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BHP 201901220003A
Operational Review for the Half Year Ended 31 December 2018
BHP Group Plc
Registration number 3196209
Registered in England and Wales
Share code: BHP
ISIN: GB00BH0P3Z91
NEWS RELEASE LOGO
Release Time IMMEDIATE
Date 22 January 2019
Release Number 01/19
BHP OPERATIONAL REVIEW
FOR THE HALF YEAR ENDED 31 DECEMBER 2018
. Production guidance for the 2019 financial year remains unchanged for
petroleum, iron ore, metallurgical coal and energy coal. Total copper
production guidance increased to between 1,645 and 1,740 kt and reflects
the retention of Cerro Colorado.
. Group copper equivalent production/(1)/ was broadly unchanged in the December
2018 half year, with volumes for the full year also expected to be in line
with last year.
. Full year unit costs for all major assets are expected to be in line with
guidance/(2)/, predominantly reflecting stronger anticipated volumes in the second half of
the year. However, unit costs were tracking above full year guidance
at the December 2018 half year as a result of planned maintenance and
production outages during the period.
. All major projects under development are tracking to plan.
. In Petroleum, the first appraisal well at Trion in Mexico (Trion-2DEL)
encountered oil, in line with expectations. A downdip sidetrack is
currently being drilled to further appraise the field.
. The Onshore US sale process was completed on 31 October 2018, with the net
proceeds of US$10.4 billion to be returned to shareholders. On 17 December
2018, a US$5.2 billion off-market buy-back of BHP Group Limited shares was
successfully completed. The balance of the net proceeds will be paid on 30
January 2019 as a special dividend of US$1.02 per share.
. The financial results for the December 2018 half year are expected to
reflect certain items as summarised in the table on page two.
. Productivity for the December 2018 half year has been impacted by unplanned production outages
at Olympic Dam, Spence and Western Australia Iron Ore, with a total negative impact
of approximately US$600 million.
Dec H18 Dec Q18
Production (vs Dec H17) (vs Sep Q18) Dec Q18 commentary
---------- ------------ ------------ ------------------
Petroleum (MMboe)............. 63 30 Lower seasonal gas sales at Bass Strait partially offset by
(-1%) (-8%) Pyrenees resuming production following maintenance in the
previous quarter.
Copper (kt)................... 825 416 Record throughput at Cerro Colorado and higher volumes at
(-1%) (+2%) Spence as production returned to full capacity following a
fire in September 2018, partially offset by lower volumes at
Escondida as a result of expected lower copper grades.
Iron ore (Mt)................. 119 58 Volumes at Western Australia Iron Ore (WAIO) impacted by a
(+2%) (-6%) train derailment on 5 November 2018.
Metallurgical coal (Mt)....... 21 10 Record production at South Walker Creek offset by the impact
(+2%) (-1%) of the scheduled longwall move at Broadmeadow.
Energy coal (Mt).............. 13 7 Increased production at New South Wales Energy Coal (NSWEC) as
(-5%) (0%) a result of higher bypass coal offset by the impact of mine
sequence changes at Cerrejon.
BHP Chief Executive Officer, Andrew Mackenzie, said: "Production in the first
half was broadly in line with the prior period despite planned maintenance and
outages. In Petroleum, our first appraisal well at Trion in Mexico encountered
oil and we added to our exploration options with successful bids for two
licences offshore Eastern Canada. We completed the sale of our US shale assets
and returned US$5.2 billion to shareholders through a share buy-back program,
with a further US$5.2 billion to be returned as a special dividend on 30 January
2019."
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BHP Operational Review for 1
the half year ended 31 December 2018
Summary
Operational performance
Production for the December 2018 half year and guidance for the 2019 financial
year are summarised below.
Dec H18 Dec Q18 Dec Q18 Previous Current
vs vs vs FY19 FY19
Production Dec H18 Dec Q18 Dec H17 Dec Q17 Sep Q18 guidance guidance
---------------------------------- -------- -------- -------- -------- -------- -------------- --------------
Petroleum - Conventional (MMboe).. 63 30 (1%) (2%) (8%) 113 - 118 113 - 118 Upper end of range
Copper (kt)....................... 825 416 (1%) (3%) 2% 1,620 - 1,705 1,645 - 1,740 Increased
Escondida (kt).................. 580 285 0% (10%) (4%) 1,120 - 1,180 1,120 - 1,180 Unchanged
Other copper/(i)/ (kt).......... 245 132 (2%) 15% 16% 500 - 525 525 - 560 Cerro Colorado
60 - 70 kt for FY19
Iron ore/(ii)/ (Mt)............... 119 58 2% (6%) (6%) 241 - 250 241 - 250 Unchanged
WAIO (100% basis) (Mt).......... 135 66 (1%) (9%) (6%) 273 - 283 273 - 283 Unchanged
Metallurgical coal (Mt)........... 21 10 2% 6% (1%) 43 - 46 43 - 46 Unchanged
Energy coal (Mt).................. 13 7 (5%) (9%) 0% 28 - 29 28 - 29 Unchanged
(i) Other copper comprises Pampa Norte (including Cerro Colorado production for
the full 2019 financial year to reflect its retention, previous guidance only included
35 kt of production for the first half of the 2019 financial year), Olympic Dam and Antamina.
(ii) Increase in BHP's share of volumes reflects the expiry of the Wheelarra
Joint Venture sublease in March 2018, with control of the sublease area
reverted to the Jimblebar Joint Venture, which is accounted for on a
consolidated basis with minority interest adjustments.
Summary of disclosures
BHP expects its financial results for the first half of the 2019 financial year
to reflect certain items as summarised in the table below. The table does not
provide a comprehensive list of all items impacting the period. The financial
statements are the subject of ongoing work that will not be finalised until the
release of the financial results on 19 February 2019. Accordingly, the
information is subject to update.
H1 FY19
impact
Description US$M/(i)/ Classification/(ii)/
----------- --------------------- ----------------------------------
Continuing operations
Change in the accounting classification of treatment and refining ~260 (down arrow) Revenue
charges as a result of IFRS15/(3)/ (reclassification between revenue and (down arrow) Operating costs
operating costs)
Unit costs tracking above full Refer footnote/(iii)/ (up arrow) Operating costs
year guidance/(2)/ in H1 FY19 as a result of planned maintenance and
production outages
Exploration expense (including petroleum and minerals exploration 222 (up arrow) Exploration expense
programs)
Impairment charges related to the Whenan shaft refurbishment project 100-150 (up arrow) Depreciation,
at Olympic Dam (changes to the mine access plan) and Cerro Colorado amortisation and impairments
(termination of the sale and purchase agreement
The Group's adjusted effective tax rate for H1 FY19 is expected to be Refer footnote/(iii)/ (up arrow) Taxation expense
slightly above the full year guidance range of 30 to 35 per cent
Non-cash fair value adjustments related to interest rate and exchange Refer footnote/(iii)/ (up arrow) Net debt
rate movements are expected to increase net debt in H1 FY19
Higher Australian and Chilean income tax payments in H1 FY19 compared ~700 (down arrow) Operating cash inflow
with H1 FY18 primarily due to higher instalment rates and settlement
of an Australian transfer pricing dispute
Dividends paid to non-controlling interests ~620 (up arrow) Financing cash outflow
Reversal of provisions for global taxation matters which were resolved ~240 Exceptional item credit
during the period
Financial impact on BHP Billiton Brasil of the Samarco Dam failure Refer footnote/(iii)/ Exceptional item charge
Discontinued operations
Loss from Onshore US (after taxation) mainly due to incremental costs 275-325 (down arrow) Profit after taxation
(including redundancy costs and retention payments to employees) and
State and Federal tax expenses
Net proceeds received from the sale of Onshore US (comprising Fayetteville US$0.3 7,028 (up arrow) Investing cash inflow
billion and Eagle Ford, Haynesville and Permian US$6.7 billion, representing one-half
of the gross consideration at completion less customary completion adjustments and two
instalment payments)
(i) Numbers are not tax effected, unless otherwise noted.
(ii) There will be a corresponding balance sheet, cash flow and/or income
statement impact as relevant.
(iii) Financial impact is the subject of ongoing work and is not yet finalised.
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BHP Operational Review for 2
the half year ended 31 December 2018
Productivity for the December 2018 half year has been impacted by lower than expected
volumes at Olympic Dam (unplanned acid plant outage in August 2018, volume
impact of 45 kt), Spence (fire at the electro-winning plant in September
2018, volume impact of 25 kt) and WAIO (train derailment in November 2018,
volume impact of 4 Mt), with a total negative impact of approximately US$600 million.
Productivity guidance for the full year is currently under review and revised guidance
will be provided in the December 2018 half year financial results.
Average realised prices
The average realised prices achieved for our major commodities are summarised
below.
Dec H18 Dec H18 Dec H18
vs vs vs
Average realised prices/(i)/ Dec H18 Dec H17 Jun H18 FY18 Dec H17 Jun H18 FY18
---------------------------- ------- ------- ------- ------- ------- ------- -------
Oil (crude and condensate) (US$/bbl)... 69.41 53.76 67.07 60.12 29% 3% 15%
Natural gas (US$/Mscf)/(ii)/........... 3.98 3.54 3.71 3.62 12% 7% 10%
US natural gas (US$/Mscf).............. 2.88 2.84 2.77 2.80 1% 4% 3%
LNG (US$/Mscf)......................... 10.19 7.48 8.65 8.07 36% 18% 26%
Copper (US$/lb)/(v)/................... 2.54 3.08 2.93 3.00 (18%) (13%) (15%)
Iron ore (US$/wmt, FOB)................ 55.62 56.54 56.86 56.71 (2%) (2%) (2%)
Metallurgical coal (US$/t)............. 179.82 164.22 189.66 177.22 9% (5%) 1%
Hard coking coal (US$/t)/(iii)/........ 197.86 182.29 205.80 194.59 9% (4%) 2%
Weak coking coal (US$/t)/(iii)/........ 134.12 120.99 143.40 131.70 11% (6%) 2%
Thermal coal (US$/t)/(iv)/............. 84.15 87.49 86.47 86.94 (4%) (3%) (3%)
Nickel metal (US$/t)................... 12,480 11,083 13,974 12,591 13% (11%) (1%)
(i) Based on provisional, unaudited estimates. Prices exclude sales from
equity accounted investments, third party product and internal sales, and
represent the weighted average of various sales terms (for example: FOB,
CIF and CFR), unless otherwise noted. Includes the impact of provisional
pricing and finalisation adjustments.
(ii) Includes internal sales.
(iii) Hard coking coal (HCC) refers generally to those metallurgical coals with
a Coke Strength after Reaction (CSR) of 35 and above, which includes coals
across the spectrum from Premium Coking to Semi Hard Coking coals, while
weak coking coal (WCC) refers generally to those metallurgical coals with
a CSR below 35.
(iv) Export sales only; excludes Cerrejon. Includes thermal coal sales from
metallurgical coal mines.
(v) Comparative financial information has been restated for the new accounting
standard, IFRS15 Revenue from Contracts with Customers, which became
effective from 1 July 2018.
The majority of iron ore shipments were linked to the index price for the month
of shipment, with price differentials predominantly a reflection of product
quality and market fundamentals. The 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 2018, the Group had 339 kt of outstanding copper sales that were
revalued at a weighted average price of US$2.70 per pound. The final price of
these sales will be determined over the remainder of the 2019 financial year. In
addition, 364 kt of copper sales from the 2018 financial year were subject to a
finalisation adjustment in the current period. The provisional pricing and
finalisation adjustments will decrease Underlying EBITDA/(4)/ by US$272 million in
the 2019 financial year and is included in the average realised copper price in
the above table.
Major development projects
During the December 2018 quarter, the North West Shelf Greater Western Flank-B
project achieved first production ahead of schedule and under
budget. The North West Shelf Greater Western Flank-B project will not be
reported in future Operational Reviews.
At the end of December 2018, BHP had five major projects under development in
petroleum, copper, iron ore and potash, with a combined budget of US$10.6
billion over the life of the projects.
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BHP Operational Review for 3
the half year ended 31 December 2018
Corporate update
The Onshore US sales process was completed on 31 October 2018, with the net
proceeds of US$10.4 billion to be returned to shareholders through an off-market
buy-back and a special dividend shareholder return program. On 17 December 2018,
the US$5.2 billion off-market buy-back of BHP Group Limited shares was
successfully completed and enabled the buy-back of approximately 265.8 million
shares (5.0 per cent of the total issued capital of BHP Group Limited and BHP
Group Plc) at A$27.64 per share. In addition, the Board of BHP determined to pay
a special dividend to shareholders of US$1.02 per share, representing the
residual US$5.2 billion of net proceeds, based on the reduced number of shares
on issue (approximately 5,058 million) following completion of the off-market
buy-back.
On 19 November 2018, BHP settled its transfer pricing dispute relating to its
marketing operations in Singapore with the Australian Taxation Office. The
settlement fully resolved all prior years, being 2003 to 2018, with no admission
of tax avoidance by BHP. As part of the settlement, BHP paid a total of
approximately A$529 million in additional taxes for the prior years (BHP paid
A$328 million of this amount when the amended assessments were received in prior
years, with the balance of A$201 million paid in the December 2018 quarter). In
addition, the settlement provides certainty in relation to the future taxation
treatment as, due to a change in ownership of the main marketing entity, all
profits made in Singapore in relation to the Australian assets owned by BHP
Group Limited will be fully subject to Australian tax under the Controlled
Foreign Company tax rules from the 2020 financial year.
BHP has agreed to fund a total of US$515 million in further financial support
for the Renova Foundation and Samarco. This comprises US$438 million to fund the
Renova Foundation until 31 December 2019 which will be offset against the
Group's provision for the Samarco dam failure, and a short-term facility of up
to US$77 million to be made available to Samarco until 30 June 2019.
As at the date of this Operational Review, we are not in a position to provide
an update, for the purpose of the December 2018 half year financial results, on
the ongoing potential financial impacts on BHP Billiton Brasil of the Samarco
dam failure. Any financial impacts will continue to be treated as an exceptional
item.
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BHP Operational Review for 4
the half year ended 31 December 2018
Petroleum
Production
Dec H18 Dec Q18 Dec Q18
vs vs vs
Dec H18 Dec Q18 Dec H17 Dec Q17 Sep Q18
------- ------- ------- ------- -------
Crude oil, condensate and natural gas liquids (MMboe)... 29 14 (5%) (3%) 3%
Natural gas (bcf)....................................... 206 94 1% (2%) (16%)
------- ------- ------- ------- -------
Total petroleum production (MMboe)...................... 63 30 (1%) (2%) (8%)
------- ------- ------- ------- -------
Petroleum - Total Conventional petroleum production was broadly flat at 63
MMboe. Guidance for the 2019 financial year remains unchanged at between 113 and
118 MMboe, with volumes expected to be towards the upper end of the guidance
range.
Crude oil, condensate and natural gas liquids production declined by five per
cent to 29 MMboe due to natural field decline across the portfolio and a 70 day
planned dry dock maintenance program at Pyrenees completed during the September
2018 quarter. This decline was partially offset by higher uptimes at our Gulf of
Mexico assets.
Natural gas production was broadly flat at 206 bcf, reflecting increased tax
barrels at Trinidad and Tobago in accordance with the terms of our Production
Sharing Contract. This was partially offset by planned maintenance at Trinidad
and Tobago in the December 2018 quarter and natural field decline across the
portfolio.
On 30 November 2018, BHP completed the sale of its interests in the Bruce and
Keith oil and gas fields in the United Kingdom to Serica Energy UK Ltd, with an
effective date of 1 January 2018.
Projects
Capital Initial
Project and expenditure production
ownership US$M target date Capacity Progress
------------------------ ----------- ----------- ------------------------------------- -----------------------------------------
North West Shelf Greater 216 CY19 To maintain LNG plant throughput from First production achieved in October
Western Flank-B the North West Shelf operations. 2018, ahead of schedule and below budget.
(Australia) The overall project is 98% complete.
16.67% (non-operator)
Mad Dog Phase 2 2,154 CY22 New floating production facility with On schedule and budget. The overall
(US Gulf of Mexico) the capacity to produce up to 140,000 project is 37% complete.
23.9% (non-operator) gross barrels of crude oil per day.
During the December 2018 quarter, the Bass Strait West Barracouta project was
approved. The A$200 million (BHP share) investment is expected to produce first
gas in the 2021 calendar year to help offset Bass Strait production decline, and
to deliver competitive returns.
On 8 January 2019, BP (the operator) announced the sanction of the Atlantis
Phase 3 project. Approval from BHP's Board will be sought during the March 2019
quarter. Study work continues on the Ruby project in Trinidad and Tobago.
Petroleum exploration
Exploration and appraisal wells drilled during the December 2018 quarter are
summarised below.
Formation Total well
Well Location Target age BHP equity Spud date Water depth depth Status
------------- ----------------- ------ ------------ ---------- ----------------- ----------- ---------- --------------------------
Samurai-2 US Gulf of Mexico Oil Miocene 50% 25 August 2018 1,088 m 10,088 m Plugged and abandoned
ST01 GC476 (Murphy
(sidetrack) Operator)
Concepcion-1 Trinidad & Tobago Gas Pleistocene/ 65% 30 September 2018 1,721 m 3,506 m No commercial hydrocarbons
Block TTDAA 5 Pliocene (BHP encountered; plugged and
Operator) abandoned
Trion-2DEL Mexico Oil Eocene 60% 15 November 2018 2,379 m 4,659 m Hydrocarbons encountered
Block AE-0093 (BHP
Operator)
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BHP Operational Review for 5
the half year ended 31 December 2018
In the US Gulf of Mexico, a sidetrack of the Samurai-2 exploration well
commenced on 25 August 2018 to further appraise the discovery, and was plugged
and abandoned on 2 November 2018 after delineating the Samurai discovery.
Appraisal and development planning is in progress. In the Western US Gulf of
Mexico, the Ocean Bottom Node/(5)/ seismic acquisition is expected to be completed
in the March 2019 quarter. This is the world's first deepwater exploration ocean
bottom node seismic acquisition.
In Trinidad and Tobago, the Concepcion-1 well was spud on 30 September 2018 to
further test the Magellan play, with no commercial hydrocarbons encountered. The
well was plugged and abandoned on 25 October 2018. This completed Phase 2 of our
deepwater exploration drilling campaign in Trinidad and Tobago.
In Mexico, we spud the Trion-2DEL appraisal well on 15 November 2018 and
encountered oil in line with expectations. This was the first well drilled by an
international operator in the Mexican deepwater. A downdip sidetrack of the
Trion-2DEL well commenced on 4 January 2019 to further appraise the field,
including the oil water contact.
BHP was successful in its bids to acquire a 100 per cent interest in, and
operatorship of, two exploration licences for blocks 8 and 12 in the Orphan
Basin, offshore Eastern Canada. BHP's aggregate bid amount of US$625 million
reflects the costs of the drilling and seismic work likely to be performed
during the exploration phase, although there is no minimum work program under
the licence agreements. BHP's minimum commitment under the licence agreements,
if no work is performed, is approximately US$119 million for block 8 and US$38
million for block 12.
Petroleum exploration expenditure for the December 2018 half year was US$316
million, of which US$166 million was expensed. A US$750 million exploration and
appraisal program is being executed for the 2019 financial year.
Onshore US - Discontinued operations
The Onshore US sales process was completed on 31 October 2018, with the rights
to the economic profits transferring to the purchasers from 1 July 2018. Onshore
US production for the July 2018 to October 2018 period was 26 MMboe, with
drilling and development expenditure of US$0.4 billion. Our operated rig count
remained unchanged at five, with two rigs at Eagle Ford, two rigs at Permian and
one at Haynesville. We continue to provide certain transitional services to BP
for up to nine months following completion, however no further production will
be reported by BHP.
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BHP Operational Review for 6
the half year ended 31 December 2018
Copper
Production
Dec H18 Dec Q18 Dec Q18
vs vs vs
Dec H18 Dec Q18 Dec H17 Dec Q17 Sep Q18
------- ------- ------- ------- -------
Copper (kt)..................... 825 416 (1%) (3%) 2%
Zinc (t)........................ 54,795 24,237 (6%) (17%) (21%)
Uranium oxide concentrate (t)... 1,495 936 33% 285% 67%
Copper - Total copper production decreased by one per cent to 825 kt. Guidance
for the 2019 financial year has been increased to between 1,645 and 1,740 kt and
reflects the retention of Cerro Colorado.
Escondida copper production was broadly unchanged at 580 kt as higher
concentrator throughput and improved recoveries offset the impact of expected
lower copper grades. Production guidance remains unchanged at between 1,120 and
1,180 kt for the 2019 financial year.
Pampa Norte copper production decreased by 17 per cent to 105 kt and reflects
planned maintenance and a production outage at Spence following a fire at the
electro-winning plant in September 2018. Record ore milled was achieved in the
half year at both Spence and Cerro Colorado. Spence returned to full capacity
during the December 2018 quarter, with production guidance of between 160 and
175 kt unchanged for the 2019 financial year. In the December 2018 quarter, BHP
and EMR Capital agreed to terminate their agreement for the sale and purchase of
Cerro Colorado after it became clear that the financing conditions of the
transaction would not be satisfied by the end of the 2018 calendar year.
Production at Cerro Colorado for the 2019 financial year is expected to be
between 60 and 70 kt.
Olympic Dam copper production increased by 20 per cent to 65 kt as a result of
the major smelter maintenance campaign in the prior period, which was partially
offset by an unplanned acid plant outage in August 2018. Surface operations
resumed at the end of October 2018 following completion of acid plant
remediation works. Underground operations continue to progress into the Southern
Mine Area, with record development kilometres achieved and the mine's third
decline becoming fully operational in the quarter. Production guidance for the
2019 financial year remains unchanged at between 170 and 180 kt.
Antamina copper production increased by eight per cent to 75 kt due to higher
head grades. Production guidance for the 2019 financial year remains unchanged
at approximately 135 kt for copper and approximately 85 kt for zinc.
Projects
Capital Initial
Project and expenditure production
ownership US$M target date Capacity Progress
----------- ------------- ------------ ------------------------------------ -------------------------------------
Spence Growth Option....... 2,460 FY21 New 95 ktpd concentrator is On schedule and budget. The overall
(Chile) expected to increase Spence's project is 34% complete.
100% payable copper in concentrate
production by approximately
185 ktpa in the first 10 years of
operation and extend the mining
operations by more than 50 years.
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BHP Operational Review for 7
the half year ended 31 December 2018
Iron Ore
Production
Dec H18 Dec Q18 Dec Q18
vs vs vs
Dec H18 Dec Q18 Dec H17 Dec Q17 Sep Q18
------- ------- ------- ------- -------
Iron ore (kt)........... 119,226 57,835 2% (6%) (6%)
Iron ore - Total iron ore production increased by two per cent to 119 Mt (135 Mt
on a 100 per cent basis). Guidance for the 2019 financial year remains unchanged
at between 241 and 250 Mt, or between 273 and 283 Mt on a 100 per cent basis.
At WAIO, increased volumes reflected record production at Jimblebar and the
impact from the Mt Whaleback fire in the prior period. This was partially offset
by the impact of planned maintenance in the September 2018 quarter and a train
derailment on 5 November 2018 which resulted in the suspension of rail
operations for five days and a production impact of approximately 4 Mt. During
the rail outage, mine stockpile levels were built and are expected to be
partially drawn down in the March 2019 quarter.
Mining and processing operations at Samarco remain suspended following the
failure of the Fundao tailings dam and Santarem water dam on 5 November 2015.
Projects
Capital Initial
Project and expenditure production
ownership US$M target date Capacity Progress
----------- ------------- ------------ ------------------------------------ -------------------------------------
South Flank................ 3,061 CY21 Sustaining iron ore mine to replace On schedule and budget. The overall
(Australia) production from the 80 Mtpa project is 21% complete.
85% (100 per cent basis) Yandi mine.
Coal
Production
Dec H18 Dec Q18 Dec Q18
vs vs vs
Dec H18 Dec Q18 Dec H17 Dec Q17 Sep Q18
------- ------- ------- ------- -------
Metallurgical coal (kt)... 20,630 10,272 2% 6% (1%)
Energy coal (kt).......... 13,307 6,667 (5%) (9%) 0%
Metallurgical coal - Metallurgical coal production increased by two per cent to
21 Mt. Guidance for the 2019 financial year remains unchanged at between 43 and
46 Mt, with volumes weighted to the second half of the year as expected.
At Queensland Coal, increased production was supported by record production at
South Walker Creek and higher wash-plant throughput at Poitrel following the
purchase of the Red Mountain processing facility. This increase was partially
offset by the scheduled longwall move at Broadmeadow which was successfully
completed during the quarter.
The Caval Ridge Southern Circuit project was completed according to plan with
the conveying of first coal in October 2018.
Energy coal - Energy coal production decreased by five per cent to 13 Mt.
Guidance for the 2019 financial year remains unchanged at approximately 28 to 29
Mt.
New South Wales Energy Coal production decreased by four per cent as a result of
a higher average strip ratio. Cerrejon production decreased by seven per cent
due to mine sequence changes.
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BHP Operational Review for 8
the half year ended 31 December 2018
Other
Nickel production
Dec H18 Dec Q18 Dec Q18
vs vs vs
Dec H18 Dec Q18 Dec H17 Dec Q17 Sep Q18
------- ------- ------- ------- -------
Nickel (kt)... 39.5 18.1 (15%) (22%) (15%)
Nickel - Nickel West production decreased by 15 per cent to 40 kt as operations
were suspended following a fire at the Kalgoorlie smelter in September 2018. The
smelter returned to operation on 1 October 2018, with full repairs now expected
to be completed in the March 2019 quarter. Planned maintenance at the Kwinana
refinery was brought forward to align with the smelter outage and, as a result,
production guidance for the 2019 financial year remains unchanged and is
expected to be broadly in line with the 2018 financial year.
Potash project
Investment
Project and ownership US$M Scope Progress
--------------------- ---------- -------------------------------------------- ------------------------------------------
Jansen Potash..... 2,700 Investment to finish the excavation and The project is 82% complete and within the
(Canada) lining of the production and service approved budget. The main activity for the
100% shafts, and to continue the installation of quarter focussed on removing the boring
essential surface infrastructure and equipment from both shafts.
utilities.
Minerals exploration
Minerals exploration expenditure for the December 2018 half year was US$81
million, of which US$56 million was expensed. Greenfield minerals exploration is
predominantly focused on advancing copper targets within Chile, Ecuador, Peru,
Canada, South Australia and the South-West United States.
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Consistent with our exploration focus on copper, in September 2018, BHP acquired
an initial 6.1 per cent interest in SolGold Plc (SolGold), the majority owner
and operator of the Cascabel porphyry copper-gold project in Ecuador. On 15
October 2018, BHP entered into an agreement to acquire an additional 100 million
shares in SolGold, for an investment of US$59 million, with our total interest
now approximately 11.2 per cent.
In November 2018, BHP confirmed identification of a potential new iron oxide,
copper, gold (IOCG) mineralised system, located 65 kilometres to the south east
of BHP's operations at Olympic Dam in South Australia. BHP is evaluating and
interpreting the results reported and planning a further drilling program, to
commence in early in the 2019 calendar year.
Variance analysis relates to the relative performance of BHP and/or its
operations during the December 2018 half year compared with the December 2017
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 2018 financial year average realised
prices.
The following footnotes apply to this Operational Review:
----------
(1) Excludes production from Onshore US.
(2) 2019 financial year unit cost guidance: Conventional Petroleum |
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