables | – | (1 | ) | |||||
|
|
|
| |||||
Balance at the end of the financial year | 820 | 602 | ||||||
|
|
|
|
(a) | Realised and unrealised gains and losses recognised in the income statement are recorded in expenses. Refer to note 5. |
(b) | Unrealised gains and losses recognised in other comprehensive income are recorded in the |
Sensitivity of Level 3 financial assets and liabilities
The carrying amount of financial assets and liabilities that are valued using inputs other than observable market data are calculated using appropriate valuation models, including discounted cash flow modelling, with inputs such as commodity prices, foreign exchange rates and inflation. The potential effect of using reasonably possible alternative assumptions in these models, based on a change in the most significant input by 10 per cent while holding all other variables constant, is shown in the following table. Significant inputs are assessed individually for each financial asset and liability.
Notes to Financial Statements continued
Profit after taxation | Equity | |||||||||||||||||||
2012 | Carrying value | 10% increase in input | 10% decrease in input | 10% increase in input | 10% decrease in input | |||||||||||||||
US$M | US$M | US$M | US$M | US$M | ||||||||||||||||
Financial assets and liabilities | ||||||||||||||||||||
Other derivative contracts | 230 | 15 | (11 | ) | 15 | (11 | ) | |||||||||||||
Investments – available for sale | 590 | – | – | 43 | (49 | ) | ||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Total | 820 | 15 | (11 | ) | 58 | (60 | ) | |||||||||||||
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|
|
|
|
|
|
|
Profit after taxation | Equity | |||||||||||||||||||
2011 | Carrying value | 10% increase in input | 10% decrease in input | 10% increase in input | 10% decrease in input | |||||||||||||||
US$M | US$M | US$M | US$M | US$M | ||||||||||||||||
Financial assets and liabilities | ||||||||||||||||||||
Other derivative contracts | 42 | (24 | ) | 24 | (24 | ) | 24 | |||||||||||||
Investments – available for sale | 560 | – | – | 67 | (88 | ) | ||||||||||||||
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|
|
|
|
|
|
|
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| |||||||||||
Total | 602 | (24 | ) | 24 | 43 | (64 | ) | |||||||||||||
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|
|
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|
|
|
28 Financial risk management continued
Post-tax profit | Equity | ||||||||||||
2010 | Carrying value US$M | 10% increase in input US$M | 10% decrease in input US$M | 10% increase in input US$M | 10% decrease in input US$M | ||||||||
Financial assets and liabilities | |||||||||||||
Other derivative contracts | 41 | (20 | ) | 21 | (20 | ) | 21 | ||||||
Investments held as available for sale | 637 | — | — | 128 | (140 | ) | |||||||
Total | 678 | (20 | ) | 21 | 108 | (119 | ) | ||||||
Capital management
The Group defines capital as the total equity of the Group. The Group manages capital with the goal of maintaining levels of gearing designed to optimise the cost of capital and return on capital employed, while also growing the business consistently through project developments and acquisitions. The Group’s priorities for cash flow are:
reinvestment in projects that carry attractive rates of return regardless of the economic climate
commitment to a solid ‘A’ credit rating
returning excess capital to shareholders via dividends and capital management (for example share buy-backs)
The Group’s strategy is focused on upstream,to own and operate large, long-life, low-cost, expandable, export-orientedupstream assets diversified by commodity, geography and market and the Group continually reviews its portfolio to identify assets which do not fit this strategy. The Group will invest capital in assets where they fit our strategy. The Group’s priorities for cash flow are:
reinvestment in projects that carry attractive rates of return regardless of the economic climate;
commitment to a solid ‘A’ credit rating;
returning excess capital to shareholders firstly with its progressive dividends policy and thereafter via capital management initiatives (for example share buy-backs).
Further information relevant to the actions and outcomes of the Group’s capital management strategy is contained in section 9.1.4 Consolidated Cash Flow Statement, note 9, note 19 and note 20.
The Group monitors capital using a gearing ratio, being the ratio of net debt to net debt plus net assets. Our policy is for net gearing to be a maximum of 40 per cent.
2012 | 2011 | |||||||||||||
2010 US$M | 2009 US$M | US$M | US$M | |||||||||||
Cash and cash equivalents | (12,456 | ) | (10,833 | ) | (4,901 | ) | (10,084 | ) | ||||||
Current debt | 2,191 | 1,094 | 3,546 | 3,519 | ||||||||||
Non-current debt | 13,573 | 15,325 | 24,962 | 12,388 | ||||||||||
|
| |||||||||||||
Net debt | 3,308 | 5,586 | ||||||||||||
Net debt(a) | 23,607 | 5,823 | ||||||||||||
|
| |||||||||||||
Net assets/Total equity | 49,329 | 40,711 | ||||||||||||
Net assets | 67,085 | 57,755 | ||||||||||||
|
| |||||||||||||
Gearing | 6.3 | % | 12.1 | % | 26.0 | % | 9.2 | % | ||||||
|
|
(a) | ||
Includes cash and cash equivalents of US$120 million and secured debt of US$178 million included in assets and liabilities held for sale. Refer to note 26. |
Notes to Financial Statements continued
29 Pension and other post-retirement obligations
Defined contribution pension schemes and multi-employer pension schemes
The Group contributed US$276361 million (2009:(2011: US$231336 million; 2008:2010: US$218276 million) to defined contribution plans and multi-employer defined contribution plans. These contributions are expensed as incurred. Contributions to defined contribution plans for Key Management Personnel are disclosed in note 30.
Defined benefit pension schemes
The Group has closed all defined benefit schemes to new entrants. Defined benefit pension schemes remain operating in Australia, the US, Canada, South America, Europe and South Africa for existing members. Full actuarial valuations are prepared and updated annually to 30 June by local actuaries for all schemes. The Projected Unit Credit valuation method is used. The Group operates final salary schemes that provide final salary benefits only, non-salary related schemes that provide flat dollar benefits and mixed benefit schemes that consist of a final salary defined benefit portion and a defined contribution portion.
Defined benefit post-retirement medical schemes
The Group operates a number of post-retirement medical schemes in the US, Canada and South Africa. Full actuarial valuations are prepared by local actuaries for all schemes. All of the post-retirement medical schemes in the Group are unfunded.
The following tables set out details in respect of the Group’s defined benefit pension and post-retirement medical schemes.
Balance sheet disclosures
The amounts recognised in the consolidated balance sheet are as follows:
Defined benefit pension schemes | Post-retirement medical schemes | |||||||||||||||||||||||||
Defined benefit pension schemes | Post-retirement medical schemes | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||
2010 US$M | 2009 US$M | 2010 US$M | 2009 US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||
Present value of funded defined benefit obligation | 1,673 | 1,666 | — | — | 2,103 | 1,948 | – | – | ||||||||||||||||||
Present value of unfunded defined benefit obligation | 89 | 70 | 343 | 310 | 112 | 95 | 446 | 437 | ||||||||||||||||||
Unrecognised past service credits | — | — | 1 | 5 | ||||||||||||||||||||||
Fair value of defined benefit scheme assets | (1,547 | ) | (1,455 | ) | — | — | (1,935 | ) | (1,866 | ) | – | – | ||||||||||||||
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|
| |||||||||||||||||||||||
Scheme deficit | 215 | 281 | 344 | 315 | 280 | 177 | 446 | 437 | ||||||||||||||||||
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| |||||||||||||||||||||||
Unrecognised surplus | 69 | 78 | — | — | 52 | 80 | – | – | ||||||||||||||||||
Unrecognised past service credits | – | – | 4 | 5 | ||||||||||||||||||||||
Adjustment for employer contributions tax | 11 | 17 | — | — | 17 | 16 | – | – | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||||
Net liability recognised in the balance sheet | 295 | 376 | 344 | 315 | ||||||||||||||||||||||
Net liability recognised in the consolidated balance sheet | 349 | 273 | 450 | 442 | ||||||||||||||||||||||
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|
|
The Group has no legal obligation to settle these liabilities with any immediate contributions or additional one-off contributions. The Group intends to continue to contribute to each defined benefit pension and post-retirement medical scheme in accordance with the latest recommendations of each scheme actuary.
Notes to Financial Statements continued
29 Pension and other post-retirement obligations continued
Income statement disclosures
The amounts recognised in the consolidated income statement are as follows:
Defined benefit pension schemes | Post-retirement medical schemes | |||||||||||||||||||||||||||||||||||||||||
Defined benefit pension schemes | Post-retirement medical schemes | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | |||||||||||||||||||||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | 2010 US$M | 2009 US$M | 2008 US$M | US$M | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||||||||||||||
Current service cost | 54 | 58 | 75 | 6 | 5 | 7 | 57 | 62 | 54 | 8 | 5 | 6 | ||||||||||||||||||||||||||||||
Interest cost | 108 | 110 | 113 | 22 | 22 | 25 | 104 | 105 | 108 | 25 | 23 | 22 | ||||||||||||||||||||||||||||||
Expected return on pension scheme assets | (98 | ) | (111 | ) | (125 | ) | — | — | — | (103 | ) | (104 | ) | (98 | ) | – | – | – | ||||||||||||||||||||||||
Past service costs | — | 1 | — | — | (5 | ) | — | – | 1 | – | 7 | 3 | – | |||||||||||||||||||||||||||||
(Gains)/losses on settlements/curtailments | — | (4 | ) | — | (7 | ) | 3 | (41 | ) | |||||||||||||||||||||||||||||||||
Curtailment gains | (4 | ) | (1 | ) | – | – | – | (7 | ) | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
Total expense | 64 | 54 | 63 | 21 | 25 | (9 | ) | 54 | 63 | 64 | 40 | 31 | 21 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
- Recognised in employee benefits expense | 54 | 55 | 75 | 6 | 3 | (34 | ) | |||||||||||||||||||||||||||||||||||
- Recognised in net finance costs | 10 | (1 | ) | (12 | ) | 22 | 22 | 25 | ||||||||||||||||||||||||||||||||||
- Recognised in other income | — | — | — | (7 | ) | — | — | |||||||||||||||||||||||||||||||||||
– Recognised in employee benefits expense | 53 | 62 | 54 | 15 | 8 | 6 | ||||||||||||||||||||||||||||||||||||
– Recognised in net finance costs | 1 | 1 | 10 | 25 | 23 | 22 | ||||||||||||||||||||||||||||||||||||
– Recognised in other income | – | – | – | – | – | (7 | ) | |||||||||||||||||||||||||||||||||||
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Statement of Comprehensive Income (SOCI) disclosures
The amounts recognised in the Statementconsolidated statement of Comprehensive Incomecomprehensive income are as follows:
Defined benefit pension schemes | Post-retirement medical schemes | Defined benefit pension schemes | Post-retirement medical schemes | ||||||||||||||||||||||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | 2010 US$M | 2009 US$M | 2008 US$M | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||
Actuarial (gains)/losses | (1 | ) | 239 | 106 | 25 | — | (17 | ) | |||||||||||||||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | ||||||||||||||||||||||||||||||||||
Actuarial losses/(gains) | 221 | 51 | (1 | ) | 47 | 68 | 25 | ||||||||||||||||||||||||||||||||
Limit on net assets and other adjustments | 14 | (12 | ) | 7 | — | — | — | (18 | ) | (6 | ) | 14 | – | – | – | ||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||
Total amount recognised in the SOCI | 13 | 227 | 113 | 25 | — | (17 | ) | 203 | 45 | 13 | 47 | 68 | 25 | ||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||
Total cumulative amount recognised in the SOCI(a) | 268 | 255 | 28 | 52 | 27 | 27 | 516 | 313 | 268 | 167 | 120 | 52 | |||||||||||||||||||||||||||
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(a) | Cumulative amounts are calculated from the transition to IFRS on 1 July 2004. |
The actual return on assets for the defined benefit pension schemes is as follows:
Defined benefit pension schemes | ||||||||
2010 US$M | 2009 US$M | 2008 US$M | ||||||
The actual return on assets for the defined benefit pension schemes | 175 | (117 | ) | (5 | ) | |||
Defined benefit pension schemes | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
US$M | US$M | US$M | ||||||||||
Actual return on assets | 182 | 136 | 175 |
The changes in the present value of defined benefit obligations are as follows:
Defined benefit pension schemes | Post-retirement medical schemes | |||||||||||
2010 US$M | 2009 US$M | 2010 US$M | 2009 US$M | |||||||||
Defined benefit obligation at beginning of year | 1,736 | 1,889 | 310 | 328 | ||||||||
Current service cost | 54 | 58 | 6 | 5 | ||||||||
Interest cost | 108 | 110 | 22 | 22 | ||||||||
Contributions by scheme participants | 3 | 3 | — | — | ||||||||
Actuarial losses/(gains) on benefit obligation | 76 | 11 | 25 | — | ||||||||
Benefits paid to participants | (164 | ) | (171 | ) | (18 | ) | (17 | ) | ||||
Past service costs | — | 1 | — | (11 | ) | |||||||
Curtailment (gains)/losses | — | (4 | ) | (7 | ) | 3 | ||||||
Exchange variations | 2 | (161 | ) | 5 | (3 | ) | ||||||
Other adjustments | (53 | ) | — | — | (17 | ) | ||||||
Defined benefit obligation at end of year | 1,762 | 1,736 | 343 | 310 | ||||||||
Defined benefit pension schemes | Post-retirement medical schemes | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
US$M | US$M | US$M | US$M | |||||||||||||
Defined benefit obligation at the beginning of the financial year | 2,043 | 1,762 | 437 | 343 | ||||||||||||
Current service cost | 57 | 62 | 8 | 5 | ||||||||||||
Interest cost | 104 | 105 | 25 | 23 | ||||||||||||
Contributions by scheme participants | 3 | 3 | – | – | ||||||||||||
Actuarial losses on benefit obligation | 300 | 83 | 47 | 68 | ||||||||||||
Benefits paid to participants | (154 | ) | (159 | ) | (22 | ) | (22 | ) | ||||||||
Past service costs | – | 1 | 7 | 3 | ||||||||||||
Curtailment gains | (4 | ) | (1 | ) | – | – | ||||||||||
Exchange variations | (129 | ) | 187 | (43 | ) | 19 | ||||||||||
Transferred to liabilities held for sale | – | – | (13 | ) | – | |||||||||||
Other adjustments | (5 | ) | – | – | (2 | ) | ||||||||||
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Defined benefit obligation at the end of the financial year | 2,215 | 2,043 | 446 | 437 | ||||||||||||
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Notes to Financial Statements continued
29 Pension and other post-retirement obligations continued
The changes in the fair value of scheme assets for defined benefit pension schemes are as follows:
Defined benefit pension schemes | Defined benefit pension schemes | |||||||||||||
2010 US$M | 2009 US$M | 2012 | 2011 | |||||||||||
Fair value of scheme assets at beginning of year | 1,455 | 1,768 | ||||||||||||
US$M | US$M | |||||||||||||
Fair value of scheme assets at the beginning of the financial year | 1,866 | 1,547 | ||||||||||||
Expected return on scheme assets | 98 | 111 | 103 | 104 | ||||||||||
Actuarial gains/(losses) on scheme assets | 77 | (228 | ) | |||||||||||
Actuarial gains on scheme assets | 79 | 32 | ||||||||||||
Employer contributions | 162 | 111 | 171 | 159 | ||||||||||
Contributions by scheme participants | 3 | 3 | 3 | 3 | ||||||||||
Benefits paid | (164 | ) | (171 | ) | (154 | ) | (159 | ) | ||||||
Exchange variations | (1 | ) | (139 | ) | (121 | ) | 157 | |||||||
Other adjustments | (83 | ) | — | (12 | ) | 23 | ||||||||
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| |||||||||||||
Fair value of scheme assets at end of year | 1,547 | 1,455 | ||||||||||||
Fair value of scheme assets at the end of the financial year | 1,935 | 1,866 | ||||||||||||
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The fair values of defined benefit pension scheme assets segregated by major asset class are as follows:
Fair Value | ||||||||||||
Fair Value | 2012 | 2011 | ||||||||||
2010 US$M | 2009 US$M | US$M | US$M | |||||||||
Asset class | ||||||||||||
Bonds | 884 | 882 | 1,314 | 1,193 | ||||||||
Equities | 391 | 345 | 337 | 393 | ||||||||
Property | 22 | 16 | 20 | 19 | ||||||||
Cash and net current assets | 49 | 24 | 56 | 61 | ||||||||
Insured annuities | 187 | 177 | 188 | 190 | ||||||||
Other | 14 | 11 | 20 | 10 | ||||||||
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Total | 1,547 | 1,455 | 1,935 | 1,866 | ||||||||
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Scheme assets classified as ‘Other’ as at 30 June 20102012 primarily comprise of investments in private equity in Australia.Australia and commodities in Europe.
The fair value of scheme assets includes no amounts relating to any of the Group’s own financial instruments or any of the property occupied by or other assets used by the Group.
The investment strategy is determined by each plan’s fiduciary body in consultation with the Group. In general, the investment strategy for each plan is set by reference to the duration and risk profile of the plan, as well as the plan’s solvency level.
Actuarial assumptions
The principal actuarial assumptions at the reporting date (expressed as weighted averages) for defined benefit pension schemes are as follows:
Australia | Americas | Europe | South Africa | |||||||||||||
2010 % | 2009 % | 2010 % | 2009 % | 2010 % | 2009 % | 2010 % | 2009 % | |||||||||
Discount rate | 5.4 | 5.3 | 5.5 | 6.3 | 5.3 | 6.2 | 8.8 | 9.0 | ||||||||
Future salary increases | 4.0 | 3.9 | 4.5 | 3.8 | 4.7 | 4.9 | 6.9 | 6.9 | ||||||||
Future pension increases | 2.5 | — | 4.0 | 2.3 | 2.6 | 2.8 | 5.9 | 5.9 | ||||||||
Expected rate of return on pension scheme assets | 5.8 | 5.2 | 5.9 | 6.6 | 5.6 | 5.6 | 9.4 | 10.0 | ||||||||
Notes to Financial Statements continued
29 Pension and other post-retirement obligations continued
Australia | Americas | Europe | South Africa | |||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||
% | % | % | % | % | % | % | % | |||||||||||||||||||||||||
Discount rate | 2.6 | 5.1 | 4.0 | 5.0 | 4.4 | 5.6 | 8.7 | 8.6 | ||||||||||||||||||||||||
Future salary increases | 4.3 | 4.3 | 4.5 | 4.6 | 4.8 | 5.0 | 8.0 | 7.6 | ||||||||||||||||||||||||
Future pension increases | n/a | n/a | 4.5 | 4.0 | 2.5 | 2.7 | 6.5 | 6.1 | ||||||||||||||||||||||||
Expected rate of return on pension scheme assets | 5.0 | 5.9 | 4.1 | 5.2 | 4.5 | 5.3 | 8.7 | 8.7 |
The principal actuarial assumptions at the reporting date (expressed as weighted averages) for post-retirement medical schemes are as follows:
Americas | South Africa | |||||||||||||||||||||||
Americas | South Africa | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
2010 % | 2009 % | 2010 % | 2009 % | % | % | % | % | |||||||||||||||||
Discount rate | 5.2 | 6.0 | 9.0 | 9.1 | 3.8 | 4.8 | 9.0 | 8.6 | ||||||||||||||||
Medical cost trend rate (ultimate) | 4.2 | 5.0 | 7.3 | 7.6 | 4.3 | 4.2 | 8.0 | 7.7 | ||||||||||||||||
Assumptions regarding future mortality can be material depending upon the size and nature of the plan liabilities. Post-retirement mortality assumptions in the Americas, Europe and South Africa are based on post-retirement mortality tables that are standard in these regions.
The overall expected rate of return on assets is the weighted average of the expected rate of return on each applicable asset class and reflects the long-term target asset allocation as at the reporting date. For bonds, the expected rate of return reflects the redemption yields available on corporate and government bonds, as applicable, as at the reporting date. For all other asset classes, the expected rate of return reflects the rate of return expected over the long term.
For the main funds, these tables imply the following expected future lifetimes (in years) for employees aged 65 as at the balance sheet date: US males 19.8 (2011: 19.8), US females 21.6;21.6 (2011: 21.6); Canadian males 19.4,19.7 (2011: 19.4), Canadian females 21.8;22.1 (2011: 21.8); Netherlands males 19.0,21.5 (2011: 21.4), Netherlands females 21.1;24.0 (2011: 23.9); UK males 22.4,23.3 (2011: 22.5), UK females 24.8;25.7 (2011: 24.9); South African males 14.8,18.8 (2011: 18.0), South African females 18.7.23.3 (2011: 22.3).
The present value of defined benefit obligations, fair value of scheme assets and associated experience adjustments for the defined benefit pension and post-retirement medical schemes are shown for the current year and the previous four years as follows:
Defined benefit pension schemes | |||||||||||||||||||||||||||||||||||
Defined benefit pension schemes | 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | 2007 US$M | 2006 US$M | US$M | US$M | US$M | US$M | US$M | ||||||||||||||||||||||||||
Present value of defined benefit obligation | 1,762 | 1,736 | 1,889 | 1,787 | 1,759 | 2,215 | 2,043 | 1,762 | 1,736 | 1,889 | |||||||||||||||||||||||||
Fair value of defined benefit scheme assets | (1,547 | ) | (1,455 | ) | (1,768 | ) | (1,756 | ) | (1,585 | ) | (1,935 | ) | (1,866 | ) | (1,547 | ) | (1,455 | ) | (1,768 | ) | |||||||||||||||
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Deficit in the schemes | 215 | 281 | 121 | 31 | 174 | 280 | 177 | 215 | 281 | 121 | |||||||||||||||||||||||||
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Experience gain/(loss) adjustments to scheme liabilities | 16 | (2 | ) | (8 | ) | 7 | (58 | ) | (47 | ) | 1 | 16 | (2 | ) | (8 | ) | |||||||||||||||||||
Experience gain/(loss) adjustments to scheme assets | 76 | (228 | ) | (130 | ) | 101 | 45 | 79 | 32 | 77 | (228 | ) | (130 | ) | |||||||||||||||||||||
Post-retirement medical schemes | |||||||||||||||||||||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | 2007 US$M | 2006 US$M | |||||||||||||||||||||||||||||||
Present value of defined benefit obligation | 343 | 310 | 328 | 380 | 353 | ||||||||||||||||||||||||||||||
Experience gain/(loss) adjustments to scheme liabilities | (7 | ) | 4 | 8 | 1 | (17 | ) | ||||||||||||||||||||||||||||
Present value of defined benefit obligation Experience gain/(loss) adjustments to scheme liabilities Post-retirement medical schemes 2012 2011 2010 2009 2008 US$M US$M US$M US$M US$M 446 437 343 310 328 (4 ) (3 ) (7 ) 4 8
Experience adjustments to scheme liabilities do not include the effect of changes in actuarial assumptions.
Estimated contributions for the defined benefit pension and post-retirement medical schemes are as follows:
Defined benefit pension schemes US$M | Post-retirement medical schemes US$M | |||
Estimated employer contributions for the year ending 30 June 2011 | 117 | 22 | ||
Estimated contributions by scheme participants for the year ending 30 June 2011 | 3 | n/a | ||
Notes to Financial Statements continued
29 Pension and other post-retirement obligations continued
Defined benefit pension schemes | Post-retirement medical schemes | |||||||
US$M | US$M | |||||||
Estimated employer contributions for the year ending 30 June 2013 | 122 | 24 | ||||||
Estimated contributions by scheme participants for the year ending 30 June 2013 | 3 | – |
The impact of a one percentage point variation in the medical cost trend rate (for the post-retirement medical schemes) on the Group’s results is as follows:
2012 | 2011 | |||||||||||||
2010 US$M | 2009 US$M | US$M | US$M | |||||||||||
Effect of an increase in the medical cost trend of 1% point on: | ||||||||||||||
Total of current service and interest cost | 3 | 7 | 5 | 5 | ||||||||||
Defined benefit obligation | 31 | 40 | 50 | 49 | ||||||||||
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Effect of a decrease in the medical cost trend of 1% point on: | ||||||||||||||
Total of current service and interest cost | (3 | ) | (1 | ) | (4 | ) | (4 | ) | ||||||
Defined benefit obligation | (26 | ) | (18 | ) | (41 | ) | (40 | ) | ||||||
Key Management Personnel compensation comprises:
2010 US$ | 2009 US$ | 2008 US$ | ||||
Short-term employee benefits | 21,851,956 | 20,015,590 | 20,607,717 | |||
Post-employment benefits | 5,281,930 | 2,870,982 | 2,958,123 | |||
Share-based payments | 26,017,590 | 23,530,682 | 12,428,149 | |||
Total | 53,151,476 | 46,417,254 | 35,993,989 | |||
2012 | 2011 | 2010 | ||||||||||
US$ | US$ | US$ | ||||||||||
Short-term employee benefits | 19,889,528 | 22,494,120 | 21,851,956 | |||||||||
Post-employment benefits | 3,586,477 | 3,270,906 | 5,281,930 | |||||||||
Share-based payments | 26,645,312 | 28,682,260 | 23,196,103 | |||||||||
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Total | 50,121,317 | 54,447,286 | 50,329,989 | |||||||||
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Notes to Financial Statements continued
30 Key Management Personnel continued
Equity Instrument disclosures relating to Key Management Personnel
BHP Billiton Limited ordinary shares under award
Scheme | At 30 June 2008 | Granted | Lapsed | Exercised | At 30 June 2009 | Granted | Lapsed | Exercised / Matched | At 30 June 2010 | Vested during the year ended 30 June 2009 | Vested during the year ended 30 June 2010 | Vested at 30 June 2009(a) | Vested at 30 June 2010(a) | |||||||||||||||
Marius Kloppers | LTIP Performance | 333,327 | 500,000 | — | — | 833,327 | 250,000 | — | — | 1,083,327 | — | — | — | — | ||||||||||||||
GIS Deferred | 27,582 | 95,847 | — | — | 123,429 | 46,951 | — | 27,582 | 142,798 | — | 27,582 | — | — | |||||||||||||||
Shareplus | 160 | 168 | — | — | 328 | 194 | — | 160 | 362 | — | 160 | — | — | |||||||||||||||
Marcus Randolph | LTIP Performance | 592,676 | 225,000 | — | — | 817,676 | 120,000 | — | 110,000 | 827,676 | — | 110,000 | — | — | ||||||||||||||
GIS Deferred | 85,302 | 45,027 | — | 61,654 | 68,675 | 25,126 | — | 23,648 | 70,153 | 29,455 | 23,648 | — | — | |||||||||||||||
Shareplus | 157 | 172 | — | — | 329 | 190 | — | 157 | 362 | — | 157 | — | — | |||||||||||||||
Alex Vanselow | LTIP Performance | 642,676 | 225,000 | — | — | 867,676 | 120,000 | — | 110,000 | 877,676 | — | 110,000 | — | — | ||||||||||||||
GIS Deferred | 73,510 | — | — | 48,663 | 24,847 | 27,727 | — | 24,847 | 27,727 | 23,030 | 24,847 | — | — | |||||||||||||||
Shareplus | 157 | 168 | — | — | 325 | 193 | — | 157 | 361 | — | 157 | — | — | |||||||||||||||
Karen Wood | LTIP Performance | 489,187 | 175,000 | — | — | 664,187 | 90,000 | — | 80,000 | 674,187 | — | 80,000 | — | — | ||||||||||||||
GIS Deferred | 85,003 | 30,778 | — | 26,631 | 89,150 | 23,686 | — | 58,372 | 54,464 | 18,267 | 19,643 | 38,729 | — | |||||||||||||||
GIS Performance | 16,547 | — | — | 16,547 | — | — | — | — | — | — | — | — | — | |||||||||||||||
PSP | 25,846 | — | — | — | 25,846 | — | — | 25,846 | — | — | — | — | — | |||||||||||||||
Shareplus | 157 | 168 | — | — | 325 | 193 | — | 157 | 361 | — | 157 | — | — | |||||||||||||||
J. Michael Yeager | LTIP Performance | 737,702 | 225,000 | — | — | 962,702 | 120,000 | — | — | 1,082,702 | — | — | — | — | ||||||||||||||
GIS Deferred | 33,074 | 56,373 | — | 6,614 | 82,833 | 29,877 | — | 26,460 | 86,250 | 6,614 | 26,460 | — | — | |||||||||||||||
Shareplus | 134 | 210 | — | — | 344 | 138 | — | 134 | 348 | — | 134 | — | — | |||||||||||||||
Total | 3,143,197 | 1,578,911 | — | 160,109 | 4,561,999 | 854,275 | — | 487,520 | 4,928,754 | 77,366 | 422,945 | 38,729 | — | |||||||||||||||
Scheme | At 30 June 2010 | Granted | Lapsed | Exercised /Matched | At 30 June 2011(b) | Granted | Lapsed | Exercised /Matched | At 30 June 2012(b) | Vested during the year ended 30 June 2011(b) | Vested during the year ended 30 June 2012(b) | Vested at 30 June 2011 (a) (b) | Vested at 2012 (a) (b) | |||||||||||||||||||||||||||||||||||||||||
Marius Kloppers | LTIP Performance | 1,083,327 | 200,000 | – | – | 1,283,327 | 226,721 | – | – | 1,510,048 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
GIS Deferred | 142,798 | 54,831 | – | 95,847 | 101,782 | 64,705 | – | 46,951 | 119,536 | 95,847 | 46,951 | – | – | |||||||||||||||||||||||||||||||||||||||||
Shareplus | 362 | 131 | – | 168 | 325 | 149 | – | 194 | 280 | 168 | 194 | – | – | |||||||||||||||||||||||||||||||||||||||||
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Mike Henry (c) | Shareplus | 68 | 110 | – | – | 178 | – | – | ||||||||||||||||||||||||||||||||||||||||||||||
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Graham Kerr (d) | MAP Restricted | 91,500 | – | – | – | 91,500 | – | 21,000 | ||||||||||||||||||||||||||||||||||||||||||||||
LTIP Performance | 60,000 | – | – | – | 60,000 | – | 20,000 | |||||||||||||||||||||||||||||||||||||||||||||||
GIS Deferred | 15,169 | – | – | – | 15,169 | – | 15,169 | |||||||||||||||||||||||||||||||||||||||||||||||
GSTIP Deferred | 26,941 | – | – | – | 26,941 | – | 4,818 | |||||||||||||||||||||||||||||||||||||||||||||||
Shareplus | 33 | 117 | – | – | 150 | – | – | |||||||||||||||||||||||||||||||||||||||||||||||
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Marcus Randolph | LTIP Performance | 827,676 | 105,000 | – | 110,000 | 822,676 | 119,603 | – | 175,000 | 767,279 | 110,000 | 175,000 | – | – | ||||||||||||||||||||||||||||||||||||||||
GIS Deferred | 70,153 | 30,819 | – | 45,027 | 55,945 | 36,824 | – | 25,126 | 67,643 | 45,027 | 25,126 | – | – | |||||||||||||||||||||||||||||||||||||||||
Shareplus | 362 | 132 | – | 172 | 322 | 150 | – | 190 | 282 | 172 | 190 | – | – | |||||||||||||||||||||||||||||||||||||||||
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Alex Vanselow (e) | LTIP Performance | 877,676 | 105,000 | – | 110,000 | 872,676 | – | 199,178 | 225,000 | 448,498 | 110,000 | 225,000 | – | – | ||||||||||||||||||||||||||||||||||||||||
GIS Deferred | 27,727 | 26,365 | – | – | 54,092 | 32,448 | – | 27,727 | 58,813 | – | 27,727 | – | – | |||||||||||||||||||||||||||||||||||||||||
Shareplus | 361 | 132 | – | 168 | 325 | 71 | – | – | 396 | 168 | – | – | – | |||||||||||||||||||||||||||||||||||||||||
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Karen Wood | LTIP Performance | 674,187 | 75,000 | – | 80,000 | 669,187 | 85,027 | – | 175,000 | 579,214 | 80,000 | 175,000 | – | – | ||||||||||||||||||||||||||||||||||||||||
GIS Deferred | 54,464 | 23,197 | – | 30,778 | 46,883 | 28,539 | – | 23,686 | 51,736 | 30,778 | 23,686 | – | – | |||||||||||||||||||||||||||||||||||||||||
Shareplus | 361 | 132 | – | 168 | 325 | 149 | – | 193 | 281 | 168 | 193 | – | – | |||||||||||||||||||||||||||||||||||||||||
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J. Michael Yeager | LTIP Performance | 1,082,702 | 105,000 | – | 325,000 | 862,702 | 119,603 | – | 225,000 | 757,305 | 325,000 | 225,000 | – | – | ||||||||||||||||||||||||||||||||||||||||
GIS Deferred | 86,250 | 31,442 | – | 56,373 | 61,319 | 37,779 | – | 29,877 | 69,221 | 56,373 | 29,877 | – | – | |||||||||||||||||||||||||||||||||||||||||
Shareplus | 348 | 108 | – | 210 | 246 | 148 | – | 138 | 256 | 210 | 138 | – | – | |||||||||||||||||||||||||||||||||||||||||
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Total | 4,928,754 | 757,289 | – | 853,911 | 5,025,843 | 752,143 | 199,178 | 954,082 | 4,624,726 | 853,911 | 954,082 | – | 60,987 | |||||||||||||||||||||||||||||||||||||||||
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Notes to Financial Statements continued
30 Key Management Personnel continued
BHP Billiton Limited ordinary shares under option
Scheme | At 30 June 2008 | Granted | Lapsed | Exercised | At 30 June 2009 | Granted | Lapsed | Exercised | At 30 June 2010 | Vested during the year ended 30 June 2009 | Vested during the year ended 30 June 2010 | Vested at 30 June 2009(a) | Vested at 30 June 2010(a) | |||||||||||||||
Alex Vanselow | GIS Options | — | 153,768 | — | — | 153,768 | — | — | — | 153,768 | — | — | — | — | ||||||||||||||
Total | — | 153,768 | — | — | 153,768 | — | — | — | 153,768 | — | — | — | — | |||||||||||||||
BHP Billiton Plc ordinary shares under award
Scheme | At 30 June 2008 | Granted | Lapsed | Exercised | At 30 June 2009 | Granted | Lapsed | Exercised / Matched | At 30 June 2010 | Vested during the year ended 30 June 2009 | Vested during the year ended 30 June 2010 | Vested at 30 June 2009(a) | Vested at 30 June 2010(a) | |||||||||||||||
Marius Kloppers | LTIP Performance | 675,000 | — | — | — | 675,000 | — | — | 225,000 | 450,000 | — | 225,000 | — | — | ||||||||||||||
GIS Deferred | 90,071 | — | — | 90,071 | — | — | — | — | — | 37,300 | — | — | — | |||||||||||||||
Alberto Calderon | LTIP Performance | 331,993 | 225,000 | — | — | 556,993 | 120,000 | — | — | 676,993 | — | — | — | — | ||||||||||||||
GIS Deferred | 29,133 | — | — | — | 29,133 | 33,343 | — | 29,133 | 33,343 | 11,926 | 17,207 | 11,926 | — | |||||||||||||||
Shareplus | 156 | 188 | — | — | 344 | 193 | — | 156 | 381 | — | 156 | — | — | |||||||||||||||
Andrew Mackenzie | LTIP Performance | — | 325,839 | — | — | 325,839 | 120,000 | — | — | 445,839 | — | — | — | — | ||||||||||||||
GIS Deferred | — | — | — | — | — | 12,476 | — | — | 12,476 | — | — | — | — | |||||||||||||||
Shareplus | — | — | — | — | — | 175 | — | — | 175 | — | — | — | — | |||||||||||||||
Total | 1,126,353 | 551,027 | — | 90,071 | 1,587,309 | 286,187 | — | 254,289 | 1,619,207 | 49,226 | 242,363 | 11,926 | — | |||||||||||||||
BHP Billiton Plc ordinary shares under option
Scheme | At 30 June 2008 | Granted | Lapsed | Exercised | At 30 June 2009 | Granted | Lapsed | Exercised | At 30 June 2010 | Vested during the year ended 30 June 2009 | Vested during the year ended 30 June 2010 | Vested at 30 June 2009 (a) | Vested at 30 June 2010(a) | |||||||||||||||
Alberto Calderon | GIS Options | — | 143,227 | — | — | 143,227 | — | — | — | 143,227 | — | — | — | — | ||||||||||||||
Andrew Mackenzie | GIS Options | — | — | — | — | — | 16,119 | — | — | 16,119 | — | — | — | — | ||||||||||||||
Total | — | 143,227 | — | — | 143,227 | 16,119 | — | — | 159,346 | — | — | — | — | |||||||||||||||
Scheme | At 30 June 2010 | Granted | Lapsed | Exercised | At 30 June 2011 (b) | Granted | Lapsed | Exercised | At 30 June 2012 (b) | Vested during the year ended 30 June 2011 (b) | Vested during the year ended 30 June 2012 (b) | Vested at 30 June 2011 (a) (b) | Vested at 30 June 2012 (a) (b) | |||||||||||||||||||||||||||||||||||||||||
Graham Kerr (d) | GSTIP Options | 17,345 | – | – | – | 17,345 | – | 17,345 | ||||||||||||||||||||||||||||||||||||||||||||||
Alex | GIS Options | 153,768 | – | – | 153,768 | – | – | – | – | – | 153,768 | – | – | – | ||||||||||||||||||||||||||||||||||||||||
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Total | 153,768 | – | – | 153,768 | 17,345 | – | – | – | 17,345 | 153,768 | – | – | 17,345 | |||||||||||||||||||||||||||||||||||||||||
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(a) | All awards and options that are vested are exercisable. |
(b) | Closing balances represent the holding at year-end or the holding at date of appointment or resignation as a KMP. Amount vested represents the amount during the financial year, or from their appointment date as a KMP until the end of the financial year, or from the beginning of the financial year until their resignation as a KMP. |
(c) | Mike Henry’s balance as reported for 30 June 2011 reflects his holding at appointment date, 28 November 2011. |
(d) | Graham Kerr’s balance as reported for 30 June 2011 reflects his holding at appointment date, 28 November 2011. |
(e) | Alex Vanselow’s balance as reported for 30 June 2012 reflects his holding at resignation date, 28 February 2012. |
BHP Billiton Plc ordinary shares under award
Scheme | At 30 June 2010 | Granted | Lapsed | Exercised/ Matched | At 30 June 2011(b) | Granted | Lapsed | Exercised/ Matched | At 30 June 2012(b) | Vested during the year ended 30 June 2011(b) | Vested during the year ended 30 June 2012(b) | Vested at 30 June 2011 (a) (b) | Vested at 30 June 2012 (a) (b) | |||||||||||||||||||||||||||||||||||||||||
Marius | LTIP Performance | 450,000 | – | – | 225,000 | 225,000 | – | – | 225,000 | – | 225,000 | 225,000 | – | – | ||||||||||||||||||||||||||||||||||||||||
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Alberto | LTIP Performance | 676,993 | 120,000 | – | 40,000 | 756,993 | 146,510 | – | 80,000 | 823,503 | 40,000 | 80,000 | – | – | ||||||||||||||||||||||||||||||||||||||||
GIS Deferred | 33,343 | 30,495 | – | – | 63,838 | 38,939 | – | 33,343 | 69,434 | – | 33,343 | – | – | |||||||||||||||||||||||||||||||||||||||||
Shareplus | 381 | 149 | – | 188 | 342 | 169 | – | 193 | 318 | 188 | 193 | – | – | |||||||||||||||||||||||||||||||||||||||||
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Mike | MAP Restricted | 66,900 | – | – | – | 66,900 | – | – | ||||||||||||||||||||||||||||||||||||||||||||||
LTIP Performance | 20,000 | – | – | – | 20,000 | – | – | |||||||||||||||||||||||||||||||||||||||||||||||
GSTIP Deferred | 24,825 | – | – | – | 24,825 | – | – | |||||||||||||||||||||||||||||||||||||||||||||||
Shareplus | 326 | – | – | 174 | 152 | 174 | – | |||||||||||||||||||||||||||||||||||||||||||||||
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Andrew | LTIP Performance | 445,839 | 120,000 | – | – | 565,839 | 146,510 | – | – | 712,349 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
GIS Deferred | 12,476 | 22,700 | – | – | 35,176 | 39,230 | – | 12,476 | 61,930 | – | 12,476 | – | – | |||||||||||||||||||||||||||||||||||||||||
Shareplus | 175 | 136 | – | – | 311 | 170 | – | 175 | 306 | – | 175 | – | – | |||||||||||||||||||||||||||||||||||||||||
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Total | 1,619,207 | 293,480 | – | 265,188 | 1,759,550 | 371,528 | – | 351,361 | 1,779,717 | 265,188 | 351,361 | – | – | |||||||||||||||||||||||||||||||||||||||||
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BHP Billiton Plc ordinary shares under option
Scheme | At30 June 2010 | Granted | Lapsed | Exercised | At30 June 2011 | Granted | Lapsed | Exercised | At30 June 2012 | Vested during the year ended 30 June 2011 | Vested during the year ended 30 June 2012 | Vested at 30 June 2011(a) | Vested at 30 June 2012(a) | |||||||||||||||||||||||||||||||||||||||||
Alberto | GIS Options | 143,227 | – | – | 143,227 | – | – | – | – | – | 143,227 | – | – | – | ||||||||||||||||||||||||||||||||||||||||
Andrew Mackenzie | GIS Options | 16,119 | 30,389 | – | – | 46,508 | – | – | – | 46,508 | – | 16,119 | – | 16,119 | ||||||||||||||||||||||||||||||||||||||||
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Total | 159,346 | 30,389 | – | 143,227 | 46,508 | – | – | – | 46,508 | 143,227 | 16,119 | – | 16,119 | |||||||||||||||||||||||||||||||||||||||||
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(a) | All awards and options that are vested are exercisable. |
(b) | Closing balances represent the holding at year-end or the holding at date of appointment or resignation as a KMP. Amount vested represents the amount during the financial year, or from their appointment date as a KMP until the end of the financial year, or from the beginning of the financial year until their resignation as a KMP. |
(c) | Mike Henry’s balance as reported for 30 June 2011 reflects his holding at appointment date, 28 November 2011. |
No options have been granted to Key Management Personnel since the end of the financial year. Further information on options and rights, including grant dates and exercise dates regarding options granted to Key Management Personnel under the employee share ownership plan, is set out in note 32.
Notes to Financial Statements continued
30 Key Management Personnel continued
Equity holdings and transactions
The movement during the financial year in the number of ordinary shares of the Group held directly, indirectly or beneficially, by each specified Key Management Personnel, including their personally related entities were as follows:
BHP Billiton Limited shares (a) | Held at 30 June 2008 (d) | Purchases | Received on exercise of options or rights | Disposals | Held at 30 June 2009(d) | Purchases | Received on exercise/ matching of options or rights | Disposals | Held at 30 June 2010(d) | |||||||||
Marius Kloppers | 160 | 168 | — | — | 328 | 194 | 27,742 | — | 28,264 | |||||||||
Marcus Randolph | 175,594 | 172 | 61,654 | 120,000 | 117,420 | 190 | 133,805 | 60,000 | 191,415 | |||||||||
Alex Vanselow | 53,057 | 168 | 48,663 | 2,000 | 99,888 | 193 | 135,004 | 60,822 | 174,263 | |||||||||
Karen Wood | 45,813 | 168 | 43,178 | 17,200 | 71,959 | 193 | 164,375 | 127,394 | 109,133 | |||||||||
J. Michael Yeager | 134 | 210 | 6,614 | — | 6,958 | 138 | 26,594 | 9,710 | 23,980 | |||||||||
Paul Anderson | 106,000 | — | — | — | 106,000 | — | — | — | 106,000 | |||||||||
Don Argus | 321,890 | — | — | — | 321,890 | 7,300 | — | — | 329,190 | |||||||||
Alan Boeckmann | — | 3,150 | — | — | 3,150 | |||||||||||||
Malcolm Broomhead(c) | 9,000 | — | — | — | 9,000 | |||||||||||||
Carlos Cordeiro | 6,550 | — | — | — | 6,550 | — | — | — | 6,550 | |||||||||
David Crawford | 33,127 | — | — | — | 33,127 | — | — | — | 33,127 | |||||||||
E. Gail de Planque | 3,580 | 1,600 | — | — | 5,180 | — | — | — | 5,180 | |||||||||
Carolyn Hewson(c) | 2,000 | — | — | — | 2,000 | |||||||||||||
David Jenkins | 2,066 | — | — | — | 2,066 | — | — | — | 2,066 | |||||||||
David Morgan(e) | 156,758 | — | — | — | 156,758 | — | — | — | 156,758 | |||||||||
Wayne Murdy(b) | 4,030 | — | — | — | 4,030 | — | — | — | 4,030 | |||||||||
Jacques Nasser | 5,600 | — | — | — | 5,600 | — | — | — | 5,600 | |||||||||
John Schubert | 23,675 | — | — | — | 23,675 | — | — | — | 23,675 | |||||||||
BHP Billiton Plc shares(a) | Held at 30 June 2008(d) | Purchases | Received on exercise of options or rights | Disposals | Held at 30 June 2009(d) | Purchases | Received on exercise/ matching of options or rights | Disposals | Held at 30 June 2010(d) | |||||||||
Marius Kloppers | 396,683 | — | 90,071 | 43,234 | 443,520 | — | 225,000 | 119,842 | 548,678 | |||||||||
Alberto Calderon | 156 | 188 | — | — | 344 | 193 | 29,289 | 11,999 | 17,827 | |||||||||
Andrew Mackenzie | 55,000 | — | — | — | 55,000 | 175 | — | — | 55,175 | |||||||||
Paul Anderson | 4,000 | — | — | — | 4,000 | — | — | — | 4,000 | |||||||||
Don Argus | — | — | — | — | — | 21,740 | — | — | 21,740 | |||||||||
Alan Boeckmann | — | — | — | — | — | 3,680 | — | — | 3,680 | |||||||||
John Buchanan | 20,000 | — | — | — | 20,000 | — | — | — | 20,000 | |||||||||
David Crawford | — | — | — | — | — | 6,000 | — | — | 6,000 | |||||||||
David Jenkins | 10,000 | — | — | — | 10,000 | — | — | — | 10,000 | |||||||||
Wayne Murdy | — | — | — | — | — | 3,512 | — | — | 3,512 | |||||||||
Keith Rumble(b) (e) | 7,200 | 5,000 | — | — | 12,200 | — | — | — | 12,200 | |||||||||
BHP Billiton Limited shares (a) | Held at 30 June 2010(b) | Purchases | Received on exercise/matching of options or rights | Disposals | Held at 30 June 2011 (b) | Purchases | Received on exercise/matching of options or rights | Disposals | Held at 30 June 2012(b) | |||||||||||||||||||||||||||
Marius Kloppers | 28,264 | 131 | 96,015 | 36 | 124,374 | 149 | 47,145 | – | 171,668 | |||||||||||||||||||||||||||
Mike Henry(c) | 18,586 | 110 | – | – | 18,696 | |||||||||||||||||||||||||||||||
Graham Kerr(d) | 5,305 | 117 | – | – | 5,422 | |||||||||||||||||||||||||||||||
Marcus Randolph | 191,415 | 132 | 155,199 | 155,000 | 191,746 | 150 | 200,316 | 70,000 | 322,212 | |||||||||||||||||||||||||||
Alex Vanselow(g) | 174,263 | 132 | 263,936 | 167,406 | 270,925 | 71 | 252,727 | 81,766 | 441,957 | |||||||||||||||||||||||||||
Karen Wood | 109,133 | 132 | 110,946 | 55,297 | 164,914 | 149 | 198,879 | 94,297 | 269,645 | |||||||||||||||||||||||||||
J. Michael Yeager | 23,980 | 108 | 381,583 | 141,165 | 264,506 | 148 | 255,015 | 92,610 | 427,059 | |||||||||||||||||||||||||||
Alan Boeckmann | 3,150 | 1,180 | – | – | 4,330 | |||||||||||||||||||||||||||||||
Malcolm Broomhead | 9,000 | – | – | – | 9,000 | – | – | – | 9,000 | |||||||||||||||||||||||||||
Carlos Cordeiro | 6,550 | – | – | – | 6,550 | – | – | – | 6,550 | |||||||||||||||||||||||||||
David Crawford | 33,127 | – | – | – | 33,127 | – | – | – | 33,127 | |||||||||||||||||||||||||||
Carolyn Hewson | 2,000 | 1,500 | – | – | 3,500 | 3,500 | – | – | 7,000 | |||||||||||||||||||||||||||
Lindsay Maxsted | – | – | – | – | – | 3,000 | – | – | 3,000 | |||||||||||||||||||||||||||
Wayne Murdy | 4,030 | – | – | – | 4,030 | 3,970 | – | – | 8,000 | |||||||||||||||||||||||||||
Jac Nasser | 5,600 | – | – | – | 5,600 | 4,800 | – | – | 10,400 | |||||||||||||||||||||||||||
John Schubert | 23,675 | – | – | – | 23,675 | – | – | – | 23,675 |
BHP Billiton Plc shares (a) Marius Kloppers Alberto Calderon Mike Henry (c) Andrew Mackenzie Alan Boeckmann John Buchanan David Crawford Pat Davies(e) Wayne Murdy Jac Nasser Keith Rumble Baroness Shriti Vadera(f) Held at 30 June
2010(b) Purchases Received on
exercise/matching of
options or rights Disposals Held at 30 June
2011 (b) Purchases Received on
exercise/matching of
options or rights Disposals Held at 30 June
2012(b) 548,678 – 225,000 165,087 608,591 – 225,000 144,696 688,895 17,827 149 183,415 111,376 90,015 25,222 113,536 52,800 175,973 44,080 – 174 – 44,254 55,175 136 – – 55,311 170 12,651 6,572 61,560 3,680 2,200 – – 5,880 20,000 – – – 20,000 – – – 20,000 6,000 – – – 6,000 – – – 6,000 4,170 – – – 4,170 3,512 – – – 3,512 10,488 – – 14,000 – 40,000 – – 40,000 41,200 – – 81,200 12,200 – – – 12,200 2,300 – – 14,500 5,000 – – – 5,000 4,000 – – 9,000
(a) | All interests are beneficial and |
|
Notes to Financial Statements continued
30 Key Management Personnel continued
|
Closing balances represent the holding at |
(c) | Mike Henry’s balance as reported for 30 June 2011 reflects his holding at appointment date, 28 November 2011. |
(d) | Graham Kerr’s balance as reported for 30 June 2011 reflects his holding at appointment date, 28 November 2011. |
(e) |
|
(f) | Baroness Vadera’s balance as reported for 30 June 2010 reflects her holding at appointment date, 1 January 2011. |
(g) | Alex Vanselow’s balance as reported for 30 June 2012 reflects his holding at resignation date, 28 February 2012. |
Directors and their personally related entities receive the same dividends and bonus share entitlements as those available to other holders of the same class of shares. Partly paid shares did not participate in dividends.
Refer to note 32 for details of the employee share ownership plans referred to above.
Transactions with Key Management Personnel
During the financial year, there were no purchases from the Group (2009: Alex Vanselow(2011: US$29,613) nil; 2010: US$ nil).
There are no amounts payable at 30 June 2010 (2009:2012 (2011: US$ nil).
Loans with Key Management Personnel
There are US$ nil loans (2009:(2011: US$ nil) with Key Management Personnel.
Transactions with personally related entities
A number of Directors or former Directors of the Group hold or have held positions in other companies, where it is considered they control or significantly influence the financial or operating policies of those entities. One of those entities, Fluor Corporation, iswas considered to be a personally related entity of Mr Alan Boeckmann.Boeckmann until Mr Boeckmann was electedBoeckmann’s resignation as a director to the Group in September 2008.an Executive Director of Fluor Corporation on 2 February 2011. During the period in which Fluor Corporation was considered a personally related entity in the financial year ended 30 June 2011, Fluor Corporation provided products and services to the Group totalling US$244.767 million (2010: US$426.368 million (2009: US$222.821 million) in accordance with normal terms and conditions.. As at 30 June 2010, US$7.083 million was owing2012, no amounts were owed by the Group to Fluor Corporation (2009:personally related entities (2011: US$3.473 million) nil).
Subsidiaries
The percentage of ordinary shares held in significant subsidiaries is disclosed in note 25 to the financial statements.
Jointly controlled entities
The percentage interest held in significant jointly controlled entities is disclosed in note 26 to the financial statements.
Key Management Personnel
Disclosures relating to Key Management Personnel are set out in note 30 to the financial statements.
Transactions with related parties
Jointly controlled entities (a) | Other related parties (b) | |||||||||||||||||||||||
Jointly controlled entities (a) | Transactions with other related parties (b) | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
2010 US$M | 2009 US$M | 2010 US$M | 2009 US$M | US$M | US$M | US$M | US$M | |||||||||||||||||
Sales of goods/services | 9.677 | 17.288 | — | — | 273.755 | 295.683 | 1.375 | 1.841 | ||||||||||||||||
Purchase of goods/services | 346.156 | 267.739 | — | — | ||||||||||||||||||||
Purchases of goods/services | 350.647 | 434.758 | – | – | ||||||||||||||||||||
Interest income | 20.970 | 0.125 | — | — | 22.884 | 31.319 | – | – | ||||||||||||||||
Loans made to related parties | 323.688 | — | — | — | 230.226 | 292.247 | – | – | ||||||||||||||||
(a) | Disclosures in respect of transactions with jointly controlled entities represent the amount of such transactions which do not eliminate on proportionate consolidation. |
(b) | Excludes |
Notes to Financial Statements continued
31 Related party transactions continued
Transactions between each parent company and its subsidiaries, which are related parties of that company, are eliminated on consolidation and are not disclosed in this note.
Outstanding balances with related parties
Jointly controlled entities (a) | Other related parties | |||||||||||||||||||||||
Jointly controlled entities (a) | Transactions with other related parties | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
2010 US$M | 2009 US$M | 2010 US$M | 2009 US$M | US$M | US$M | US$M | US$M | |||||||||||||||||
Trade amounts owing to related parties | 44.561 | 67.694 | — | — | 60.876 | 228.852 | – | – | ||||||||||||||||
Other amounts owing to related parties | 29.814 | 41.544 | – | – | ||||||||||||||||||||
Trade amounts owing from related parties | 38.566 | 11.320 | — | — | 112.544 | 96.604 | – | – | ||||||||||||||||
Other amounts owing from related parties | 323.688 | — | — | — | 875.952 | 657.456 | – | – | ||||||||||||||||
(a) | Disclosures in respect of amounts owing to/from jointly controlled entities represent those balances which do not eliminate upon proportionate consolidation. |
Terms and conditions
Sales to and purchases from related parties of goods and services are made in arm’s length transactions at normal market prices and on normal commercial terms.
Outstanding balances at year endyear-end are unsecured and settlement occurs in cash.
Other amounts owing from related parties represent secured loans made to jointly controlled entities 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 between 22 January 2011December 2014 and 22 January 2022.31 August 2031.
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.
Notes to Financial Statements continued
32 Employee share ownership plans
Employee share awards – current plans
2010 | Number of awards on issue at the beginning of the financial year | Number of awards issued during the year | Number of awards vested and exercised | Number of awards lapsed | Number of awards remaining at the end of the financial year | Number of awards vested and exercisable at the end of the financial year | ||||||
BHP Billiton Limited | ||||||||||||
Group Incentive Scheme Deferred Shares (a) | 3,709,437 | 153,367 | 1,249,998 | 21,334 | 2,591,472 | 671,873 | ||||||
Group Incentive Scheme Options (a) | 1,985,321 | — | 321,509 | 58,144 | 1,605,668 | 525,536 | ||||||
- weighted average exercise price – A$ | 29.92 | — | 22.14 | 29.15 | 31.51 | 36.36 | ||||||
- weighted average share price – A$ | 44.76 | |||||||||||
- weighted average contractual term for outstanding options - days | 56 | |||||||||||
Group Incentive Scheme Performance Shares(a) | 77,651 | — | 63,242 | 10,868 | 3,541 | 3,541 | ||||||
Group Short-Term Incentive Plan Deferred Shares(a) | — | 891,037 | 20,081 | 3,239 | 867,717 | — | ||||||
Group Short-Term Incentive Plan Options(a) | — | 268,558 | — | 20,652 | 247,906 | — | ||||||
- weighted average exercise price – A$ | — | 38.41 | — | 38.41 | 38.41 | — | ||||||
- weighted average share price – A$ | — | |||||||||||
- weighted average contractual term for outstanding options - days | 420 | |||||||||||
Long Term Incentive Plan Performance Shares (a) | 20,331,131 | 700,000 | 2,771,669 | 468,766 | 17,790,696 | 760,150 | ||||||
Management Award Plan Restricted Shares(a) | 2,352,947 | 2,413,149 | 129,160 | 228,692 | 4,408,244 | — | ||||||
Shareplus Matched Shares(b) | 2,082,831 | 1,469,556 | 952,917 | 166,710 | 2,432,760 | — | ||||||
BHP Billiton Plc | ||||||||||||
Group Incentive Scheme Deferred Shares (a) | 1,468,731 | 45,819 | 666,987 | 4,816 | 842,747 | 206,894 | ||||||
Group Incentive Scheme Options(a) | 1,413,717 | 16,119 | 144,884 | 36,105 | 1,248,847 | 296,106 | ||||||
- weighted average exercise price – £ | 11.14 | 18.68 | 10.72 | 8.09 | 11.38 | 12.53 | ||||||
- weighted average share price – £ | 18.11 | |||||||||||
- weighted average contractual term for outstanding options - days | 56 | |||||||||||
Group Incentive Scheme Performance Shares(a) | 41,022 | — | 36,188 | 4,834 | — | — | ||||||
Group Short-Term Incentive Plan Deferred Shares(a) | — | 424,555 | — | 3,558 | 420,997 | — | ||||||
Group Short-Term Incentive Plan Options(a) | — | 32,989 | — | 3,532 | 29,457 | — | ||||||
- weighted average exercise price – £ | — | 16.44 | — | 16.44 | 16.44 | — | ||||||
- weighted average share price – £ | — | |||||||||||
- weighted average contractual term for outstanding options - days | 420 | |||||||||||
Long Term Incentive Plan Performance Shares (a) | 8,258,750 | 240,000 | 1,185,345 | 288,700 | 7,024,705 | 338,954 | ||||||
Management Award Plan Restricted Shares(a) | 959,610 | 962,000 | 21,151 | 89,918 | 1,810,541 | — | ||||||
Shareplus Matched Shares(b) | 616,595 | 332,151 | 292,899 | 47,916 | 607,931 | — | ||||||
2012 | Number of awards on issue at the beginning of the financial year | Number of awards issued during the year | Number of awards vested and exercised | Number of awards lapsed | Number of awards remaining at the end of the financial year | Number of awards vested and exercisable at the end of the financial year | ||||||||||||||||||
BHP Billiton Limited | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares (a) | 979,532 | 200,295 | 560,080 | 5,412 | 614,335 | 306,199 | ||||||||||||||||||
Group Incentive Scheme Options(a) | 935,360 | – | 163,268 | 7,774 | 764,318 | 764,318 | ||||||||||||||||||
– weighted average exercise price – A$ | 33.47 | – | 29.10 | 30.12 | 34.44 | 34.44 | ||||||||||||||||||
– weighted average share price – A$ | 35.37 | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | – | |||||||||||||||||||||||
Group Short Term Incentive Plan Deferred Shares(a) | 1,649,522 | 1,246,167 | 600,778 | 60,501 | 2,234,410 | 191,704 | ||||||||||||||||||
Group Short Term Incentive Plan Options (a) | 335,160 | – | – | – | 335,160 | 247,906 | ||||||||||||||||||
– weighted average exercise price – A$ | 39.29 | – | – | – | 39.29 | 38.41 | ||||||||||||||||||
– weighted average share price – A$ | – | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | 14 | |||||||||||||||||||||||
Long Term Incentive Plan Performance Shares (a) | 13,531,419 | 550,954 | 3,747,840 | 287,179 | 10,047,354 | 2,250,843 | ||||||||||||||||||
Management Award Plan Restricted Shares (a) | 6,207,609 | 3,287,253 | 1,334,130 | 319,058 | 7,841,674 | 554,150 | ||||||||||||||||||
Shareplus Matched Shares(b) | 2,154,184 | 1,620,551 | 1,113,270 | 225,264 | 2,436,201 | – | ||||||||||||||||||
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BHP Billiton Plc | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares | 358,741 | 78,169 | 175,749 | 8,085 | 253,076 | 121,712 | ||||||||||||||||||
Group Incentive Scheme Options | 490,143 | – | 169,287 | 23,814 | 297,042 | 266,653 | ||||||||||||||||||
– weighted average exercise price – £ | 12.51 | – | 11.20 | 16.51 | 12.94 | 11.71 | ||||||||||||||||||
– weighted average share price – £ | 19.43 | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | 5 | |||||||||||||||||||||||
Group Short Term Incentive Plan Deferred Shares | 715,310 | 489,703 | 309,737 | 4,723 | 890,553 | 117,071 | ||||||||||||||||||
Group Short Term Incentive Plan Options | 96,012 | – | – | – | 96,012 | 29,457 | ||||||||||||||||||
– weighted average exercise price – £ | 20.35 | – | – | – | 20.35 | 16.44 | ||||||||||||||||||
– weighted average share price – £ | – | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | 37 | |||||||||||||||||||||||
Long Term Incentive Plan Performance Shares | 5,461,373 | 293,020 | 1,637,984 | 175,139 | 3,941,270 | 859,016 | ||||||||||||||||||
Management Award Plan Restricted Shares | 2,358,080 | 1,084,015 | 540,306 | 64,749 | 2,837,040 | 257,500 | ||||||||||||||||||
Shareplus Matched Shares | 516,791 | 400,855 | 259,884 | 69,406 | 588,356 | – |
Fair value and assumptions in the calculation of fair value for awards issued
2010 | Weighted average fair value of awards granted during the year(c) US$ | Risk-free interest rate (d) | Estimated life of awards | Share price at grant date | Estimated volatility of share price (e) | Dividend yield | ||||||||||
BHP Billiton Limited | ||||||||||||||||
Group Incentive Scheme Deferred Shares (a) | 25.22 | n/a | 3 years | A$ | 33.90 | n/a | n/a | |||||||||
Group Incentive Scheme Options(a) | — | — | — | — | — | — | ||||||||||
Group Short-Term Incentive Plan Deferred Shares(a) | 25.22 | n/a | 3 years | A$ | 33.90 | n/a | n/a | |||||||||
Group Short-Term Incentive Plan Options(a) | 7.37 | n/a | 3 years | A$ | 33.90 | 35.0 | % | 3.98 | % | |||||||
Long Term Incentive Plan Performance Shares(a) | 9.49 | 2.58 | % | 5 years | A$ | 33.90 | 31.0 | % | 3.98 | % | ||||||
Management Award Plan Restricted Shares(a) | 24.21 | n/a | 3 years | A$ | 33.90 | n/a | 3.98 | % | ||||||||
Shareplus Matched Shares(b) | 33.59 | 2.51 | % | 3 years | A$ | 44.29 | n/a | 3.28 | % | |||||||
BHP Billiton Plc | ||||||||||||||||
Group Incentive Scheme Deferred Shares (a) | 21.83 | n/a | 3 years | £ | 14.25 | n/a | n/a | |||||||||
Group Incentive Scheme Options(a) | 6.59 | n/a | 3 years | £ | 14.25 | 40.0 | % | 3.58 | % | |||||||
Group Short-Term Incentive Plan Deferred Shares(a) | 21.83 | n/a | 3 years | £ | 14.25 | n/a | n/a | |||||||||
Group Short-Term Incentive Plan Options(a) | 6.59 | n/a | 3 years | £ | 14.25 | 40.0 | % | 3.58 | % | |||||||
Long Term Incentive Plan Performance Shares(a) | 8.32 | 2.58 | % | 5 years | £ | 14.25 | 31.0 | % | 3.58 | % | ||||||
Management Award Plan Restricted Shares(a) | 21.04 | n/a | 3 years | £ | 14.25 | n/a | 3.58 | % | ||||||||
Shareplus Matched Shares(b) | 28.63 | 3.42 | % | 3 years | £ | 19.44 | n/a | 2.97 | % | |||||||
2012 | Weighted average fair value of awards granted during the year (c) US$ | Risk-free interest rate(d) | Estimated life of awards | Share price at grant date | Estimated volatility of share price (e) | Dividend yield | ||||||||||||||||||
BHP Billiton Limited | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares | 47.77 | n/a | 3 years | A$43.77 | n/a | 2.19 | % | |||||||||||||||||
Group Incentive Scheme Options | – | – | – | – | – | – | ||||||||||||||||||
Group Short Term Incentive Plan Deferred Shares | 44.77 | n/a | 3 years | A$43.77 | n/a | 2.19 | % | |||||||||||||||||
Group Short Term Incentive Plan Options | – | – | – | – | – | – | ||||||||||||||||||
Long Term Incentive Plan Performance Shares | 27.61 | 1.82 | % | 5 years | A$43.77 | 33.0 | % | 2.19 | % | |||||||||||||||
Management Award Plan Restricted Shares | 43.79 | n/a | 3 years | A$43.77 | n/a | 2.19 | % | |||||||||||||||||
Shareplus Matched Shares | 30.47 | 4.38 | % | 3 years | A$33.80 | n/a | 2.25 | % | ||||||||||||||||
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BHP Billiton Plc | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares | 40.38 | n/a | 3 years | £24.60 | n/a | 2.47 | % | |||||||||||||||||
Group Incentive Scheme Options | – | – | – | – | – | – | ||||||||||||||||||
Group Short Term Incentive Plan Deferred Shares | 37.52 | n/a | 3 years | £24.60 | n/a | 2.47 | % | |||||||||||||||||
Group Short Term Incentive Plan Options | – | – | – | – | – | – | ||||||||||||||||||
Long Term Incentive Plan Performance Shares | 23.27 | 1.82 | % | 5 years | £24.60 | 33.0 | % | 2.47 | % | |||||||||||||||
Management Award Plan Restricted Shares | 36.59 | n/a | 3 years | £24.60 | n/a | 2.47 | % | |||||||||||||||||
Shareplus Matched Shares | 25.57 | 2.76 | % | 3 years | £18.53 | n/a | 2.57 | % | ||||||||||||||||
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Notes to Financial Statements continued
32 Employee share ownership plans continued
Employee share awards – current plans
2009 | Number of awards on issue at the beginning of the financial year | Number of awards issued during the year | Number of awards vested and exercised | Number of awards lapsed | Number of awards remaining at the end of the financial year | Number of awards vested and exercisable at the end of the financial year | ||||||
BHP Billiton Limited | ||||||||||||
Group Incentive Scheme Deferred Shares (a) | 3,422,157 | 1,980,820 | 1,621,584 | 71,956 | 3,709,437 | 874,599 | ||||||
Group Incentive Scheme Options (a) | 1,331,293 | 1,182,159 | 522,906 | 5,225 | 1,985,321 | 483,068 | ||||||
- weighted average exercise price – A$ | 25.05 | 29.15 | 15.95 | 11.11 | 29.92 | 22.74 | ||||||
- weighted average share price – A$ | 35.14 | |||||||||||
- weighted average contractual term for outstanding options - days | 340 | |||||||||||
Group Incentive Scheme Performance Shares(a) | 639,287 | — | 523,548 | 38,088 | 77,651 | 77,651 | ||||||
Long Term Incentive Plan Performance Shares (a) | 20,260,877 | 1,350,000 | 7,750 | 1,271,996 | 20,331,131 | — | ||||||
Management Award Plan Restricted Shares(a) | — | 2,484,233 | 15,556 | 115,730 | 2,352,947 | — | ||||||
Shareplus Matched Shares(b) | 985,333 | 1,270,067 | 91,125 | 81,444 | 2,082,831 | — | ||||||
BHP Billiton Plc | ||||||||||||
Group Incentive Scheme Deferred Shares (a) | 1,456,483 | 679,170 | 599,621 | 67,301 | 1,468,731 | 367,762 | ||||||
Group Incentive Scheme Options(a) | 641,124 | 957,588 | 172,951 | 12,044 | 1,413,717 | 289,088 | ||||||
- weighted average exercise price – £ | 10.60 | 10.89 | 7.90 | 8.59 | 11.14 | 8.81 | ||||||
- weighted average share price – £ | 14.34 | |||||||||||
- weighted average contractual term for outstanding options - days | 364 | |||||||||||
Group Incentive Scheme Performance Shares(a) | 150,687 | — | 101,865 | 7,800 | 41,022 | 41,022 | ||||||
Long Term Incentive Plan Performance Shares (a) | 8,194,079 | 550,839 | — | 486,168 | 8,258,750 | — | ||||||
Management Award Plan Restricted Shares(a) | — | 1,052,500 | 8,666 | 84,224 | 959,610 | — | ||||||
Shareplus Matched Shares(b) | 305,468 | 405,841 | 68,280 | 26,434 | 616,595 | — | ||||||
2011 | Number of awards on issue at the beginning of the financial year | Number of awards issued during the year | Number of awards vested and exercised | Number of awards lapsed | Number of awards remaining at the end of the financial year | Number of awards vested and exercisable at the end of the financial year | ||||||||||||||||||
BHP Billiton Limited | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares | 2,591,472 | 166,654 | 1,747,477 | 31,117 | 979,532 | 659,511 | ||||||||||||||||||
Group Incentive Scheme Options | 1,605,668 | – | 663,815 | 6,493 | 935,360 | 935,360 | ||||||||||||||||||
– weighted average exercise price – A$ | 31.51 | – | 28.77 | 29.15 | 33.47 | 33.47 | ||||||||||||||||||
– weighted average share price – A$ | 42.25 | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | – | |||||||||||||||||||||||
Group Incentive Scheme Performance Shares | 3,541 | – | 3,541 | – | – | – | ||||||||||||||||||
Group Short Term Incentive Plan Deferred Shares | 867,717 | 939,359 | 118,628 | 38,926 | 1,649,522 | – | ||||||||||||||||||
Group Short Term Incentive Plan Options | 247,906 | 87,254 | – | – | 335,160 | – | ||||||||||||||||||
– weighted average exercise price – A$ | 38.41 | 41.78 | – | – | 39.29 | – | ||||||||||||||||||
– weighted average share price – A$ | – | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | 150 | |||||||||||||||||||||||
Long Term Incentive Plan Performance Shares(a) | 17,790,696 | 590,000 | 4,382,309 | 466,968 | 13,531,419 | 1,223,312 | ||||||||||||||||||
Management Award Plan Restricted Shares | 4,408,244 | 2,452,996 | 283,648 | 369,983 | 6,207,609 | – | ||||||||||||||||||
Shareplus Matched Shares | 2,432,760 | 1,076,579 | 1,095,254 | 259,901 | 2,154,184 | – | ||||||||||||||||||
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BHP Billiton Plc | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares | 842,747 | 53,195 | 522,227 | 14,974 | 358,741 | 259,727 | ||||||||||||||||||
Group Incentive Scheme Options | 1,248,847 | 30,389 | 766,831 | 22,262 | 490,143 | 443,635 | ||||||||||||||||||
– weighted average exercise price – £ | 11.38 | 23.71 | 11.22 | 8.82 | 12.51 | 11.52 | ||||||||||||||||||
– weighted average share price – £ | 20.95 | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | 28 | |||||||||||||||||||||||
Group Short Term Incentive Plan Deferred Shares | 420,997 | 359,440 | 58,953 | 6,174 | 715,310 | – | ||||||||||||||||||
Group Short Term Incentive Plan Options | 29,457 | 66,555 | – | – | 96,012 | – | ||||||||||||||||||
– weighted average exercise price – £ | 16.44 | 22.08 | – | – | 20.35 | – | ||||||||||||||||||
– weighted average share price – £ | – | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | 307 | |||||||||||||||||||||||
Long Term Incentive Plan Performance Shares | 7,024,705 | 240,000 | 1,616,087 | 187,245 | 5,461,373 | 712,042 | ||||||||||||||||||
Management Award Plan Restricted Shares | 1,810,541 | 848,950 | 101,921 | 199,490 | 2,358,080 | – | ||||||||||||||||||
Shareplus Matched Shares | 607,931 | 260,990 | 285,382 | 66,748 | 516,791 | – | ||||||||||||||||||
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Fair value and assumptions in the calculation of fair value for awards issued
2009 | Weighted average fair value of awards granted during the year(c) US$ | Risk-free interest rate (d) | Estimated life of awards | Share price at grant date | Estimated volatility of share price (e) | Dividend yield | ||||||||||
BHP Billiton Limited | ||||||||||||||||
Group Incentive Scheme Deferred Shares (a) | 24.94 | 6.39 | % | 3 years | n/a | n/a | n/a | |||||||||
Group Incentive Scheme Options(a) | 8.46 | 6.39 | % | 3 years | A$ | 44.40 | 30.0 | % | 2.05 | % | ||||||
Long Term Incentive Plan Performance Shares(a) | 15.74 | 3.30 | % | 5 years | A$ | 44.40 | 28.9 | % | 2.05 | % | ||||||
Management Award Plan Restricted Shares(a) | 39.97 | n/a | 3 years | A$ | 44.40 | n/a | 2.05 | % | ||||||||
Shareplus Matched Shares(b) | 23.79 | 5.93 | % | 3 years | A$ | 42.06 | n/a | 1.47 | % | |||||||
BHP Billiton Plc | ||||||||||||||||
Group Incentive Scheme Deferred Shares (a) | 19.90 | 5.69 | % | 3 years | n/a | n/a | n/a | |||||||||
Group Incentive Scheme Options(a) | 6.34 | 5.69 | % | 3 years | £ | 18.41 | 35.0 | % | 1.65 | % | ||||||
Long Term Incentive Plan Performance Shares(a) | 13.55 | 3.30 | % | 5 years | £ | 18.41 | 28.9 | % | 1.65 | % | ||||||
Management Award Plan Restricted Shares(a) | 34.84 | n/a | 3 years | £ | 18.41 | n/a | 1.65 | % | ||||||||
Shareplus Matched Shares(b) | 19.82 | 6.52 | % | 3 years | £ | 17.44 | n/a | 1.53 | % | |||||||
2011 | Weighted average fair value of awards granted during the year (c) US$ | Risk-free interest rate(d) | Estimated life of awards | Share price at grant date | Estimated volatility of share price (e) | Dividend yield | ||||||||||||||||||
BHP Billiton Limited | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares | 31.71 | n/a | 3 years | A$37.11 | n/a | 2.69 | % | |||||||||||||||||
Group Incentive Scheme Options | – | – | – | – | – | – | ||||||||||||||||||
Group Short Term Incentive Plan Deferred Shares | 31.71 | n/a | 3 years | A$37.11 | n/a | 2.69 | % | |||||||||||||||||
Group Short Term Incentive Plan Options | 8.84 | 4.80 | % | 3 years | A$37.11 | 30.0 | % | 2.69 | % | |||||||||||||||
Long Term Incentive Plan Performance Shares | 19.48 | 1.85 | % | 5 years | A$37.11 | 33.0 | % | 2.69 | % | |||||||||||||||
Management Award Plan Restricted Shares | 30.84 | n/a | 3 years | A$37.11 | n/a | 2.69 | % | |||||||||||||||||
Shareplus Matched Shares | 39.02 | 4.26 | % | 3 years | A$43.16 | n/a | 2.87 | % | ||||||||||||||||
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BHP Billiton Plc | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares | 25.98 | n/a | 3 years | £16.95 | n/a | 2.91 | % | |||||||||||||||||
Group Incentive Scheme Options | 6.98 | 2.23 | % | 3 years | £16.95 | 35.0 | % | 2.91 | % | |||||||||||||||
Group Short Term Incentive Plan Deferred Shares | 25.98 | n/a | 3 years | £16.95 | n/a | 2.91 | % | |||||||||||||||||
Group Short Term Incentive Plan Options | 6.98 | 2.23 | % | 3 years | £16.95 | 35.0 | % | 2.91 | % | |||||||||||||||
Long Term Incentive Plan Performance Shares | 15.93 | 1.85 | % | 5 years | £16.95 | 33.0 | % | 2.91 | % | |||||||||||||||
Management Award Plan Restricted Shares | 25.21 | n/a | 3 years | £16.95 | n/a | 2.91 | % | |||||||||||||||||
Shareplus Matched Shares | 35.45 | 3.19 | % | 3 years | £22.95 | n/a | 3.24 | % | ||||||||||||||||
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Notes to Financial Statements continued
32 Employee share ownership plans continued
Employee share awards – current plans
2008 | Number of awards on issue at the beginning of the financial year | Number of awards issued during the year | Number of awards vested and exercised | Number of awards lapsed | Number of awards remaining at the end of the financial year | Number of awards vested and exercisable at the end of the financial year | ||||||
BHP Billiton Limited | ||||||||||||
Group Incentive Scheme Deferred Shares (a) | 4,211,961 | 1,104,588 | 1,878,079 | 16,313 | 3,422,157 | 1,208,840 | ||||||
Group Incentive Scheme Options (a) | 2,067,911 | 320,094 | 1,056,712 | — | 1,331,293 | 786,351 | ||||||
- weighted average exercise price – A$ | 16.26 | 43.61 | 13.47 | — | 25.05 | 17.14 | ||||||
- weighted average share price – A$ | 40.28 | |||||||||||
- weighted average contractual term for outstanding options - days | 260 | |||||||||||
Group Incentive Scheme Performance Shares(a) | 1,915,489 | — | 1,073,121 | 203,081 | 639,287 | 639,287 | ||||||
Long Term Incentive Plan Performance Shares (a) | 16,766,200 | 6,018,068 | — | 2,523,391 | 20,260,877 | — | ||||||
Shareplus Matched Shares(b) | — | 1,027,618 | 12,770 | 29,515 | 985,333 | — | ||||||
BHP Billiton Plc | ||||||||||||
Group Incentive Scheme Deferred Shares (a) | 1,670,111 | 515,152 | 709,074 | 19,706 | 1,456,483 | 404,426 | ||||||
Group Incentive Scheme Options(a) | 723,632 | 177,158 | 259,666 | — | 641,124 | 302,671 | ||||||
- weighted average exercise price – £ | 7.86 | 16.51 | 7.00 | — | 10.60 | 7.61 | ||||||
- weighted average share price – £ | 16.90 | |||||||||||
- weighted average contractual term for outstanding options - days | 237 | |||||||||||
Group Incentive Scheme Performance Shares(a) | 594,363 | — | 319,210 | 124,466 | 150,687 | 150,687 | ||||||
Long Term Incentive Plan Performance Shares (a) | 6,311,626 | 2,340,993 | 15,000 | 443,540 | 8,194,079 | — | ||||||
Shareplus Matched Shares(b) | — | 321,587 | 5,270 | 10,849 | 305,468 | — | ||||||
2010 | Number of awards on issue at the beginning of the financial year | Number of awards issued during the year | Number of awards vested and exercised | Number of awards lapsed | Number of awards remaining at the end of the financial year | Number of awards vested and exercisable at the end of the financial year | ||||||||||||||||||
BHP Billiton Limited | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares | 3,709,437 | 153,367 | 1,249,998 | 21,334 | 2,591,472 | 671,873 | ||||||||||||||||||
Group Incentive Scheme Options | 1,985,321 | – | 321,509 | 58,144 | 1,605,668 | 525,536 | ||||||||||||||||||
– weighted average exercise price – A$ | 29.92 | – | 22.14 | 29.15 | 31.51 | 36.36 | ||||||||||||||||||
– weighted average share price – A$ | 44.76 | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | 38 | |||||||||||||||||||||||
Group Incentive Scheme Performance Shares | 77,651 | – | 63,242 | 10,868 | 3,541 | 3,541 | ||||||||||||||||||
Group Short Term Incentive Plan Deferred Shares | – | 891,037 | 20,081 | 3,239 | 867,717 | – | ||||||||||||||||||
Group Short Term Incentive Plan Options | – | 268,558 | – | 20,652 | 247,906 | – | ||||||||||||||||||
– weighted average exercise price – A$ | – | 38.41 | – | 38.41 | 38.41 | – | ||||||||||||||||||
– weighted average share price – A$ | – | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | 420 | |||||||||||||||||||||||
Long Term Incentive Plan Performance Shares | 20,331,131 | 700,000 | 2,771,669 | 468,766 | 17,790,696 | 760,150 | ||||||||||||||||||
Management Award Plan Restricted Shares | 2,352,947 | 2,413,149 | 129,160 | 228,692 | 4,408,244 | – | ||||||||||||||||||
Shareplus Matched Shares | 2,082,831 | 1,469,556 | 952,917 | 166,710 | 2,432,760 | – | ||||||||||||||||||
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BHP Billiton Plc | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares | 1,468,731 | 45,819 | 666,987 | 4,816 | 842,747 | 206,894 | ||||||||||||||||||
Group Incentive Scheme Options | 1,413,717 | 16,119 | 144,884 | 36,105 | 1,248,847 | 296,106 | ||||||||||||||||||
– weighted average exercise price – £ | 11.14 | 18.68 | 10.72 | 8.09 | 11.38 | 12.53 | ||||||||||||||||||
– weighted average share price – £ | 18.11 | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | 47 | |||||||||||||||||||||||
Group Incentive Scheme Performance Shares | 41,022 | – | 36,188 | 4,834 | – | – | ||||||||||||||||||
Group Short Term Incentive Plan Deferred Shares | – | 424,555 | – | 3,558 | 420,997 | – | ||||||||||||||||||
Group Short Term Incentive Plan Options | – | 32,989 | – | 3,532 | 29,457 | – | ||||||||||||||||||
– weighted average exercise price – £ | – | 16.44 | – | 16.44 | 16.44 | – | ||||||||||||||||||
– weighted average share price – £ | – | |||||||||||||||||||||||
– weighted average contractual term for outstanding options – days | 420 | |||||||||||||||||||||||
Long Term Incentive Plan Performance Shares | 8,258,750 | 240,000 | 1,185,345 | 288,700 | 7,024,705 | 338,954 | ||||||||||||||||||
Management Award Plan Restricted Shares | 959,610 | 962,000 | 21,151 | 89,918 | 1,810,541 | – | ||||||||||||||||||
Shareplus Matched Shares | 616,595 | 332,151 | 292,899 | 47,916 | 607,931 | – | ||||||||||||||||||
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|
Fair value and assumptions in the calculation of fair value for awards issued
2008 | Weighted average fair value of awards granted during the year(c) US$ | Risk-free interest rate (d) | Estimated life of awards | Share price at grant date | Estimated volatility of share price (e) | Dividend yield | ||||||||||
BHP Billiton Limited | ||||||||||||||||
Group Incentive Scheme Deferred Shares (a) | 34.28 | 5.79 | % | 3 years | n/a | n/a | n/a | |||||||||
Group Incentive Scheme Options(a) | 9.50 | 5.79 | % | 3 years | A$ | 42.05 | 27.0 | % | 1.52 | % | ||||||
Long Term Incentive Plan Performance Shares(a) | 11.04 | 5.00 | % | 5 years | A$ | 35.03 | 26.0 | % | 1.70 | % | ||||||
Shareplus Matched Shares(b) | 34.85 | 6.35 | % | 3 years | A$ | 30.30 | n/a | 1.68 | % | |||||||
BHP Billiton Plc | ||||||||||||||||
Group Incentive Scheme Deferred Shares (a) | 31.37 | 4.76 | % | 3 years | n/a | n/a | n/a | |||||||||
Group Incentive Scheme Options(a) | 7.98 | 4.76 | % | 3 years | £ | 15.45 | 31.0 | % | 1.49 | % | ||||||
Long Term Incentive Plan Performance Shares(a) | 10.33 | 5.00 | % | 5 years | £ | 13.90 | 26.0 | % | 1.70 | % | ||||||
Shareplus Matched Shares(b) | 30.62 | 6.64 | % | 3 years | £ | 11.68 | n/a | 1.67 | % | |||||||
2010 | Weighted average fair value of awards granted during the year (c) | Risk-free interest rate(d) | Estimated life of awards | Share price at grant date | Estimated volatility of share price (e) | Dividend yield | ||||||||||||||||||
US$ | ||||||||||||||||||||||||
BHP Billiton Limited | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares | 25.22 | n/a | 3 years | A$33.90 | n/a | 3.98 | % | |||||||||||||||||
Group Incentive Scheme Options | – | – | – | – | – | – | ||||||||||||||||||
Group Short Term Incentive Plan Deferred Shares | 25.22 | n/a | 3 years | A$33.90 | n/a | 3.98 | % | |||||||||||||||||
Group Short Term Incentive Plan Options | 7.37 | 5.35 | % | 3 years | A$33.90 | 35.0 | % | 3.98 | % | |||||||||||||||
Long Term Incentive Plan Performance Shares | 9.49 | 2.58 | % | 5 years | A$33.90 | 31.0 | % | 3.98 | % | |||||||||||||||
Management Award Plan Restricted Shares | 24.21 | n/a | 3 years | A$33.90 | n/a | 3.98 | % | |||||||||||||||||
Shareplus Matched Shares | 33.59 | 2.51 | % | 3 years | A$40.81 | n/a | 3.28 | % | ||||||||||||||||
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BHP Billiton Plc | ||||||||||||||||||||||||
Group Incentive Scheme Deferred Shares | 21.83 | n/a | 3 years | £14.25 | n/a | 3.58 | % | |||||||||||||||||
Group Incentive Scheme Options | 6.59 | 3.02 | % | 3 years | £14.25 | 40.0 | % | 3.58 | % | |||||||||||||||
Group Short Term Incentive Plan Deferred Shares | 21.83 | n/a | 3 years | £14.25 | n/a | 3.58 | % | |||||||||||||||||
Group Short Term Incentive Plan Options | 6.59 | 3.02 | % | 3 years | £14.25 | 40.0 | % | 3.58 | % | |||||||||||||||
Long Term Incentive Plan Performance Shares | 8.32 | 2.58 | % | 5 years | £14.25 | 31.0 | % | 3.58 | % | |||||||||||||||
Management Award Plan Restricted Shares | 21.04 | n/a | 3 years | £14.25 | n/a | 3.58 | % | |||||||||||||||||
Shareplus Matched Shares | 28.63 | 3.42 | % | 3 years | £19.44 | n/a | 2.97 | % | ||||||||||||||||
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Notes to Financial Statements continued
32 Employee share ownership plans continued
Employee share awards – past plans(f)
2010 | Number of awards at the beginning of the financial year | Number of awards issued | Number of awards exercised | Number of awards lapsed | Number of awards remaining at the end of the financial year | Number of awards exercisable at the end of the financial year | ||||||
BHP Billiton Limited | ||||||||||||
Employee Share Plan Options | 1,632,133 | — | 766,838 | — | 865,295 | 865,295 | ||||||
- weighted average exercise price – A$ | 8.38 | — | 8.39 | — | 8.37 | 8.37 | ||||||
Employee Share Plan Shares | 9,134,763 | — | 924,545 | — | 8,210,218 | 8,210,218 | ||||||
Executive Share Scheme Partly Paid Shares | 189,918 | — | — | — | 189,918 | 189,918 | ||||||
Performance Share Plan Performance Rights | 95,038 | — | 36,475 | — | 58,563 | 58,563 | ||||||
BHP Billiton Plc | ||||||||||||
Co-Investment Plan | 24,047 | — | 1,051 | — | 22,996 | 22,996 | ||||||
2009 | Number of awards at the beginning of the financial year | Number of awards issued | Number of awards exercised | Number of awards lapsed | Number of awards remaining at the end of the financial year | Number of awards exercisable at the end of the financial year | ||||||
BHP Billiton Limited | ||||||||||||
Employee Share Plan Options | 4,620,131 | — | 2,229,098 | 758,900 | 1,632,133 | 1,632,133 | ||||||
- weighted average exercise price – A$ | 7.59 | — | 7.25 | 6.10 | 8.38 | 8.38 | ||||||
Employee Share Plan Shares | 11,039,818 | — | 1,905,055 | — | 9,134,763 | 9,134,763 | ||||||
Executive Share Scheme Partly Paid Shares | 274,918 | — | 85,000 | — | 189,918 | 189,918 | ||||||
Performance Share Plan Performance Rights | 357,607 | — | 262,569 | — | 95,038 | 95,038 | ||||||
BHP Billiton Plc | ||||||||||||
Co-Investment Plan | 27,776 | — | 3,729 | — | 24,047 | 24,047 | ||||||
Restricted Share Scheme | 76,633 | — | 26,915 | 49,718 | — | — | ||||||
2008 | Number of awards at the beginning of the financial year | Number of awards issued | Number of awards exercised | Number of awards lapsed | Number of awards remaining at the end of the financial year | Number of awards exercisable at the end of the financial year | ||||||
BHP Billiton Limited | ||||||||||||
Employee Share Plan Options | 7,725,422 | — | 3,092,470 | 12,821 | 4,620,131 | 4,620,131 | ||||||
- weighted average exercise price – A$ | 7.65 | — | 7.74 | 6.92 | 7.59 | 7.59 | ||||||
Employee Share Plan Shares | 12,501,289 | — | 1,461,471 | — | 11,039,818 | 11,039,818 | ||||||
Executive Share Scheme Partly Paid Shares | 274,918 | — | — | — | 274,918 | 274,918 | ||||||
Performance Share Plan Performance Rights | 518,942 | — | 161,335 | — | 357,607 | 357,607 | ||||||
BHP Billiton Plc | ||||||||||||
Co-Investment Plan | 32,746 | — | 4,970 | — | 27,776 | 27,776 | ||||||
Restricted Share Scheme | 76,633 | — | — | — | 76,633 | 76,633 | ||||||
Notes to Financial Statements continued
2012 BHP Billiton Limited Employee Share Plan Options – weighted average exercise price A$ Employee Share Plan Shares Performance Share Plan Performance Rights BHP Billiton Plc Co-Investment Plan 2011 BHP Billiton Limited Employee Share Plan Options – weighted average exercise price A$ Employee Share Plan Shares Executive Share Scheme Partly Paid Shares Performance Share Plan Performance Rights BHP Billiton Plc Co-Investment Plan 32 Employee share ownership plans continued Number
of awards
at the
beginning
of the
financial
year Number
of
awards
issued Number
of
awards
exercised Number
of
awards
lapsed Number
of awards
remaining
at the end
of the
financial
year Number of
awards
exercisable
at the end
of the
financial
year 284,850 – 242,010 42,840 – – 8.30 – 8.30 8.30 – – 6,960,419 – 1,513,098 – 5,447,321 5,447,321 58,563 – 58,563 – – – 2,245 – 2,245 – – – Number
of awards
at the
beginning
of the
financial
year Number
of
4awards
issued Number
of
awards
exercised Number
of
awards
lapsed Number
of awards
remaining
at the end
of the
financial
year Number of
awards
exercisable
at the end
of the
financial
year 865,295 – 580,445 – 284,850 284,850 8.37 – 8.41 – 8.30 8.30 8,210,218 – 1,249,799 – 6,960,419 6,960,419 189,918 – 189,918 – – – 58,563 – – – 58,563 58,563 22,996 – 4,640 16,111 2,245 2,245
2010 | Number of awards at the beginning of the financial year | Number of awards issued | Number of awards exercised | Number of awards lapsed | Number of awards remaining at the end of the financial year | Number of awards exercisable at the end of the financial year | ||||||||||||||||||
BHP Billiton Limited | ||||||||||||||||||||||||
Employee Share Plan Options | 1,632,133 | – | 766,838 | – | 865,295 | 865,295 | ||||||||||||||||||
– weighted average exercise price A$ | 8.38 | – | 8.39 | – | 8.37 | 8.37 | ||||||||||||||||||
Employee Share Plan Shares | 9,134,763 | – | 924,545 | – | 8,210,218 | 8,210,218 | ||||||||||||||||||
Executive Share Scheme Partly Paid Shares | 189,918 | – | – | – | 189,918 | 189,918 | ||||||||||||||||||
Performance Share Plan Performance Rights | 95,038 | – | 36,475 | – | 58,563 | 58,563 | ||||||||||||||||||
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| |||||||||||||
BHP Billiton Plc | ||||||||||||||||||||||||
Co-Investment Plan | 24,047 | – | 1,051 | – | 22,996 | 22,996 | ||||||||||||||||||
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Employee share awards – summary(h) (i)
Awards outstanding at: | |||||||||
Month of issue | 30 June 2010 | 7 September 2010 | Exercise price (g) | Exercise period / release date | |||||
BHP Billiton Limited | |||||||||
Employee Share Plan Options | |||||||||
November 2001 | 406,290 | 406,290 | A$ | 8.30 | Oct 2004 – Sep 2011 | ||||
November 2001 | 77,220 | 77,220 | A$ | 8.29 | Oct 2004 – Sep 2011 | ||||
December 2000 | 140,427 | 99,124 | A$ | 8.72 | Jul 2003 – Dec 2010 | ||||
December 2000 | 26,588 | 15,487 | A$ | 8.71 | Jul 2003 – Dec 2010 | ||||
November 2000 | 77,441 | 77,441 | A$ | 8.28 | Jul 2003 – Dec 2010 | ||||
November 2000 | 137,329 | 97,061 | A$ | 8.27 | Jul 2003 – Dec 2010 | ||||
865,295 | 772,623 | ||||||||
Employee Share Plan Shares | |||||||||
October 1997 | 1,348,510 | 1,328,892 | — | Oct 1997 – Oct 2017 | |||||
May 1995 | 2,260,252 | 2,231,341 | — | May 1995 – May 2015 | |||||
May 1994 | 1,579,388 | 1,554,607 | — | May 1994 – May 2014 | |||||
May 1993 | 1,283,460 | 1,258,678 | — | May 1993 – May 2013 | |||||
May 1992 | 1,070,135 | 1,047,419 | — | May 1992 – May 2012 | |||||
April 1991 | 668,473 | 651,952 | — | Apr 1991 – Apr 2011 | |||||
8,210,218 | 8,072,889 | ||||||||
Executive Share Scheme Partly Paid Shares | |||||||||
October 1997 | 74,959 | 74,959 | — | Oct 1997 – Oct 2017 | |||||
October 1996 | 74,959 | 74,959 | — | Oct 1996 – Oct 2016 | |||||
October 1995 | 40,000 | 40,000 | — | Oct 1995 – Oct 2015 | |||||
189,918 | 189,918 | ||||||||
Group Incentive Scheme | |||||||||
Deferred Shares | |||||||||
December 2009 | 153,367 | 153,367 | — | Aug 2011 – Aug 2014 | |||||
December 2008 | 1,766,232 | 1,128,584 | — | Aug 2010 – Aug 2013 | |||||
December 2007 | 356,319 | 322,495 | — | Aug 2009 – Aug 2012 | |||||
December 2006 | 269,289 | 243,201 | — | Aug 2008 – Aug 2011 | |||||
December 2005 | 46,265 | — | — | Aug 2007 – Aug 2010 | |||||
Options | |||||||||
December 2008 | 1,080,132 | 1,061,795 | A$ | 29.15 | Aug 2010 – Aug 2013 | ||||
December 2007 | 320,094 | 320,094 | A$ | 43.61 | Aug 2009 – Aug 2012 | ||||
December 2006 | 148,175 | 141,162 | A$ | 26.28 | Aug 2008 – Aug 2011 | ||||
December 2005 | 57,267 | — | A$ | 21.91 | Aug 2007 – Aug 2010 | ||||
Performance Shares | |||||||||
December 2004 | 3,541 | — | — | Aug 2007 – Aug 2010 | |||||
4,200,681 | 3,370,698 | ||||||||
Group Short-Term Incentive Plan | |||||||||
Deferred Shares | |||||||||
December 2009 | 867,717 | 848,196 | — | Aug 2011 – Aug 2014 | |||||
Options | |||||||||
December 2009 | 247,906 | 247,906 | A$ | 38.41 | Aug 2011 – Aug 2014 | ||||
1,115,623 | 1,096,102 | ||||||||
Long Term Incentive Plan Performance Shares | |||||||||
December 2009 | 700,000 | 700,000 | — | Aug 2014 – Aug 2019 | |||||
December 2008 | 1,350,000 | 1,350,000 | — | Aug 2013 – Aug 2018 | |||||
December 2007 | 5,177,191 | 5,099,551 | — | Aug 2012 – Aug 2017 | |||||
December 2006 | 4,903,290 | 4,831,063 | — | Aug 2011 – Aug 2016 | |||||
December 2005 | 4,900,065 | 3,057,965 | — | Aug 2010 – Aug 2015 | |||||
December 2004 | 760,150 | 635,858 | — | Aug 2009 – Aug 2014 | |||||
17,790,696 | 15,674,437 | ||||||||
Management Award Plan | |||||||||
December 2009 | 2,324,497 | 2,324,038 | — | Aug 2012 – Aug 2015 | |||||
November 2008 and March 2009 | 2,083,747 | 1,983,454 | — | Aug 2011 – Aug 2014 | |||||
4,408,244 | 4,307,492 | ||||||||
Awards outstanding at: | Exercise price (g) | Exercise period/release date | ||||||||||||
Month of issue | 30 June 2012 | 12 September 2012 | ||||||||||||
BHP Billiton Limited | ||||||||||||||
Employee Share Plan Shares | ||||||||||||||
October 1997 | 1,152,739 | 1,139,316 | – | Oct 1997 – Oct 2017 | ||||||||||
May 1995 | 1,919,097 | 1,894,316 | – | May 1995 – May 2015 | ||||||||||
May 1994 | 1,324,349 | 1,308,447 | – | May 1994 – May 2014 | ||||||||||
May 1993 | 1,051,136 | 1,035,235 | – | May 1993 – May 2013 | ||||||||||
|
|
|
| |||||||||||
5,447,321 | 5,377,314 | |||||||||||||
|
|
|
| |||||||||||
Group Incentive Scheme | ||||||||||||||
Deferred Shares | ||||||||||||||
December 2011 | 167,847 | 167,847 | – | Aug 2013 – Aug 2016 | ||||||||||
December 2010 | 140,289 | 140,289 | – | Aug 2012 – Aug 2015 | ||||||||||
December 2008 | 265,710 | 207,813 | – | Aug 2010 – Aug 2013 | ||||||||||
December 2007 | 40,489 | – | – | Aug 2009 – Aug 2012 | ||||||||||
Options | ||||||||||||||
December 2008 | 484,671 | 476,067 | A$29.15 | Aug 2010 – Aug 2013 | ||||||||||
December 2007 | 279,647 | – | A$43.61 | Aug 2009 – Aug 2012 | ||||||||||
|
|
|
| |||||||||||
1,378,653 | 992,016 | |||||||||||||
|
|
|
| |||||||||||
Group Short Term Incentive Plan | ||||||||||||||
Deferred Shares | ||||||||||||||
October 2011 | 1,229,048 | 1,140,536 | – | Aug 2013 – Aug 2016 | ||||||||||
October 2010 | 813,658 | 349,908 | – | Aug 2012 – Aug 2015 | ||||||||||
October 2009 | 191,704 | 148,609 | – | Aug 2011 – Aug 2014 | ||||||||||
Options | ||||||||||||||
October 2010 | 87,254 | 87,254 | A$41.78 | Aug 2012 – Aug 2015 | ||||||||||
October 2009 | 247,906 | 247,906 | A$38.41 | Aug 2011 – Aug 2014 | ||||||||||
|
|
|
| |||||||||||
2,569,570 | 1,974,213 | |||||||||||||
|
|
|
|
Exercise period/release date Month of issue Long Term Incentive Plan Performance Shares December 2011 December 2010 December 2009 December 2008 December 2007 December 2006 December 2005 December 2004 Management Award Plan October 2011 and March 2012 October 2010 and March 2011 October 2009 and March 2010 November 2008 and March 2009 Shareplus September 2011 to June 2012 September 2010 to June 2011 Awards outstanding at: Exercise price (g) 30 June 2012 12 September 2012 550,954 550,954 – Aug 2016 – Aug 2021 520,000 520,000 – Aug 2015 – Aug 2020 644,000 644,000 – Aug 2014 – Aug 2019 1,290,000 1,290,000 – Aug 2013 – Aug 2018 4,791,557 2,552,606 – Aug 2012 – Aug 2017 1,298,102 1,042,169 – Aug 2011 – Aug 2016 659,343 541,462 – Aug 2010 – Aug 2015 293,398 225,065 – Aug 2009 – Aug 2014 10,047,354 7,366,256 3,240,582 2,891,554 – Aug 2014 – Aug 2017 2,198,123 1,938,488 – Aug 2013 – Aug 2016 1,858,819 765,350 – Aug 2012 – Aug 2015 544,150 417,950 – Aug 2011 – Aug 2014 7,841,674 6,013,342 1,519,710 1,462,634 – Apr 2014 916,491 876,740 – Apr 2013 2,436,201 2,339,374
Awards outstanding at: | ||||||||||||||
Month of issue | 30 June 2012 | 12 September 2012 | Exercise price (g) | Exercise period/release date | ||||||||||
BHP Billiton Plc | ||||||||||||||
Group Incentive Scheme | ||||||||||||||
Deferred Shares | ||||||||||||||
December 2011 | 78,169 | 78,169 | – | Aug 2013 – Aug 2016 | ||||||||||
December 2010 | 53,195 | 53,195 | – | Aug 2012 – Aug 2015 | ||||||||||
December 2008 | 109,547 | 106,465 | – | Aug 2010 – Aug 2013 | ||||||||||
December 2007 | 12,165 | – | – | Aug 2009 – Aug 2012 | ||||||||||
Options | ||||||||||||||
December 2010 | 30,389 | 30,389 | £23.71 | Aug 2012 – Aug 2015 | ||||||||||
December 2009 | 16,119 | 16,119 | £18.68 | Aug 2011 – Aug 2014 | ||||||||||
December 2008 | 233,878 | 220,508 | £10.89 | Aug 2010 – Aug 2013 | ||||||||||
December 2007 | 16,656 | – | £16.51 | Aug 2009 – Aug 2012 | ||||||||||
|
|
|
| |||||||||||
550,118 | 504,845 | |||||||||||||
|
|
|
| |||||||||||
Group Short Term Incentive Plan | ||||||||||||||
Deferred Shares | ||||||||||||||
October 2011 | 459,913 | 451,719 | – | Aug 2013 – Aug 2016 | ||||||||||
October 2010 | 313,569 | 153,781 | – | Aug 2012 – Aug 2015 | ||||||||||
October 2009 | 117,071 | 101,250 | – | Aug 2011 – Aug 2014 | ||||||||||
Options | ||||||||||||||
October 2010 | 66,555 | 42,473 | £22.08 | Aug 2012 – Aug 2015 | ||||||||||
October 2009 | 29,457 | 27,958 | £16.44 | Aug 2011 – Aug 2014 | ||||||||||
|
|
|
| |||||||||||
986,565 | 777,181 | |||||||||||||
|
|
|
|
Notes to Financial Statements continued
32 Employee share ownership plans continued
Awards outstanding at: | Awards outstanding at: | ||||||||||||||||||||||
Month of issue | 30 June 2010 | 7 September 2010 | Exercise price (g) | Exercise period / release date | 30 June 2012 | 12 September 2012 | Exercise price (g) | Exercise period/release date | |||||||||||||||
Performance Share Plan Performance Rights | |||||||||||||||||||||||
November 2001 (LTI) | 58,563 | 58,563 | — | Oct 2004 – Aug 2011 | |||||||||||||||||||
58,563 | 58,563 | ||||||||||||||||||||||
Shareplus | |||||||||||||||||||||||
September 2009 to June 2010 | 1,290,786 | 1,260,866 | — | Apr 2012 | |||||||||||||||||||
September 2008 to June 2009 | 1,141,974 | 1,118,091 | — | Apr 2011 | |||||||||||||||||||
2,432,760 | 2,378,957 | ||||||||||||||||||||||
BHP Billiton Plc | |||||||||||||||||||||||
Co-Investment Plan | |||||||||||||||||||||||
October 2001 | 22,996 | 7,997 | — | Oct 2003 – Sep 2011 | |||||||||||||||||||
22,996 | 7,997 | ||||||||||||||||||||||
Group Incentive Scheme | |||||||||||||||||||||||
Deferred Shares | |||||||||||||||||||||||
December 2009 | 45,819 | 45,819 | — | Aug 2011 – Aug 2014 | |||||||||||||||||||
December 2008 | 590,034 | 426,709 | — | Aug 2010 – Aug 2013 | |||||||||||||||||||
December 2007 | 109,600 | 107,975 | — | Aug 2009 – Aug 2012 | |||||||||||||||||||
December 2006 | 73,052 | 68,979 | — | Aug 2008 – Aug 2011 | |||||||||||||||||||
December 2005 | 24,242 | — | — | Aug 2007 – Aug 2010 | |||||||||||||||||||
Options | |||||||||||||||||||||||
December 2009 | 16,119 | 16,119 | £ | 18.68 | Aug 2011 – Aug 2014 | ||||||||||||||||||
December 2008 | 936,622 | 796,907 | £ | 10.89 | Aug 2010 – Aug 2013 | ||||||||||||||||||
December 2007 | 134,451 | 134,451 | £ | 16.51 | Aug 2009 – Aug 2012 | ||||||||||||||||||
December 2006 | 71,817 | 71,817 | £ | 9.72 | Aug 2008 – Aug 2011 | ||||||||||||||||||
December 2005 | 89,838 | — | £ | 8.82 | Aug 2007 – Aug 2010 | ||||||||||||||||||
2,091,594 | 1,668,776 | ||||||||||||||||||||||
Group Short-Term Incentive Plan | |||||||||||||||||||||||
Deferred Shares | |||||||||||||||||||||||
December 2009 | 420,997 | 419,030 | — | Aug 2011 – Aug 2014 | |||||||||||||||||||
Options | |||||||||||||||||||||||
December 2009 | 29,457 | 29,457 | £ | 16.44 | Aug 2011 – Aug 2014 | ||||||||||||||||||
450,454 | 448,487 | ||||||||||||||||||||||
Long Term Incentive Plan Performance Shares | |||||||||||||||||||||||
December 2011 | 293,020 | 293,020 | – | Aug 2016 – Aug 2021 | |||||||||||||||||||
December 2010 | 240,000 | 240,000 | – | Aug 2015 – Aug 2020 | |||||||||||||||||||
December 2009 | 240,000 | 240,000 | — | Aug 2014 – Aug 2019 | 240,000 | 240,000 | – | Aug 2014 – Aug 2019 | |||||||||||||||
December 2008 | 550,839 | 550,839 | — | Aug 2013 – Aug 2018 | 550,839 | 550,839 | – | Aug 2013 – Aug 2018 | |||||||||||||||
December 2007 | 1,895,178 | 1,866,560 | — | Aug 2012 – Aug 2017 | 1,758,395 | 1,067,514 | – | Aug 2012 – Aug 2017 | |||||||||||||||
December 2006 | 1,954,560 | 1,921,109 | — | Aug 2011 – Aug 2016 | 447,366 | 376,491 | – | Aug 2011 – Aug 2016 | |||||||||||||||
December 2005 | 2,045,174 | 1,494,762 | — | Aug 2010 – Aug 2015 | 268,583 | 251,166 | – | Aug 2010 – Aug 2015 | |||||||||||||||
December 2004 | 338,954 | 279,417 | — | Aug 2009 – Aug 2014 | 143,067 | 111,567 | – | Aug 2009 – Aug 2014 | |||||||||||||||
|
| ||||||||||||||||||||||
7,024,705 | 6,352,687 | 3,941,270 | 3,130,597 | ||||||||||||||||||||
|
| ||||||||||||||||||||||
Management Award Plan | |||||||||||||||||||||||
December 2009 | 927,194 | 912,763 | — | Aug 2012 – Aug 2015 | |||||||||||||||||||
October 2011 and March 2012 | 1,033,390 | 1,033,171 | – | Aug 2014 – Aug 2017 | |||||||||||||||||||
October 2010 and March 2011 | 761,900 | 711,538 | – | Aug 2013 – Aug 2016 | |||||||||||||||||||
October 2009 and March 2010 | 784,250 | 455,750 | – | Aug 2012 – Aug 2015 | |||||||||||||||||||
November 2008 and March 2009 | 883,347 | 862,750 | — | Aug 2011 – Aug 2014 | 257,500 | 231,000 | – | Aug 2011 – Aug 2014 | |||||||||||||||
|
| ||||||||||||||||||||||
1,810,541 | 1,775,513 | 2,837,040 | 2,431,459 | ||||||||||||||||||||
|
| ||||||||||||||||||||||
Shareplus | |||||||||||||||||||||||
September 2009 to June 2010 | 313,667 | 301,213 | — | Apr 2012 | |||||||||||||||||||
September 2008 to June 2009 | 294,264 | 280,933 | — | Apr 2011 | |||||||||||||||||||
September 2011 to June 2012 | 358,160 | 342,877 | – | Apr 2014 | |||||||||||||||||||
September 2010 to June 2011 | 230,196 | 218,297 | – | Apr 2013 | |||||||||||||||||||
|
| ||||||||||||||||||||||
607,931 | 582,146 | 588,356 | 561,174 | ||||||||||||||||||||
|
|
(a) | Awards were made to senior management under four active employee ownership plans in BHP Billiton for the year ended 30 June |
Notes to Financial Statements continued
32 Employee share ownership plans continued
(i) | GIS and GSTIP |
The GIS awards are split equally between a cash award (being a percentage of base salary) and a grant of Deferred Shares and/or Options. The GSTIP is a replacement plan to the GIS for certain employees below the GMC and was first introduced during the year ended 30 June 2009. Awards are split equally between a cash award (being a percentage of base salary) and a grant of Deferred Shares and/or Options. Deferred Shares and/or Options are subject to a two-year vesting period before they can be exercised. If, during that period, an individual resigns without the Remuneration Committee’s consent, or is dismissed for cause, their entitlement is forfeited. Deferred Shares and/or Options in respect of the year ended 30 June 20102012 will be awarded during the year ending 30 June 2011.2013.
(ii) | LTIP and MAP |
The LTIP awards are in the form of Performance Shares, and are awarded annually. The performance hurdle applicable to the awards granted requires the Group’s Total Shareholder Return (TSR) over a five-year performance period to be greater than a combination of the weighted average TSR of a peer group of companies.companies and of the Morgan Stanley Capital Index World. To the extent that the performance hurdle is not achieved, awards are forfeited. There is no retesting. For all Performance Shares to vest, the Group’s TSR must exceed the weighted average TSR of the Index by a specified percentage, determined each year
by the Remuneration Committee. Since the establishment of the LTIP in 2004, this percentage has been set each year at 5.5 per cent. For performance between the weighted average TSR of the Index and 5.5 per cent per annum above the Index, vesting occurs on a sliding scale.
The MAP is a replacement plan to the LTIP for employees below the GMC. Under the MAP participants receive an Award of Restricted Shares, the number of which is determined by role, performance and organisational level. There are no performance conditions attached to the Award and all the shares that have been granted will vest at the end of three years providing participants remain in employment over that time.
Participants in all award plansAll awards issued prior to 1 July 2011 are eligible to receive a payment equal to the dividend amount that would have been earned on the underlying shares represented by the Deferred Shares, Options, Restricted Shares and Performance Shares awarded to those participants (the Dividend Equivalent Payment). The Dividend Equivalent Payment is made to the participants once the underlying ordinary shares are issued or transferred to them. No Dividend Equivalent Payment is made in respect of Deferred Shares, Options, Restricted Shares and Performance Shares that lapse. Awards issued after 1 July 2011 under the GSTIP and MAP plans are no longer eligible to receive the Dividend Equivalent Payment.
(b) | Shareplus, an all-employee share purchase plan, commenced in April 2007. Employees may contribute up to US$5,000 to acquire shares (Acquired Shares) in any Plan year. On the third anniversary of the start of a Plan year, the Company will match the number of Acquired Shares held by the employee at that time with Matched Shares. The employees have no beneficial entitlement to the Matched Shares until they are awarded. Acquired Shares are purchased on a quarterly basis. Employees can sell their Acquired Shares at any time. If, prior to the third anniversary, an individual sells their Acquired Shares, resigns without the Remuneration Committee’s consent or is dismissed for cause, their entitlement to Matched Shares is forfeited. |
(c) | The fair value of awards as presented in the tables above represents the fair value at grant date. The fair values of awards granted were estimated using a Monte Carlo simulation methodology, Black-Scholes option pricing technique and net present value technique. |
(d) | The risk-free interest rate used |
(e) | Historical volatility has been used to estimate the volatility of the share price. |
(f) | Awards issued under these plans occurred before 7 November 2002 and as such are exempt from the provisions of IFRS 2 ‘Share-based Payment’. Details of these plans have been provided here for information purposes only. |
(g) | Exercise price on awards issued is equal to the exercise price as per awards outstanding. |
(h) | Shares issued on exercise of BHP Billiton’s employee share ownership plans include shares purchased on-market. |
In respect of employee share awards, the Group utilises the following trusts: |
The Billiton Employee Share Ownership Plan Trust |
The BHP Performance Share Plan Trust |
The BHP Billiton Limited Executive Incentive |
Notes to Financial Statements continued
2010 Number | 2009 Number | 2008 Number | 2012 Number | 2011 Number | 2010 Number | |||||||||||||
Average number of employees(a) | ||||||||||||||||||
Petroleum | 2,178 | 2,105 | 2,143 | 3,058 | 2,308 | 2,178 | ||||||||||||
Aluminium | 4,471 | 4,938 | 5,145 | 5,050 | 4,599 | 4,471 | ||||||||||||
Base Metals | 7,434 | 7,731 | 7,443 | 8,775 | 7,602 | 7,434 | ||||||||||||
Diamonds and Specialty Products | 1,689 | 1,923 | 2,043 | 1,905 | 1,737 | 1,689 | ||||||||||||
Stainless Steel Materials | 3,481 | 4,039 | 4,223 | 3,578 | 3,412 | 3,481 | ||||||||||||
Iron Ore | 3,624 | 3,254 | 3,105 | 5,784 | 4,047 | 3,624 | ||||||||||||
Manganese | 2,549 | 2,532 | 2,142 | 2,760 | 2,426 | 2,549 | ||||||||||||
Metallurgical Coal | 3,533 | 3,892 | 3,680 | 4,535 | 4,019 | 3,533 | ||||||||||||
Energy Coal | 8,762 | 8,437 | 9,183 | 8,977 | 8,752 | 8,762 | ||||||||||||
Group and unallocated | 1,849 | 2,139 | 2,625 | 1,948 | 1,855 | 1,849 | ||||||||||||
|
|
| ||||||||||||||||
39,570 | 40,990 | 41,732 | 46,370 | 40,757 | 39,570 | |||||||||||||
|
|
|
(a) | Average employee numbers include |
2010 US$M | 2009 US$M | 2008 US$M | ||||
Fees payable to the Group’s auditor for audit services | ||||||
Audit of the Group’s annual report | 3.799 | 4.011 | 3.517 | |||
Audit of subsidiaries and associates pursuant to legislation(a) | 9.578 | 11.312 | 10.159 | |||
Total audit services | 13.377 | 15.323 | 13.676 | |||
Fees payable to the Group’s auditor for other services | ||||||
Other services pursuant to legislation(b) | 5.433 | 6.050 | 5.009 | |||
Other services relating to taxation(c) | 0.065 | 0.068 | 0.063 | |||
Other services relating to corporate finance(d) | 2.308 | 3.571 | 3.253 | |||
All other services(e) | 1.021 | 0.762 | 1.085 | |||
Total other services | 8.827 | 10.451 | 9.410 | |||
Total fees | 22.204 | 25.774 | 23.086 | |||
2012 | 2011 | 2010 | ||||||||||
US$M | US$M | US$M | ||||||||||
Fees payable to the Group’s auditor for assurance services | ||||||||||||
Audit of the Group’s annual report(a) | 4.386 | 4.216 | 4.135 | |||||||||
Audit of subsidiaries and associates(b) | 16.752 | 12.729 | 10.428 | |||||||||
Audit-related assurance services(c) | 6.317 | 4.764 | 4.400 | |||||||||
Other assurance services(d) | 3.637 | 2.270 | 1.344 | |||||||||
|
|
|
|
|
| |||||||
Total assurance services | 31.092 | 23.979 | 20.307 | |||||||||
|
|
|
|
|
| |||||||
Fees payable to the Group’s auditor for other services | ||||||||||||
Other services relating to taxation(e) | – | – | 0.065 | |||||||||
Other services relating to corporate finance(f) | 2.378 | 1.243 | 2.308 | |||||||||
All other services(g) | 1.407 | 1.104 | 1.021 | |||||||||
|
|
|
|
|
| |||||||
Total other services | 3.785 | 2.347 | 3.394 | |||||||||
|
|
|
|
|
| |||||||
Total fees | 34.877 | 26.326 | 23.701 | |||||||||
|
|
|
|
|
|
All amounts were paid to KPMG or KPMG affiliated firms. Fees are determined in local currencies and are billed in US dollars based on the exchange rate at the beginning of the relevant financial year.
(a) | Comprises the |
(b) | Comprises the audits of the Group’s subsidiaries and associates, including the audit of Petrohawk subsequent to acquisition, as well as audit fees of US$ |
Mainly comprises review of half year reports, |
Mainly comprises assurance in respect of the Group’s sustainability reporting. |
(e) | Mainly comprises tax compliance services. |
Mainly comprises services in connection with acquisitions, divestments and debt raising transactions. |
(g) | ||
Mainly comprises non-statutory assurance based procedures and advice on accounting matters. |
Notes to Financial Statements continued
On 2027 August 2010,2012, the Group announced it had signed an all-cash offeragreement to acquire allsell its wholly owned Yeelirrie uranium deposit in Western Australia to Cameco Corporation for US$430 million. The sale is subject to relevant approvals from the Australian Foreign Investment Review Board and the Government of Western Australia.
On 1 February 2012, the issuedGroup announced it had exercised an option to sell its 37.8 per cent non-operated interest in Richards Bay Minerals, South Africa, and outstanding common shares of Potash Corporation of Saskatchewan Inc. (PotashCorp) at a price ofwould exit the titanium business. On 7 September 2012, the Group announced it had completed the sale to Rio Tinto. Pursuant to the prescribed valuation process, the Group has sold its entire interest in Richards Bay Minerals for US$130 per common share. As part of this transaction a funding facility of US$451.9 billion has been established.before adjustments.
Other than the matters outlined above or elsewhere in these financial statements, no matters or circumstances have arisen since the end of the financial year that have significantly affected, or may significantly affect, the operations, results of operations or state of affairs of the BHP Billiton Group in subsequent accounting periods.
9.2 Not required for US reporting
In accordance with a resolution of the Directors of the BHP Billiton Group, the Directors declare that:
(a) | in the Directors’ opinion the financial statements and notes, set out in sections 9.1 and 9.2 are in accordance with the UK Companies Act 2006 and the Australian Corporations Act 2001, including: |
(i) | Complying with the applicable Accounting Standards; and |
(ii) | Giving a true and fair view of the financial position of each of BHP Billiton Limited, BHP Billiton Plc, the BHP Billiton Group and the undertakings included in the consolidation taken as a whole as at 30 June 2012 and of their performance for the year ended 30 June 2012; |
(b) | the financial report also complies with International Financial Reporting Standards, as disclosed in note 1; |
(c) | the Directors’ Report includes a fair review of the development and performance of the business and the financial position of the BHP Billiton Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that the Group faces; and |
(d) | in the Directors’ opinion there are reasonable grounds to believe that each of the BHP Billiton Group, BHP Billiton Limited and BHP Billiton Plc will be able to pay its debts as and when they become due and payable. |
The Directors have been given the declarations required by Section 295A of the Australian Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2012.
Signed in accordance with a resolution of the Board of Directors.
Jac Nasser AO
Chairman
Marius Kloppers
Chief Executive Officer
Dated this 12th day of September 2012
9.4 | Statement of Directors’ Responsibilities in respect of the Annual Report and the Financial Statements |
The Directors are responsible for preparing the Annual Report and the Group and parent company financial statements in accordance with applicable law and regulations. References to the ‘Group and parent company financial statements’ are made in relation to the Group and individual parent company financial statements of BHP Billiton Plc.
UK company law requires the Directors to prepare Group and parent company financial statements for each financial year. The Directors are required to prepare the Group financial statements in accordance with IFRS as adopted by the EU and applicable law and have elected to prepare the parent company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).
The Group financial statements must, in accordance with IFRS as adopted by the EU and applicable law, present fairly the financial position and performance of the Group; references in the UK Companies Act 2006 to such financial statements giving a true and fair view are references to their achieving a fair presentation.
The parent company financial statements must, in accordance with UK Generally Accepted Accounting Practice, give a true and fair view of the state of affairs of the parent company at the end of the financial year and of the profit or loss of the parent company for the financial year.
In preparing each of the Group and parent company financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
for the Group financial statements, state whether they have been prepared in accordance with IFRS as adopted by the EU;
for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent company financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the UK Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
9.5 Not required for US reporting
9.6 Independent auditors’ reports
Report of Independent Registered Public Accounting Firms
To the members of BHP Billiton Plc and BHP Billiton Limited:
We have audited the BHP Billiton Group’s (comprising BHP Billiton Plc, BHP Billiton Limited and their respective subsidiaries) internal control over financial reporting as of 30 June 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). BHP Billiton Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying section 5.13.1 Risk and Audit Committee Report. Our responsibility is to express an opinion on the BHP Billiton Group’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the BHP Billiton Group maintained, in all material respects, effective internal control over financial reporting as of 30 June 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the BHP Billiton Group as of 30 June 2012 and 2011, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated cash flow statements for each of the years in the three-year period ended 30 June 2012, and our report dated 18 September 2012 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG Audit Plc | /s/ KPMG | |
KPMG Audit Plc London, United Kingdom 18 September 2012 | KPMG Melbourne, Australia 18 September 2012 |
Report of Independent Registered Public Accounting Firms
To the members of BHP Billiton Plc and BHP Billiton Limited:
We have audited the accompanying consolidated balance sheets of the BHP Billiton Group (comprising BHP Billiton Plc, BHP Billiton Limited and their respective subsidiaries) as of 30 June 2012 and 2011, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated cash flow statements for each of the years in the three-year period ended 30 June 2012. These consolidated financial statements are the responsibility of the BHP Billiton Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the BHP Billiton Group as of 30 June 2012 and 2011, and the results of its operations and its cash flows for each of the years in the three-year period ended 30 June 2012, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
As discussed in Note 1 to the accompanying consolidated financial statements, the BHP Billiton Group has elected to change its method of determining when borrowings are classified as current or non-current.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the BHP Billiton Group’s internal control over financial reporting as of 30 June 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated 18 September 2012 expressed an unqualified opinion on the effectiveness of BHP Billiton Group’s internal control over financial reporting.
/s/ KPMG Audit Plc | /s/ KPMG | |
KPMG Audit Plc London, United Kingdom 18 September 2012 | KPMG Melbourne, Australia 18 September 2012 |
9.7 Supplementary oil and gas information – unaudited
In accordance with the requirements of the Financial Accounting Standards Board (FASB) Accounting Standard Codification ‘Extractive Activities-Oil and Gas’ (Topic 932) and SEC requirements set out in Subpart 1200 of Regulation S-K, the Group is presenting certain disclosures about its oil and gas activities. These disclosures are presented below as supplementary oil and gas information, in addition to information disclosed in section 2.2.2 ‘Petroleum Customer Segment Group’, section 2.3.1 ‘Production – Petroleum’ and section 2.13.1 ‘Petroleum Reserves’.
The information set out in this section is referred to as unaudited as it is not included in the scope of the audit opinion of the independent auditor on the Consolidated Financial Statements, refer section 9.6.
Reserves and production
Proved oil and gas reserves and net crude oil and condensate, natural gas, LNG and NGL production information is included in thesection 2.3.1 ‘Production – Petroleum’ and section 2.13.1 ‘Petroleum Reserves’ and ‘Production’ sections of this Annual Report.
Capitalised costs incurred relating to oil and gas exploration and production activities
The following table shows the aggregate capitalised costs relating to oil and gas exploration and production activities and related accumulated depreciation, depletion, amortisation and valuation allowances.
Australia | United States | Other (a) | Total | |||||||||||||||||||||||||
Australia US$M | United States US$M | Other (a) US$M | Total US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||||
Capitalised cost | ||||||||||||||||||||||||||||
2012 | ||||||||||||||||||||||||||||
Unproved properties | 363 | 11,800 | 155 | 12,318 | ||||||||||||||||||||||||
Proved properties | 12,572 | 20,008 | 3,846 | 36,426 | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Total costs | 12,935 | 31,808 | 4,001 | 48,744 | ||||||||||||||||||||||||
Less: Accumulated depreciation, depletion, amortisation and valuation allowances | (5,973 | ) | (7,447 | ) | (3,211 | ) | (16,631 | ) | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Net capitalised costs | 6,962 | 24,361 | 790 | 32,113 | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
2011 | ||||||||||||||||||||||||||||
Unproved properties | 321 | 3,143 | 116 | 3,580 | ||||||||||||||||||||||||
Proved properties | 10,935 | 9,248 | 4,304 | 24,487 | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Total costs | 11,256 | 12,391 | 4,420 | 28,067 | ||||||||||||||||||||||||
Less: Accumulated depreciation, depletion, amortisation and valuation allowances | (5,285 | ) | (3,183 | ) | (3,601 | ) | (12,069 | ) | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Net capitalised costs | 5,971 | 9,208 | 819 | 15,998 | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
2010 | ||||||||||||||||||||||||||||
Unproved properties | 276 | 711 | 61 | 1,048 | 276 | 711 | 61 | 1,048 | ||||||||||||||||||||
Proved properties | 9,578 | 6,373 | 4,071 | 20,022 | 9,578 | 6,373 | 4,071 | 20,022 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Total costs | 9,854 | 7,084 | 4,132 | 21,070 | 9,854 | 7,084 | 4,132 | 21,070 | ||||||||||||||||||||
Less: Accumulated depreciation, depletion, amortisation and valuation allowances | (4,608 | ) | (2,373 | ) | (3,237 | ) | (10,218 | ) | (4,608 | ) | (2,373 | ) | (3,237 | ) | (10,218 | ) | ||||||||||||
|
|
|
| |||||||||||||||||||||||||
Net capitalised costs | 5,246 | 4,711 | 895 | 10,852 | 5,246 | 4,711 | 895 | 10,852 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||
Unproved properties | 224 | 606 | 24 | 854 | ||||||||||||||||||||||||
Proved properties | 8,269 | 5,818 | 4,115 | 18,202 | ||||||||||||||||||||||||
Total costs | 8,493 | 6,424 | 4,139 | 19,056 | ||||||||||||||||||||||||
Less: Accumulated depreciation, depletion, amortisation and valuation allowances | (4,008 | ) | (1,216 | ) | (3,232 | ) | (8,456 | ) | ||||||||||||||||||||
Net capitalised costs | 4,485 | 5,208 | 907 | 10,600 | ||||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||
Unproved properties | 193 | 544 | 24 | 761 | ||||||||||||||||||||||||
Proved properties | 7,171 | 4,997 | 4,503 | 16,671 | ||||||||||||||||||||||||
Total costs | 7,364 | 5,541 | 4,527 | 17,432 | ||||||||||||||||||||||||
Less: Accumulated depreciation, depletion, amortisation and valuation allowances | (3,479 | ) | (684 | ) | (3,418 | ) | (7,581 | ) | ||||||||||||||||||||
Net capitalised costs | 3,885 | 4,857 | 1,109 | 9,851 | ||||||||||||||||||||||||
(a) | See |
Costs incurred relating to oil and gas property acquisition, exploration and development activities
The following table shows costs incurred relating to oil and gas property acquisition, exploration and development activities (whether charged to expense or capitalised). Amounts shown include interest capitalised.
Property acquisition costs represent costs incurred to purchase or lease oil and gas properties. Exploration costs include costs of geological and geophysical activities and drilling of exploratory wells. Development costs were all incurred to develop booked proved undeveloped reserves.
Supplementary oil and gas information – unaudited continued
Australia | United States | Other (a) | Total | |||||||||||||||||||||
US$M | US$M | US$M | US$M | |||||||||||||||||||||
2012 | ||||||||||||||||||||||||
Acquisitions of proved property | – | 4,746 | – | 4,746 | ||||||||||||||||||||
Acquisitions of unproved property | 5 | 10,366 | – | 10,371 | ||||||||||||||||||||
Exploration(a) | 251 | 690 | 331 | 1,272 | ||||||||||||||||||||
Development | 1,663 | 4,460 | 102 | 6,225 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total costs(b) | 1,919 | 20,262 | 433 | 22,614 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
2011 | ||||||||||||||||||||||||
Acquisitions of proved property | – | 2,334 | – | 2,334 | ||||||||||||||||||||
Acquisitions of unproved property | 30 | 2,469 | 8 | 2,507 | ||||||||||||||||||||
Exploration(a) | 187 | 137 | 351 | 675 | ||||||||||||||||||||
Development | 1,454 | 558 | 127 | 2,139 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total costs(b) | 1,671 | 5,498 | 486 | 7,655 | ||||||||||||||||||||
Australia US$M | United States US$M | Other US$M | Total US$M |
|
|
|
| |||||||||||||||||
2010 | ||||||||||||||||||||||||
Acquisitions of proved property | — | — | — | — | – | – | – | – | ||||||||||||||||
Acquisitions of unproved property | — | 40 | — | 40 | – | 40 | – | 40 | ||||||||||||||||
Exploration(a) | 109 | 371 | 371 | 851 | 109 | 371 | 371 | 851 | ||||||||||||||||
Development | 1,297 | 525 | 184 | 2,006 | 1,297 | 525 | 184 | 2,006 | ||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total costs(b) | 1,406 | 936 | 555 | 2,897 | 1,406 | 936 | 555 | 2,897 | ||||||||||||||||
|
|
|
| |||||||||||||||||||||
2009 | ||||||||||||||||||||||||
Acquisitions of proved property | — | — | — | — | ||||||||||||||||||||
Acquisitions of unproved property | — | 60 | — | 60 | ||||||||||||||||||||
Exploration(a) | 86 | 183 | 219 | 488 | ||||||||||||||||||||
Development | 1,153 | 807 | 115 | 2,075 | ||||||||||||||||||||
Total costs(b) | 1,239 | 1,050 | 334 | 2,623 | ||||||||||||||||||||
2008 | ||||||||||||||||||||||||
Acquisitions of proved property | — | — | — | — | ||||||||||||||||||||
Acquisitions of unproved property | — | — | — | — | ||||||||||||||||||||
Exploration(a) | 121 | 392 | 179 | 692 | ||||||||||||||||||||
Development | 999 | 1,124 | 80 | 2,203 | ||||||||||||||||||||
Total costs(b) | 1,120 | 1,516 | 259 | 2,895 | ||||||||||||||||||||
(a) | Represents gross exploration expenditure. |
(b) | Total costs include US$ |
Results of operations from oil and gas producing activities
The following information is similar to the disclosures in note 2 to the financial statements ‘Segment reporting’ but differs in several respects as to the level of detail and geographic information. Amounts shown in the following table exclude financial income, financial expenses, and general corporate overheads.
Income taxes were determined by applying the applicable statutory rates to pre-tax income with adjustments for permanent differences and tax credits. Certain allocations of tax provisions among geographic areas were necessary and are based on management’s assessment of the principal factors giving rise to the tax obligation.
Revenues include sales to affiliates but amounts are not significant.
|
Supplementary oil and gas information – unaudited continued
Australia US$M | United States US$M | Other US$M | Total US$M | |||||||||
2010 | ||||||||||||
Oil and gas revenue | 4,321 | 3,177 | 1,198 | 8,696 | ||||||||
Production costs | (586 | ) | (275 | ) | (216 | ) | (1,077 | ) | ||||
Exploration expenses | (60 | ) | (248 | ) | (329 | ) | (637 | ) | ||||
Depreciation, depletion and amortisation | (597 | ) | (1,179 | ) | (212 | ) | (1,988 | ) | ||||
Production taxes(a) | (264 | ) | — | (8 | ) | (272 | ) | |||||
2,814 | 1,475 | 433 | 4,722 | |||||||||
Income taxes | (815 | ) | (516 | ) | (326 | ) | (1,657 | ) | ||||
Royalty related taxes(b) | (397 | ) | — | 14 | (383 | ) | ||||||
Results of oil and gas producing activities(c) | 1,602 | 959 | 121 | 2,682 | ||||||||
2009 | ||||||||||||
Oil and gas revenue | 4,337 | 1,439 | 1,243 | 7,019 | ||||||||
Production costs | (376 | ) | (172 | ) | (206 | ) | (754 | ) | ||||
Exploration expenses | (55 | ) | (123 | ) | (222 | ) | (400 | ) | ||||
Depreciation, depletion and amortisation | (553 | ) | (560 | ) | (248 | ) | (1,361 | ) | ||||
Production taxes(a) | (293 | ) | — | (9 | ) | (302 | ) | |||||
3,060 | 584 | 558 | 4,202 | |||||||||
Income taxes | (928 | ) | (214 | ) | (347 | ) | (1,489 | ) | ||||
Royalty related taxes(b) | (470 | ) | — | (11 | ) | (481 | ) | |||||
Results of oil and gas producing activities(c) | 1,662 | 370 | 200 | 2,232 | ||||||||
2008 | ||||||||||||
Oil and gas revenue | 4,860 | 1,358 | 1,882 | 8,100 | ||||||||
Production costs | (301 | ) | (103 | ) | (233 | ) | (637 | ) | ||||
Exploration expenses | (48 | ) | (187 | ) | (124 | ) | (359 | ) | ||||
Depreciation, depletion and amortisation | (461 | ) | (312 | ) | (330 | ) | (1,103 | ) | ||||
Production taxes(a) | (229 | ) | — | (11 | ) | (240 | ) | |||||
3,821 | 756 | 1,184 | 5,761 | |||||||||
Income taxes | (1,650 | ) | (266 | ) | (723 | ) | (2,639 | ) | ||||
Royalty related taxes(b) | (590 | ) | — | (5 | ) | (595 | ) | |||||
Results of oil and gas producing activities(c) | 1,581 | 490 | 456 | 2,527 | ||||||||
Australia | United States | Other (a) | Total | |||||||||||||
US$M | US$M | US$M | US$M | |||||||||||||
2012 | ||||||||||||||||
Oil and gas revenue | 6,233 | 4,894 | 1,580 | 12,707 | ||||||||||||
Production costs | (684 | ) | (1,186 | ) | (354 | ) | (2,224 | ) | ||||||||
Exploration expenses | (156 | ) | (275 | ) | (304 | ) | (735 | ) | ||||||||
Depreciation, depletion, amortisation and valuation allowance (a) | (707 | ) | (4,964 | ) | (218 | ) | (5,889 | ) | ||||||||
Production taxes(b) | (342 | ) | (190 | ) | (30 | ) | (562 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
4,344 | (1,721 | ) | 674 | 3,297 | ||||||||||||
Income taxes | (1,332 | ) | 745 | (534 | ) | (1,121 | ) | |||||||||
Royalty-related taxes(c) | (641 | ) | – | (3 | ) | (644 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Results of oil and gas producing activities(d) | 2,371 | (976 | ) | 137 | 1,532 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
2011 | ||||||||||||||||
Oil and gas revenue | 6,370 | 2,938 | 1,302 | 10,610 | ||||||||||||
Production costs | (590 | ) | (353 | ) | (231 | ) | (1,174 | ) | ||||||||
Exploration expenses | (159 | ) | (104 | ) | (296 | ) | (559 | ) | ||||||||
Depreciation, depletion, amortisation and valuation allowance (a) | (851 | ) | (893 | ) | (230 | ) | (1,974 | ) | ||||||||
Production taxes(b) | (332 | ) | – | (38 | ) | (370 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
4,438 | 1,588 | 507 | 6,533 | |||||||||||||
Income taxes | (1,068 | ) | (566 | ) | (452 | ) | (2,086 | ) | ||||||||
Royalty-related taxes(c) | (734 | ) | – | (9 | ) | (743 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Results of oil and gas producing activities(d) | 2,636 | 1,022 | 46 | 3,704 | ||||||||||||
|
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|
|
|
|
|
| |||||||||
2010 | ||||||||||||||||
Oil and gas revenue | 4,321 | 3,177 | 1,198 | 8,696 | ||||||||||||
Production costs | (586 | ) | (275 | ) | (216 | ) | (1,077 | ) | ||||||||
Exploration expenses | (60 | ) | (248 | ) | (329 | ) | (637 | ) | ||||||||
Depreciation, depletion, amortisation and valuation allowance (a) | (597 | ) | (1,179 | ) | (212 | ) | (1,988 | ) | ||||||||
Production taxes(b) | (264 | ) | – | (8 | ) | (272 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
2,814 | 1,475 | 433 | 4,722 | |||||||||||||
Income taxes | (815 | ) | (516 | ) | (326 | ) | (1,657 | ) | ||||||||
Royalty-related taxes(c) | (397 | ) | – | 14 | (383 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Results of oil and gas producing activities(d) | 1,602 | 959 | 121 | 2,682 | ||||||||||||
|
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|
|
|
|
|
|
(a) | Includes valuation allowance of US$2,986 million (2011: US$76 million; 2010: US$ nil). |
(b) | Includes royalties and excise duty. |
Includes petroleum resource rent tax and petroleum revenue tax where applicable. |
Amounts shown exclude financial income, financial expenses and general corporate overheads and, accordingly, do not represent all of the operations attributable to the Petroleum segment presented in note 2 to the financial statements. There are no non-controlling equity |
Standardised measure of discounted future net cash flows relating to proved oil and gas reserves (‘Standardised measure’)(Standardised measure)
The purpose of this disclosure is to provide data with respect to the estimated future net cash flows from future production of proved developed and undeveloped reserves of crude oil, condensate, natural gas liquids and natural gas.
The Standardised measure is based on the Group’s estimated proved reserves (as presented in section 2.14.12.13.1 ‘Petroleum Reserves’) and this data should be read in conjunction with that disclosure, which is hereby incorporated by reference into this section. The Standardised measure is prepared on a basis which presumes that year endyear-end economic and operating conditions will continue over the periods in which year endyear-end proved reserves would be produced. The effects of future inflation, future changes in exchange rates, expected future changes in technology, taxes, operating practices and any regulatory changes have not been included.
The Standardised measure is prepared by projecting the estimated future annual production of proved reserves owned at period end and pricing that future production to derive future cash inflows. Estimates of future cash flows for 2012, 2011 and 2010 are computed using the average first-day-of-the-month price during the 12-month period for 2010 and using the year end prices for 2009 and 2008.period. Future price increases for all periods presented are considered only to the extent that they are provided by fixed and determinable contractual arrangements in effect at year endyear-end and are not dependent upon future inflation or exchange rate changes.
|
Supplementary oil and gas information – unaudited continued
Future cash inflows for all periods presented are then reduced by future costs of producing and developing the year endyear-end proved reserves based on costs in effect at year endyear-end without regard to future inflation or changes in technology or operating practices. Future development costs include the costs of drilling and equipping development wells and construction of platforms and production facilities to gain access to proved reserves owned at year end.year-end. They also include future costs, net of residual salvage value, associated with the abandonment of wells, dismantling of production platforms and rehabilitation of drilling sites. Future cash inflows are further reduced by future income taxes based on tax rates in effect at year endyear-end and after considering the future deductions and credits applicable to proved properties owned at year end.year-end. The resultant annual future net cash flows (after deductions of operating costs including resource rent taxes, development costs and income taxes) are discounted at 10 per cent per annum to derive the Standardised measure.
Standardised measure of discounted future net cash flows relating to proved oil and gas reserves (Standardised measure)continued
There are many important variables, assumptions and imprecisions inherent in developing the Standardised measure, the most important of which are the level of proved reserves and the rate of production thereof. The Standardised measure is not an estimate of the fair market value of the BHP Billiton Group’s oil and gas reserves. An estimate of fair value would also take into account, among other things, the expected recovery of reserves in excess of proved reserves, anticipated future changes in prices, costs and exchange rates, anticipated future changes in secondary tax and income tax rates and alternative discount factors representing the time value of money and adjustments for risks inherent in producing oil and gas.
Australia | United States | Other | Total | |||||||||||||||||||||||||
Australia US$M | United States US$M | Other US$M | Total US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||||
Standardised measure | ||||||||||||||||||||||||||||
2012 | ||||||||||||||||||||||||||||
Future cash inflows | 52,777 | 67,811 | 6,293 | 126,881 | ||||||||||||||||||||||||
Future production costs | (19,043 | ) | (17,582 | ) | (1,352 | ) | (37,977 | ) | ||||||||||||||||||||
Future development costs | (8,612 | ) | (13,212 | ) | (450 | ) | (22,274 | ) | ||||||||||||||||||||
Future income taxes | (5,485 | ) | (10,414 | ) | (2,332 | ) | (18,231 | ) | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Future net cash flows | 19,637 | 26,603 | 2,159 | 48,399 | ||||||||||||||||||||||||
Discount at 10 per cent per annum | (7,363 | ) | (13,090 | ) | (469 | ) | (20,922 | ) | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Standardised measure | 12,274 | 13,513 | 1,690 | 27,477 | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
2011 | ||||||||||||||||||||||||||||
Future cash inflows | 51,067 | 35,004 | 6,109 | 92,180 | ||||||||||||||||||||||||
Future production costs | (18,143 | ) | (8,757 | ) | (1,247 | ) | (28,147 | ) | ||||||||||||||||||||
Future development costs | (8,935 | ) | (6,909 | ) | (530 | ) | (16,374 | ) | ||||||||||||||||||||
Future income taxes | (5,481 | ) | (4,699 | ) | (2,121 | ) | (12,301 | ) | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Future net cash flows | 18,508 | 14,639 | 2,211 | 35,358 | ||||||||||||||||||||||||
Discount at 10 per cent per annum | (7,955 | ) | (6,937 | ) | (546 | ) | (15,438 | ) | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Standardised measure | 10,553 | 7,702 | 1,665 | 19,920 | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
2010 | ||||||||||||||||||||||||||||
Future cash inflows | 41,544 | 19,792 | 5,810 | 67,146 | 41,544 | 19,792 | 5,810 | 67,146 | ||||||||||||||||||||
Future production costs | (15,618 | ) | (3,060 | ) | (1,336 | ) | (20,014 | ) | (15,618 | ) | (3,060 | ) | (1,336 | ) | (20,014 | ) | ||||||||||||
Future development costs | (6,933 | ) | (3,733 | ) | (607 | ) | (11,273 | ) | (6,933 | ) | (3,733 | ) | (607 | ) | (11,273 | ) | ||||||||||||
Future income taxes | (4,502 | ) | (3,888 | ) | (1,852 | ) | (10,242 | ) | (4,502 | ) | (3,888 | ) | (1,852 | ) | (10,242 | ) | ||||||||||||
|
|
|
| |||||||||||||||||||||||||
Future net cash flows | 14,491 | 9,111 | 2,015 | 25,617 | 14,491 | 9,111 | 2,015 | 25,617 | ||||||||||||||||||||
Discount at 10 per cent per annum | (6,092 | ) | (3,560 | ) | (538 | ) | (10,190 | ) | (6,092 | ) | (3,560 | ) | (538 | ) | �� | (10,190 | ) | |||||||||||
|
|
|
| |||||||||||||||||||||||||
Standardised measure | 8,399 | 5,551 | 1,477 | 15,427 | 8,399 | 5,551 | 1,477 | 15,427 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||
Future cash inflows | 36,016 | 13,463 | 6,354 | 55,833 | ||||||||||||||||||||||||
Future production costs | (14,198 | ) | (1,778 | ) | (1,340 | ) | (17,316 | ) | ||||||||||||||||||||
Future development costs | (7,699 | ) | (2,053 | ) | (672 | ) | (10,424 | ) | ||||||||||||||||||||
Future income taxes | (3,314 | ) | (2,647 | ) | (1,989 | ) | (7,950 | ) | ||||||||||||||||||||
Future net cash flows | 10,805 | 6,985 | 2,353 | 20,143 | ||||||||||||||||||||||||
Discount at 10 per cent per annum | (4,877 | ) | (2,619 | ) | (642 | ) | (8,138 | ) | ||||||||||||||||||||
Standardised measure | 5,928 | 4,366 | 1,711 | 12,005 | ||||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||
Future cash inflows | 63,266 | 27,973 | 9,499 | 100,738 | ||||||||||||||||||||||||
Future production costs | (23,558 | ) | (2,125 | ) | (2,086 | ) | (27,769 | ) | ||||||||||||||||||||
Future development costs | (7,356 | ) | (1,626 | ) | (859 | ) | (9,841 | ) | ||||||||||||||||||||
Future income taxes | (9,941 | ) | (7,852 | ) | (3,214 | ) | (21,007 | ) | ||||||||||||||||||||
Future net cash flows | 22,411 | 16,370 | 3,340 | 42,121 | ||||||||||||||||||||||||
Discount at 10 per cent per annum | (8,490 | ) | (6,176 | ) | (839 | ) | (15,505 | ) | ||||||||||||||||||||
Standardised measure | 13,921 | 10,194 | 2,501 | 26,616 | ||||||||||||||||||||||||
Standardised measure of discounted future net cash flows relating to proved oil and gas reserves (Standardised measure)continued
Changes in the Standardised measure are presented in the following table. The beginning of the year and end of the year totals are shown after reduction for income taxes and these, together with the changes in income tax amounts, are shown as discounted amounts (at 10 per cent per annum). All other items of change represent discounted amounts before consideration of income tax effects.
|
Supplementary oil and gas information – unaudited continued
2012 | 2011 | 2010 | |||||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | US$M | US$M | US$M | ||||||||||||||||
Changes in the Standardised measure | |||||||||||||||||||||
Standardised measure at the beginning of the year | 12,005 | 26,616 | 13,545 | 19,920 | 15,427 | 12,005 | |||||||||||||||
Revisions: | |||||||||||||||||||||
Prices, net of production costs | 4,029 | (21,588 | ) | 20,778 | 14,373 | 8,667 | 4,029 | ||||||||||||||
Revisions of quantity estimates(a) | 2,716 | 1,100 | 1,629 | (3,330 | ) | 2,879 | 2,716 | ||||||||||||||
Accretion of discount | 1,751 | 3,998 | 2,011 | 2,794 | 2,233 | 1,751 | |||||||||||||||
Changes in production timing and other (b) | (89 | ) | (3,690 | ) | (1,792 | ) | (6,209 | ) | (3,866 | ) | (89 | ) | |||||||||
|
|
| |||||||||||||||||||
20,412 | 6,436 | 36,171 | 27,548 | 25,340 | 20,412 | ||||||||||||||||
Sales of oil and gas, net of production costs | (6,964 | ) | (5,421 | ) | (7,156 | ) | (9,450 | ) | (8,375 | ) | (6,964 | ) | |||||||||
Acquisitions of reserves-in-place | — | — | — | 5,661 | 1,079 | – | |||||||||||||||
Sales of reserves-in-place | — | — | — | (16 | ) | – | – | ||||||||||||||
Development costs incurred which reduced previously estimated development costs | 2,006 | 2,075 | 2,203 | 6,225 | 2,138 | 2,006 | |||||||||||||||
Extensions, discoveries, and improved recoveries, net of future costs | 1,375 | 1,056 | 2,199 | 946 | 855 | 1,375 | |||||||||||||||
Changes in future income taxes | (1,402 | ) | 7,859 | (6,801 | ) | (3,437 | ) | (1,117 | ) | (1,402 | ) | ||||||||||
|
|
| |||||||||||||||||||
Standardised measure at the end of the year | 15,427 | 12,005 | 26,616 | 27,477 | 19,920 | 15,427 | |||||||||||||||
|
|
|
(a) | Changes in reserves quantities are shown in the Petroleum Reserves tables in section |
(b) | Includes the effect of foreign exchange and changes in future development costs. |
Accounting for suspended exploratory well costs
Refer to Accounting Policies ‘Exploration and evaluation expenditure’ for a discussion of the accounting policy applied to the cost of exploratory wells. Suspended wells are also reviewed in this context.
The following table presentstables provide the changes to capitalised exploratory well costs that were pending the determination of proved reserves for the three years ended 30 June 2010,2012, 30 June 20092011 and 30 June 2008.2010.
2012 | 2011 | 2010 | |||||||||||||||||||
2010 US$M | 2009 US$M | 2008 US$M | US$M | US$M | US$M | ||||||||||||||||
Movement in capitalised exploratory well costs | |||||||||||||||||||||
Balance at the beginning of the year | 299.7 | 245.9 | 236.3 | 549.4 | 482.3 | 299.7 | |||||||||||||||
Additions to capitalised exploratory well costs pending the determination of proved reserves | 214.8 | 122.4 | 111.2 | 455.1 | 114.2 | 214.8 | |||||||||||||||
Capitalised exploratory well costs charged to expense | 1.0 | (68.6 | ) | (100.1 | ) | (144.1 | ) | (47.1 | ) | 1.0 | |||||||||||
Capitalised exploratory well costs reclassified to wells, equipment, and facilities based on the determination of proved reserves | (33.2 | ) | — | (1.5 | ) | (157.7 | ) | – | (33.2 | ) | |||||||||||
|
|
| |||||||||||||||||||
Balance at the end of the year | 482.3 | 299.7 | 245.9 | 702.7 | 549.4 | 482.3 | |||||||||||||||
|
|
|
The following table provides an ageing of capitalised exploratory well costs, based on the date the drilling was completed, and the number of projects for which exploratory well costs has been capitalised for a period greater than one year since the completion of drilling.
2010 US$M | 2009 US$M | 2008 US$M | ||||
Ageing of capitalised exploratory well costs | ||||||
Exploratory well costs capitalised for a period of one year or less | 213.0 | 83.0 | 78.7 | |||
Exploratory well costs capitalised for a period greater than one year | 269.3 | 216.7 | 167.2 | |||
Balance at the end of the year | 482.3 | 299.7 | 245.9 | |||
2010 | 2009 | 2008 | ||||
Number of projects that have been capitalised for a period greater than one year | 8 | 7 | 7 | |||
|
Supplementary oil and gas information – unaudited continued
2012 | 2011 | 2010 | ||||||||||
US$M | US$M | US$M | ||||||||||
Ageing of capitalised exploratory well costs | ||||||||||||
Exploratory well costs capitalised for a period of one year or less | 339.6 | 114.2 | 213.0 | |||||||||
Exploratory well costs capitalised for a period greater than one year | 363.1 | 435.2 | 269.3 | |||||||||
|
|
|
|
|
| |||||||
Balance at the end of the year | 702.7 | 549.4 | 482.3 | |||||||||
|
|
|
|
|
| |||||||
2012 | 2011 | 2010 | ||||||||||
Number of projects that have been capitalised for a period greater than one year | 10 | 11 | 8 | |||||||||
|
|
|
|
|
|
Drilling and other exploratory and development activities
The number of crude oil and natural gas wells drilled and completed for each of the last three years was as follows:
Net Exploratory Wells | Net Development Wells | Net Exploratory Wells | Net Development Wells | |||||||||||||||||||||||||||||||||||||||
Productive | Dry | Total | Productive | Dry | Total | Total | ||||||||||||||||||||||||||||||||||||
Year ended 30 June 2012 | ||||||||||||||||||||||||||||||||||||||||||
Australia | – | – | – | 1 | – | 1 | 1 | |||||||||||||||||||||||||||||||||||
United States | 4 | 3 | 7 | 190 | 1 | 191 | 198 | |||||||||||||||||||||||||||||||||||
Other | – | 1 | 1 | 2 | 1 | 3 | 4 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Total | 4 | 4 | 8 | 193 | 2 | 195 | 203 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Year ended 30 June 2011 | ||||||||||||||||||||||||||||||||||||||||||
Australia | – | 2 | 2 | 5 | 1 | 6 | 8 | |||||||||||||||||||||||||||||||||||
United States | – | – | – | 21 | 1 | 22 | 22 | |||||||||||||||||||||||||||||||||||
Other | – | 1 | 1 | 1 | – | 1 | 2 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Total | – | 3 | 3 | 27 | 2 | 29 | 32 | |||||||||||||||||||||||||||||||||||
Productive | Dry | Total | Productive | Dry | Total | Total |
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Year ended 30 June 2010 | ||||||||||||||||||||||||||||||||||||||||||
Australia | 1 | — | 1 | 11 | 1 | 12 | 13 | 1 | – | 1 | 11 | 1 | 12 | 13 | ||||||||||||||||||||||||||||
United States | — | 1 | 1 | 1 | — | 1 | 2 | – | 1 | 1 | 1 | – | 1 | 2 | ||||||||||||||||||||||||||||
Other | — | 2 | 2 | 1 | — | 1 | 3 | – | 2 | 2 | 1 | – | 1 | 3 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Total | 1 | 3 | 4 | 13 | 1 | 14 | 18 | 1 | 3 | 4 | 13 | 1 | 14 | 18 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Year ended 30 June 2009 | ||||||||||||||||||||||||||||||||||||||||||
Australia | — | 1 | 1 | 8 | — | 8 | 9 | |||||||||||||||||||||||||||||||||||
United States | — | 1 | 1 | 6 | 1 | 7 | 8 | |||||||||||||||||||||||||||||||||||
Other | — | — | — | 4 | — | 4 | 4 | |||||||||||||||||||||||||||||||||||
Total | – | 2 | 2 | 18 | 1 | 19 | 21 | |||||||||||||||||||||||||||||||||||
Year ended 30 June 2008 | ||||||||||||||||||||||||||||||||||||||||||
Australia | 2 | — | 2 | 7 | — | 7 | 9 | |||||||||||||||||||||||||||||||||||
United States | — | 1 | 1 | 7 | — | 7 | 8 | |||||||||||||||||||||||||||||||||||
Other | — | — | — | 1 | — | 1 | 1 | |||||||||||||||||||||||||||||||||||
Total | 2 | 1 | 3 | 15 | — | 15 | 18 | |||||||||||||||||||||||||||||||||||
The number of wells drilled refers to the number of wells completed at any time during the respective year, regardless of when drilling was initiated. Completion refers to the installation of permanent equipment for production of oil or gas, or, in the case of a dry well, to reporting to the appropriate authority that the well has been abandoned.
An exploratory well is a well drilled to find and produce oil or gas in an unproved area,a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir, or to extend a known reservoir. A development well is a well drilled within the proved arealimits of ana known oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.
A productive well is an exploratory, development or extension well that is not a dry well. A dry well (hole) is an exploratory, development, or extension well that proves to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well.
Oil and gas properties, wells, operations, and acreage
The following tables show the number of gross and net productive crude oil and natural gas wells and total gross and net developed and undeveloped oil and natural gas acreage as at 30 June 2010.2012. A gross well or acre is one in which a working interest is owned, while a net well or acre exists when the sum of fractional working interests owned in gross wells or acres equals one. Productive wells are producing wells and wells mechanically capable of production. Developed acreage is comprised of leased acres that are within an area by or assignable to a productive well. Undeveloped acreage is comprised of leased acres on which wells have not been drilled or completed to a point that would permit the production of economic quantities of oil and gas, regardless of whether such acres contain proved reserves.
The number of productive crude oil and natural gas wells in which we held an interest at 30 June 20102012 was as follows:
Crude Oil Wells | Natural Gas Wells | Total | ||||||||||
Gross | Net | Gross | Net | Gross | Net | |||||||
Australia | 361 | 177 | 122 | 51 | 483 | 228 | ||||||
United States | 48 | 17 | 14 | 5 | 62 | 22 | ||||||
Other | 73 | 31 | 98 | 35 | 171 | 66 | ||||||
Total | 482 | 225 | 234 | 91 | 716 | 316 | ||||||
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Supplementary oil and gas information – unaudited continued
Crude Oil Wells | Natural Gas Wells | Total | ||||||||||||||||||||||
Gross | Net | Gross | Net | Gross | Net | |||||||||||||||||||
Australia | 282 | 139 | 104 | 37 | 386 | 176 | ||||||||||||||||||
United States | 114 | 52 | 5,877 | 1,792 | 5,991 | 1,844 | ||||||||||||||||||
Other | 71 | 30 | 49 | 14 | 120 | 44 | ||||||||||||||||||
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Total | 467 | 221 | 6,030 | 1,843 | 6,497 | 2,064 | ||||||||||||||||||
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Of the productive crude oil and natural gas wells, 2824 (Net: 12)10) had multiple completions.
Developed and undeveloped acreage (including both leases and concessions) held at 30 June 20102012 was as follows:
Developed Acreage | Undeveloped Acreage | Developed Acreage | Undeveloped Acreage | |||||||||||||||||||||
Thousands of acres | Gross | Net | Gross | Net | Gross | Net | Gross | Net | ||||||||||||||||
Australia | 2,093 | 840 | 4,788 | 2,325 | 2,093 | 840 | 5,580 | 3,021 | ||||||||||||||||
United States | 156 | 52 | 1,614 | 1,053 | 1,280 | 687 | 3,071 | 1,959 | ||||||||||||||||
Other(a) | 437 | 183 | 50,952 | 27,724 | 349 | 135 | 38,707 | 23,441 | ||||||||||||||||
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Total(b) | 2,686 | 1,075 | 57,354 | 31,102 | 3,722 | 1,662 | 47,358 | 28,421 | ||||||||||||||||
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(a) | Primarily consists of acreage in South Africa, |
(b) | Approximately |
2015.
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