Capital Allocation Briefing
Updated : 07:01
Issued by: | BHP Group Plc
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Date: | 21 November 2018
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To: | London Stock Exchange JSE Limited
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For Release: | Immediately
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Contact: | Helen Ratsey +44 (0) 20 7802 7540
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BHP - Capital allocation briefing
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UK Listing Authority Submissions
The following document has today been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do:
· Capital allocation briefing.
The document may also be accessed via BHP's website - bhp.com
NEWS RELEASE
Release Time | IMMEDIATE |
Date | 21 November 2018
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Release Number | 26/18 |
Capital allocation briefing
BHP will be holding an investor and analyst briefing today in Melbourne on BHP's Capital Allocation Framework.
The purpose of the briefing is to provide greater detail in relation to BHP's capital allocation processes, and greater transparency on BHP's approach to capital allocation and investment decisions.
The presentation is available on BHP's website at: https://www.bhp.com/-/media/documents/media/reports-and-presentations/2018/181121_CapitalAllocationBriefing.pdf
The webcast of the briefing will be available at: https://edge.media-server.com/m6/p/nxkxg8iw
Further information on BHP can be found at: bhp.com
APPENDIX
The following information is included in Peter Beaven's presentation slides.
Latent capacity
Options | IRR2 (%) | Risk3 (1-5) | Timing4 | Capex (US$m) | Description |
WAIO | >100 | ● | <2 years | <250 | Supply chain debottlenecking initiatives at the port and rail, and releasing latent capacity at Jimblebar to increase production to 290 Mtpa |
Barracouta West Petroleum | ~20 | Non operated | <2 years | ~250 | Brownfield tieback opportunity to existing infrastructure in the Bass Strait. |
Escondida | >50 | ●● | <2 years | ~500 | Expansion of desalination plant to reduce groundwater usage and maximise concentrator throughput |
Escondida | >100 | ●● | various | >500 | Concentrator debottlenecking, sulphide leach reprocessing of ripios, truck and shovel fleet upgrades |
Spence | ~60 | ●● | 2-5 years | 250-500 | Reprocessing of ripios dumped since the beginning of the Spence operations |
Queensland Coal | >100 | ● | >5 years | >500 | Investing in stripping capacity and pipeline of productivity initiatives to shift the bottleneck towards the coal handling plants |
Spence | >15 | ●●● | >5 years | >500 | Processing lower grade hypogene material with increased recoveries, concentrator debottlenecking, in-pit semi mobile ore conveying |
Average/aggregate | >100 | ~US$4 bn | Up to ~2 Mt of incremental Cu eq. capacity with |
1. Projects as presented in May 2018 at the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference; IRR: Returns at 2018 consensus price forecasts; ungeared, post tax, nominal return; Risk profile is based on a BHP assessment of each project against defined quantified and non-quantified risk metrics rated out of 5; 5 represents more risk; Timing: Represents potential first production
Future options
Options | Description | Potential execution timing | Capex (US$m) | GIP | IRR1 (%) | Risk1 (1-5) | Investment Considerations |
Atlantis Phase 3 | Tie back to existing Atlantis facility unlocked through Advanced Seismic Imaging | <1 year | >500 | Feasibility | ~25 | Non- | - Resilient to price - Low risk, robust economics - Non-operated JV |
Ruby Petroleum | Tie back into existing processing facilities in Trinidad & Tobago | <1 year | >150 | Feasibility | - Similar scope to existing tie backs - Utilisation of existing facility capacity - Early life sensitivity to oil price | ||
Olympic Dam BFX | Accelerated development into the Southern Mine Area, debottlenecking of existing surface infrastructure to increase production | <5 years | >2,000 | Pre-feasibility | ~20 | ●● | - Resilient to price - Improved Cu grades in the Southern Mine Area - Continued resource definition - Power network instability |
Scarborough | Tie back development to existing LNG facility | <5 years | <2,000 | Pre-Feasibility | >15 | Non- | - Tier 1 resource - Ability to process through North West Shelf - Oversupply of LNG driving low price market environment - Remote field location, deep water, severe metocean conditions |
Wards Well | Long-life, premium hard coking coal resource, greenfield underground long-wall mine | >5 years | >1,000 | Opportunity assessment | ~15 | ●●●● | - Tier 1 resource - Proximity to existing operating assets - Geological definition required to de-risk - Risk of impact on market supply - Supply chain logistic complexities |
Resolution | Underground block cave with attractive grade profile and competitive cost curve position | >5 years | <3,000 | Conceptual | ~15 | Non- | - High copper grades - Resilient to price - Non-operated JV - Technical risk due to caving at the resource depth and tailings options. - Permitting requirements |
Jansen Stage 12 | Tier 1 resource with valuable expansion optionality | <5 years | ~5,000 | Feasibility | ~13 | ●●● | - Tier 1 resource, stable jurisdiction - Operating costs of ~US$100/t (FOB Vancouver) - Unrivalled position of land - Risk of market oversupply - New commodity entry - Sensitive to price - High capital cost and long payback |
Jansen Stage 2-4 | Sequenced brownfield expansions of up to 12 Mtpa (4 Mtpa per stage) | >15 years | ~4,000 per stage | Opportunity assessment | ~16 | ●● | - Long term growth optionality and value generation - Risk of market oversupply - Complexities from project size - Significant capital requirement - Further de-risking required |
Average/ aggregate | Feasibility | ~17 | Aggregate unrisked value of ~US$15 bn spanning commodities and time periods |
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