BHP Group Regulatory News (BHP)

BHP OPERATIONAL REVIEWFOR THE QUARTER ENDED 30 SEPTEMBER 2019

·; Group copper equivalent production decreased by 3% in the September 2019 quarter largely due to planned maintenance across a number of operations and natural field decline in Petroleum. Volumes for the 2020 financial year are expected to be slightly higher than last year.

·; All production and unit cost guidance (based on exchange rates of AUD/USD 0.70 and USD/CLP 683) remains unchanged for the 2020 financial year.

·; All major projects under development are tracking to plan, with the Ruby oil and gas development in Trinidad and Tobago approved during the September 2019 quarter.

·; In Petroleum, the Trion 3-DEL appraisal well in Mexico encountered oil in the reservoirs up dip from all previous well intersections. Phase 4 of our deepwater drilling campaign in Trinidad and Tobago was completed, evaluation and development planning studies of the discoveries are ongoing.

·; Further high-grade mineralised intercepts of copper, with associated gold, uranium and silver, were confirmed during the second phase of the drilling program at Oak Dam in South Australia. The next drilling phase is expected to commence in November 2019.

BHP Chief Executive Officer, Andrew Mackenzie, said: "We delivered a solid start to the 2020 financial year through ongoing strong operational performance across our portfolio. While Group production for the quarter decreased slightly due to the expected impacts of planned maintenance and natural field decline in Petroleum, guidance remains unchanged and we are on track to deliver slightly higher volumes than last financial year. The South Flank iron ore project is 50 per cent complete, with all our major projects on schedule and budget. We achieved further encouraging exploration results in Petroleum and at the Oak Dam copper prospect."

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Summary

Production and guidance are summarised below.

(i) Other copper comprises Pampa Norte, Olympic Dam and Antamina.

During the September 2019 quarter, the BHP Board approved an investment of US$283 million (BHP share) for the development of the Ruby oil and gas project in Trinidad and Tobago.

At the end of the September 2019 quarter, BHP had six major projects under development in petroleum, copper, iron ore and potash, with a combined budget of US$11.4 billion over the life of the projects.

The Jansen Stage 1 potash project in Canada will be presented to the Board for final investment decision by February 2021. In order to make a final investment decision, work on engineering to support project planning and on finalising the port solution is required, and the Board has approved US$144 million for these activities. An additional US$201 million in funding was approved to further derisk the project, focussing on the mine's scope of work, advancing other engineering and procurement activities, and preparation works for underground infrastructure. This will enable an efficient transition of the project team between the study and execution phase, should the project be approved. The release of funding to the project will be staged over this period.

As outlined in our 2019 financial year results announcement, we expect a US$3.8 billion increase in net debt over the 2020 financial year from the application of IFRS 16 'Leases', new leases commencing in the year and a change in our definition of net debt to include fair value of derivatives related to net debt.

Susan Kilsby has been appointed as the Chairman of the Remuneration Committee and John Mogford has been appointed as the Chairman of the Sustainability Committee, both with effect from the conclusion of the BHP Group Limited Annual General Meeting on 7 November 2019. Susan has been a Non-executive Director of BHP since April 2019 and John has been a Non-executive Director of BHP since October 2017.

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Petroleum

Petroleum - Total petroleum production decreased by 11 per cent to 29 MMboe. Guidance for the 2020 financial year remains unchanged at between 110 and 116 MMboe.

Crude oil, condensate and natural gas liquids production declined by 11 per cent to 13 MMboe due to the impact of Tropical Storm Barry in the Gulf of Mexico and natural field decline across the portfolio. This decline was partially offset by higher uptime at Pyrenees following the 70 day dry dock maintenance during the same period last year.

Natural gas production decreased by 11 per cent to 100 bcf, reflecting a decrease in tax barrels at Trinidad and Tobago in accordance with the terms of our Production Sharing Contract, planned maintenance at North West Shelf and natural field decline across the portfolio.

The Bass Strait West Barracouta project is tracking to plan and is expected to achieve first production in the 2021 calendar year.

On 3 September 2019, the Minerva gas field reached end-of-field life and production ceased at the Minerva Gas Plant. As announced in the June 2018 quarter, BHP agreed to sell its 90 per cent interest in the Minerva Gas Plant to the Casino Henry Joint Venture after the cessation of gas processing from the Minerva gas field. The sale is subject to customary closing conditions and is expected to close during the December 2019 quarter.

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Exploration and appraisal wells drilled during the September 2019 quarter are summarised below.

In Mexico, we spud the Trion 3-DEL appraisal well on 9 July 2019. We are encouraged by the preliminary results, with the well encountering oil in the reservoirs up dip from all previous well intersections. Evaluation and analysis is ongoing. No further appraisal wells are anticipated.

In Trinidad and Tobago, we drilled two additional exploration wells in our Northern licences as a part of Phase 4 of our deepwater drilling campaign. The Boom-1 well was spud on 28 August 2019 and encountered hydrocarbons. Evaluation an analysis is ongoing. The Carnival-1 well was spud on 30 September 2019 and reached total depth after the end of the September 2019 quarter. The well was a dry hole. This completed the exploration program on our Trinidad and Tobago Northern licences. Evaluation and development planning studies of the discoveries in the North are ongoing. Following Carnival-1, the Deepwater Invictus rig will return to the US Gulf of Mexico to complete regulatory abandonment work on Shenzi appraisal and exploration boreholes.

In the US Gulf of Mexico, in August 2019, we were the apparent high bidder on blocks GC124 and GC168 in the central Gulf of Mexico, building on our Green Canyon position. Additionally, we were the apparent high bidder on 18 additional blocks(2), which would expand our position in the western Gulf of Mexico.

In Australia, the National Offshore Petroleum Titles Administrator approved the surrender of the WA-255-P exploration permit, following our technical assessment of remaining potential.

Petroleum exploration expenditure for the September 2019 quarter was US$162 million, of which US$69 million was expensed. A US$0.7 billion exploration and appraisal program is being executed for the 2020 financial year.

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Copper

Copper - Total copper production increased by five per cent to 430 kt. Guidance for the 2020 financial year remains unchanged at between 1,705 and 1,820 kt.

Escondida copper production decreased by one per cent to 293 kt, with record concentrator throughput of 369 ktpd in the quarter offsetting expected grade decline. Ongoing improvements in maintenance implemented as part of our Transformation agenda contributed to the higher throughput, with the rate increasing to 377 ktpd in September 2019. Guidance for the 2020 financial year remains unchanged at between 1,160 and 1,230 kt, underpinned by an expected uplift in concentrator throughput performance versus the prior year, partly offset by an approximately five per cent reduction in copper grade of concentrator feed.

Pampa Norte copper production increased by 47 per cent to 64 kt, reflecting the impact of a fire at the electro-winning plant at Spence in the September 2018 quarter. Guidance for the 2020 financial year remains unchanged at between 230 and 250 kt, including expected grade decline of approximately 10 per cent.

Olympic Dam copper production increased by five per cent to 35 kt as a result of the prior period acid plant outage, partially offset by the impact of planned preparatory work undertaken in the September 2019 quarter related to the replacement of the refinery crane. The preparatory work is the most significant part of the project, with the physical replacement and commissioning of the refinery crane scheduled for the March 2020 quarter. Underground operations, the mill and the smelter performed to plan, enabling the build of anode stocks for processing through the refinery in the subsequent three quarters. Guidance for the 2020 financial year remains unchanged at between 180 and 205 kt.

Antamina copper production increased by two per cent to 38 kt and zinc production decreased by 33 per cent to 20 kt, reflecting higher copper head grades and lower zinc head grades. Guidance for the 2020 financial year remains unchanged at approximately 135 kt for copper and approximately 110 kt for zinc.

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Iron Ore

Iron ore - Total iron ore production decreased by one per cent to 61 Mt (69 Mt on a 100 per cent basis). Guidance for the 2020 financial year remains unchanged at between 242 and 253 Mt (273 and 286 Mt on a 100 per cent basis).

At WAIO, lower volumes reflected significant planned maintenance at Port Hedland, including a major car dumper maintenance program, to further improve port reliability and provide a stable base for our tightly coupled supply chain. Major planned car dumper maintenance was completed on 16 October 2019, while the port maintenance program continues through the 2020 financial year. Mine operations continued to deliver consistent performance during the quarter.

Mining and processing operations at Samarco remain suspended following the failure of the Fundão tailings dam and Santarém water dam on 5 November 2015.

In September 2019, BHP divested its 45.5 per cent interest in the Nimba iron ore project in Guinea to High Power Exploration Inc. (HPX).

Coal

Metallurgical coal - Metallurgical coal production was down 10 per cent to 9 Mt (16 Mt on a 100 per cent basis). Guidance for the 2020 financial year remains unchanged at between 41 and 45 Mt (73 and 79 Mt on a 100 per cent basis) with volumes weighted to the last three quarters of the financial year.

At Queensland Coal, production was impacted by the planned major wash plant shutdowns at Goonyella, Peak Downs and Caval Ridge. This was partially offset by increased feed rates at the Peak Downs wash plant following a change in mine sequencing.

Energy coal - Energy coal production decreased by 15 per cent to 6 Mt. Guidance for the 2020 financial year remains unchanged at between 24 and 26 Mt.

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New South Wales Energy Coal production decreased by 10 per cent as a result of the change in product strategy to focus on higher quality products. Guidance for the 2020 financial year remains unchanged at between 15 and 17 Mt.

Cerrejón production decreased by 23 per cent due to the impact of adverse weather. Guidance for the 2020 financial year remains unchanged at approximately 9 Mt.

Other

Nickel - Nickel West production increased by one per cent to 22 kt, reflecting higher volumes at the Kalgoorlie smelter following the fire in September 2018.

Major quadrennial maintenance shutdowns at the Kwinana refinery and the Kalgoorlie smelter are scheduled for the December 2019 quarter. Guidance for the 2020 financial year remains unchanged, with production expected to be broadly in line with the 2019 financial year.

Potash - The Jansen Stage 1 potash project in Canada will be presented to the Board for final investment decision by February 2021. In order to make a final investment decision, work on engineering to support project planning and on finalising the port solution is required, and the Board has approved US$144 million for these activities. An additional US$201 million in funding was approved to further derisk the project, focussing on the mine's scope of work, advancing other engineering and procurement activities, and preparation works for underground infrastructure. This will enable an efficient transition of the project team between the study and execution phase, should the project be approved. The release of funding to the project will be staged over this period.

Minerals exploration

Minerals exploration expenditure for the September 2019 quarter was US$44 million, of which US$38 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.

At Oak Dam in South Australia, the second phase of the drilling program delivered encouraging results. Further high-grade mineralised intercepts of copper, with associated gold, uranium and silver, were confirmed. Multiple intervals ranging between 0.25 and 5.77 per cent copper were identified by laboratory assay results from 10 diamond drill holes, totalling 12,441 metres. For further details refer to Appendix 1.

The exploration project remains at an early stage with large parts of the target still to be drill tested. The next phase of the drilling program is expected to commence in November 2019.

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Variance analysis relates to the relative performance of BHP and/or its operations during the September 2019 quarter compared with the September 2018 quarter, 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.

The following footnotes apply to this Operational Review:

(1) Well depth and status as at 30 September 2019.

(2) We were the apparent high bidder on 18 additional blocks: GB630, GB574, GB575, GB619, GB676, GB677, EB655, EB656, EB701, GB762, GB805, GB806, GB851, GB852, GB895, GB672, GB716 and GB760.

The following abbreviations may have been used throughout this report: barrels (bbl); billion cubic feet (bcf); cost and freight (CFR); cost, insurance and freight (CIF); dry metric tonne unit (dmtu); free on board (FOB); grams per tonne (g/t); kilograms per tonne (kg/t); kilometre (km); metre (m); million barrels of oil equivalent (MMboe); million cubic feet per day (MMcf/d); million tonnes (Mt); million tonnes per annum (Mtpa); ounces (oz); pounds (lb); thousand barrels of oil equivalent (Mboe); thousand barrels of oil equivalent per day (Mboe/d); thousand ounces (koz); thousand standard cubic feet (Mscf); thousand tonnes (kt); thousand tonnes per annum (ktpa); thousand tonnes per day (ktpd); tonnes (t); and wet metric tonnes (wmt).

In this release, the terms 'BHP', 'Group', 'BHP Group', 'we', 'us', 'our' and ourselves' are used to refer to BHP Group Limited, BHP Group plc and, except where the context otherwise requires, their respective subsidiaries as defined in note 28 'Subsidiaries' in section 5.1 of BHP's 30 June 2019 Annual Report and Form 20-F, unless stated otherwise. Notwithstanding that this release may include production, financial and other information from non-operated assets, non-operated assets are not included in the BHP Group and, as a result, statements regarding our operations, assets and values apply only to our operated assets unless stated otherwise.

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Production summary

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Production summary

(1) LPG and ethane are reported as natural gas liquids (NGL). Product-specific conversions are made and NGL is reported in barrels of oil

equivalent (boe). Total boe conversions are based on 6 bcf of natural gas equals 1 MMboe.

(2) Metal production is reported on the basis of payable metal.

(3) Shown on a 100% basis. BHP interest in saleable production is 57.5%.

(4) Includes Cerro Colorado and Spence.

(5) Iron ore production is reported on a wet tonnes basis.

(6) Shown on a 100% basis. BHP interest in saleable production is 85%.

(7) Metallurgical coal production is reported on the basis of saleable product. Production figures include some thermal coal.

(8) Shown on a 100% basis. BHP interest in saleable production is 80%.

(9) Production restated to include other nickel by-products.

Throughout this report figures in italics indicate that this figure has been adjusted since it was previously reported.

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Production and sales report

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Production and sales report

 (1) Total boe conversions are based on 6 bcf of natural gas equals 1 MMboe. Negative production figures represent finalisation adjustments.

 (2) Other Australia includes Minerva and Macedon.

 (3) Gulf of Mexico volumes are net of royalties.

 (4) Other Americas includes Neptune, Genesis and Overriding Royalty Interest.

 (5) BHP completed the sale of its interest in the Bruce and Keith oil and gas fields on 30 November 2018. The sale has an effective date of 1 January 2018.

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Production and sales report