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BHP - director declaration
BHP advised that Shriti Vadera, director of BHP and BHP Group Ltd., has been appointed to the board of Prudential plc as a non-executive director with effect from 1 May 2020.
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BHP - operational review
BHP released their operational review for the half year ended 31 December 2019.
Major development projects
At the end of December 2019, BHP had six major projects under development in petroleum, copper, iron ore and potash, with a combined budget of USD11.4 billion over the life of the projects. All major projects under development are tracking to plan.
Average realised prices
The large majority of iron ore shipments were linked to the index price for the month of shipment, with price differentials predominantly a reflection of market fundamentals and product quality. The large majority of metallurgical coal and energy coal exports were linked to the index price for the month of shipment or sold on the spot market at fixed or index-linked prices, with price differentials reflecting product quality.
At 31 December 2019, the Group had 345 kt of outstanding copper sales that were revalued at a weighted average price of USD2.80 per pound. The final price of these sales will be determined over the remainder of the 2020 financial year. In addition, 322 kt of copper sales from the 2019 financial year were subject to a finalisation adjustment in the current period. The provisional pricing and finalisation adjustments will increase Underlying EBITDA by USD16 million in the 2020 financial year and is included in the average realised copper price in the above table.
Corporate update
In November 2019, BHP approved USD44 million for BHP Brasil's share of the funding for work related to the restart of one concentrator at Samarco. The funding will enable the construction of a filtration plant and the commencement of operation readiness activities. This follows the approval of the Corrective Operating Licence (LOC) for Samarco's operating activities at its Germano Complex in October 2019. Restart can occur when the filtration system is complete and Samarco has met all necessary safety requirements, and will be subject to final approval by Samarco's shareholders.
In December 2019, BHP agreed to fund a total of USD793 million in further financial support for the Renova Foundation and Samarco. This comprises USD581 million to fund the Renova Foundation until 31 December 2020 which will be offset against the Group's provision for the Samarco dam failure, and a short-term facility of up to USD212 million to be made available to Samarco until 31 December 2020.
As at the date of this Operational Review, for the purpose of the December 2019 half year financial results, we are not in a position to provide an update on the ongoing potential financial impacts on BHP Brasil of the Samarco dam failure. Any financial impacts will continue to be treated as an exceptional item.
Projects
In Trinidad and Tobago, BHP completed the exploration program on their Northern licences as part of Phase 4 of the deepwater drilling campaign. The Carnival-1 well was spud on 30 September 2019 and was a dry hole. The well was plugged and abandoned on 13 October 2019. Development planning studies of the discoveries in the North are ongoing. Following Carnival-1, the Deepwater Invictus rig returned to the US Gulf of Mexico where it is currently completing regulatory abandonment work on Shenzi appraisal and exploration boreholes.
During the December 2019 quarter, we extended our contract for the Deepwater Invictus rig for an additional year through to May 2021 to support our ongoing exploration activities.
As reported in the September 2019 Operational Review, we were the apparent highest bidder on blocks GC124 and GC168 in Green Canyon in the central Gulf of Mexico and on 18 additional blocks/(4)/ in the western Gulf of Mexico. All leases were awarded by the Regulator in the December 2019 quarter.
Petroleum exploration expenditure for the December 2019 half year was USD306 million, of which USD164 million was expensed. A USD0.7 billion exploration and appraisal program is being executed for the 2020 financial year.
Minerals exploration
Minerals exploration expenditure for the December 2019 half year was USD84 million, of which USD67 million was expensed. Greenfield minerals exploration is predominantly focused on advancing copper targets within Chile, Ecuador, Mexico, Peru, Canada, South Australia and the south-west United States.
Consistent with BHP's focus on copper, in November 2019, BHP increased its interest in SolGold Plc, the majority owner and operator of the Cascabel porphyry copper-gold project in Ecuador, by 3.6 per cent to 14.7 per cent.
At Oak Dam in South Australia, the third phase of the drilling program commenced in November 2019 and is expected to be completed in the June 2020 quarter. This follows encouraging results from the previous drilling phases, which confirmed high-grade mineralised intercepts of copper, with associated gold, uranium and silver.
Variance analysis relates to the relative performance of BHP and/or its operations during the December 2019 half year compared with the December 2018 half year, unless otherwise noted. Production volumes, sales volumes and capital and exploration expenditure from subsidiaries are reported on a 100 per cent basis; production and sales volumes from equity accounted investments and other operations are reported on a proportionate consolidation basis. Numbers presented may not add up precisely to the totals provided due to rounding. Copper equivalent production based on 2019 financial year average realised prices.
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BHP - board update
BHP advised that Terry Bowen, Director of BHP and BHP Group Ltd. ("BHP"), has been appointed to the Board of Transurban Group ("Transurban") with effect from 1 February 2020.
BHP applies a nine year tenure guideline as part of Director succession planning and therefore, as planned, Lindsay Maxsted will not stand for re-election at the 2020 BHP Annual General Meetings. As a consequence, there will be a limited period of overlap between Terry Bowen and Lindsay Maxsted on the Boards of BHP and Transurban.
As planned, Terry Bowen has also been appointed as Chair of BHP's Risk and Audit Committee, effective from 1 May 2020. Lindsay Maxsted will remain a member of the Risk and Audit Committee until his retirement from the BHP Board at or before the 2020 Annual General Meetings.
Mr Bowen is currently a Managing Partner & Head of the Operations Group at BGH Capital. Upon joining the Transurban Board, Mr Bowen will reduce his responsibilities at BGH, transitioning to a part-time role as Partner and Chair of the Operations Group.
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