Bhp Group Ltd · ASX:BHP
Bhp — Investor Presentation (May 2019)
35 slides from Bhp's investor presentation, May 22, 2019
Slide 1: Strategy briefing
Strategy briefing Peter Beaven Chief Financial Officer 22 May 2019
Slide 2: Disclaimer
Disclaimer Forward-looking statements This presentation contains forward-looking statements, including statements which may include: trends in commodity prices and currency exchange rates; demand for commodities; plans; strategies and objectives of management; closure or divestment of certain operat
Slide 3: Key messages
Key messages Our strategy identifies how to position the portfolio to maximise long-term value and deliver high returns for shareholders Our • To have the best capabilities, best commodities and best assets, to create long-term value and high returns strategy • Transformation, capital discipline and
Slide 4: Our strategy to maximise value and returns
Our strategy to maximise value and returns To have industry-leading capabilities applied to a portfolio of world-class assets in the most attractive commodities Culture and capabilities that enable the Highly attractive commodities, matched execution of our business strategy to our capabilities Ma
Slide 5: We are deliberate about the commodities we choose
We are deliberate about the commodities we choose Focused on holistic long-term value creation potential, informed by supply/demand balance – not just demand outlook Favourable supply and demand gap Large market sizes Favour commodities where inducement economics, rather than operating costs, set th
Slide 6: We seek long-life assets with embedded optionality
We seek long-life assets with embedded optionality Creating and exercising embedded options is critical to maximising value Escondida Asset returns1 Production and resources (annualised, %) (Mt, 100% basis) ~25% 180 Huge resource potential Cumulative production Contained Cu Resource (recovery factor
Slide 7: Our capabilities enable the execution of our strategy
Our capabilities enable the execution of our strategy Emphasis on culture and core capabilities to drive competitive advantage Access, discovery Value conversion in Market intelligence and appraisal operations and marketing • Early identification of new opportunities • Gaining access to new resource
Slide 8: The external environment is changing rapidly
The external environment is changing rapidly Our world is in constant flux and levels of uncertainty are high Unsustainable Dramatic change in Rise of emerging land and water use the energy system markets 23% Up ~3x 70% of land areas have seen a reduction in IEA’s forecast for solar power generation
Slide 9: We have responded: our portfolio is in great shape today
We have responded: our portfolio is in great shape today We have reshaped our portfolio through the demerger of South32 and US$18 billion of divestments9 Large assets Long-life Low-cost Upstream >80% ~2x ~70% >30% ~50% FY13 Current FY13 Current FY13 Current FY13 Current Average Cu Eq resource size P
Slide 10: Navigating future uncertainty through scenario analysis
Navigating future uncertainty through scenario analysis Our approach allows us to test the resilience of our portfolio and to optimise it for the long term We consider durable Which could lead to extreme, but We derive and test strategic Outcomes of hypothesis testing inform and emerging trends plau
Slide 11: We monitor and test strategic themes
We monitor and test strategic themes Extreme, but plausible, scenarios used as bookends to test the portfolio and identify future opportunities and risks Electrification of transport Circular economy Electric Vehicles (EVs) progressively displace The reuse, reduction, repurposing and recycling of th
Slide 12: Well positioned to mitigate impacts and create value
Well positioned to mitigate impacts and create value Understanding the signposts allows us to identify common no-regret actions and future decision points Value Decarbonisation of stationary power • Early retirement of non-renewable resources • Standalone renewable cost competitiveness • Grid flexib
Slide 13: Implications for strategy: Electrification of transport
Implications for strategy: Electrification of transport Portfolio advantaged through exposures in copper and nickel with further options available to take advantage of the trend Commodities Assets Capabilities Nickel: major driver for Class I demand; • Strong environment for development and • Blo
Slide 14: Implications for strategy: Licence to operate
Implications for strategy: Licence to operate Assets already permitted with low geopolitical risk likely to increase in value while new resource harder to develop Commodities Assets Capabilities Iron ore, copper, nickel and • All assets with permits already in place • Social value becomes a major
Slide 15: Implications for strategy: Power decarbonisation
Implications for strategy: Power decarbonisation Risks associated with carbon-exposed commodities offset by upside to copper and nickel Commodities Assets Capabilities Copper: intensive use in renewable • Strong environment for development and • Block caving skills in copper to become a power cap
Slide 16: Implications for strategy: Biosphere
Implications for strategy: Biosphere A positive world for potash and one that favours assets with existing cost effective water stewardship strategies Commodities Assets Capabilities Potash: high demand case as food • Strong environment for Jansen option • Heightened importance on judicious insec
Slide 17: Implications for strategy: Circular economy
Implications for strategy: Circular economy A very challenging environment, with potential growth provided by potash Commodities Assets Capabilities Copper: likely to remain supported by • Still room for growth in copper, but a • Transformation agenda will be key to cost new demand sources, even a
Slide 18: Implications for strategy
Implications for strategy Positioning our portfolio to seize opportunities as they emerge Electrification of Decarbonisation of Licence to operate Biosphere Circular economy transport stationary power Social value credentials, strategic partnerships, market intelligence, resource access and resource
Slide 19: Broad suite of attractive opportunities
Broad suite of attractive opportunities Our portfolio is in great shape today but we have more to do Optionality In execution Orphan Basin Ecuador and South South Flank Atlantis Phase 3 Higher exploration Australia exploration (Iron ore) (Petroleum) return (Petroleum) (Copper) Nickel West Spence Mat
Slide 20: Our framework promotes discipline in all capital decisions
Our framework promotes discipline in all capital decisions Our Capital Allocation Framework is transparent and embeds discipline Operating Capital productivity productivity Net operating cash flow Maintenance capital Strong balance sheet Minimum 50% payout ratio dividend Excess cash flow Debt Additi
Slide 21: Key messages
Key messages Our strategy identifies how to position the portfolio to maximise long-term value and deliver high returns for shareholders Our • To have the best capabilities, best commodities and best assets, to create long-term value and high returns strategy • Transformation, capital discipline and
Slide 22: Slide 22
Slide 23: Appendix
Appendix Strategy briefing 22 May 2019 23
Slide 24: Transformation – delivers significant value
Transformation – delivers significant value Increase in productivity, reduction in costs and application of technology Initiatives Value14 Timing15 Capex over Description 5-years (US$m) - BHP Operating System: piloted at Port Hedland and Perth Repair Centre WAIO ~5 years <800 - Value Chain Automatio
Slide 25: Future options – worked for value, timed for returns
Future options – worked for value, timed for returns Investment decisions made in accordance with our Capital Allocation Framework and fully consider the broader market impact Options Description Potential Capex Tollgate IRR14 Risk16 Investment considerations execution (US$m) (1-5) timing Ruby Tie b
Slide 26: Exploration – extending our conventional reserve life
Exploration – extending our conventional reserve life Investment decisions made in accordance with our Capital Allocation Framework and fully consider the broader market impact Options Location Ownership Maturity Earliest first Description Planned future activity production Trion Mexico - Gulf of 60
Slide 27: Projects in feasibility
Projects in feasibility Autonomous truck hauling Ruby Jansen Stage 1 Australia Trinidad and Tobago Saskatchewan, Canada Automating ~500 haul trucks across Oil and gas development consisting of five Shaft equipping, mine development, Western Australia Iron Ore and production wells tied back into exis
Slide 28: Statement of Petroleum Resources
Statement of Petroleum Resources Petroleum Resources The estimates of Petroleum Reserves and Contingent Resources contained in this presentation are based on, and fairly represent, information and supporting documentation prepared under the supervision of Mr. A. G. Gadgil, who is employed by BHP. Mr
Slide 29: Mineral Resources and Competent Persons statement
Mineral Resources and Competent Persons statement Competent Person Statement The information in this presentation that relates to the FY2018 and FY2013 Mineral Resources (inclusive of Ore Reserves) were first reported by the Company in compliance with the ‘Australasian Code for Reporting of Explorat
Slide 30: Mineral Resources (100% basis)
Mineral Resources (100% basis) Commodity BHP interest Financial year Measured Resources (Mt) Indicated Resources (Mt) Inferred Resources (Mt) Deposit % Minerals Australia Iron Ore WAIO 2018 2,750 6,500 20,020 88 2013 2,550 4,210 14,560 88 Energy Coal Operations - Mt Arthur Coal 2018 875 1,299 1,019
Slide 31: Mineral Resources (100% basis)
Mineral Resources (100% basis) Commodity BHP interest Financial year Measured Resources (Mt) Indicated Resources (Mt) Inferred Resources (Mt) Deposit % Mineral Americas Copper Escondida District 2018 5,779@0.61% TCu 5,050@0.52% TCu 16,573@0.49 TCu 57.5 2013 5,785@0.67% TCu 3,542@0.54% TCu 12,930@0.4
Slide 32: Mineral Resources (100% basis)
Mineral Resources (100% basis) Commodity BHP interest Financial year Measured Resources (Mt) Indicated Resources (Mt) Inferred Resources (Mt) Deposit % Divested assets Metallurgical Coal Illawarra Coal 2013 278 455 586 100 Nickel Nickel Colombia 2013 115@1.04% Ni 186@0.9% Ni 90@0.8% Ni 99.94 Energy
Slide 33: Mineral Resources (100% basis)
Mineral Resources (100% basis) Commodity BHP interest Financial year Measured Resources (Mt) Indicated Resources (Mt) Inferred Resources (Mt) Deposit % Mineral Americas Copper Escondida deposit 2018 5,376@0.61% TCu 3,674@0.51% TCu 10,437@0.52% TCu 57.5 2017 5,524@0.63% TCu 3,675@0.57% TCu 9,649@0.51
Slide 34: Footnotes
Footnotes 1. Slide 6: IRR (real) on a risked basis. Indicative internal analysis. Source: Thomson Reuters, BHP. Market indices reflected with Total Shareholder Return (TSR). 2. Slide 6: Reserves/Contingent Resources at 30 June 2018: 1P: 303 MMboe (10 MMboe fuel); 2P: 431 MMboe (13 MMboe fuel); 2C: 3
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