BHP Group interim operational review and unification proposal

BHP half year production mixed

The BHP Group has released production and sales guidance for the 6 months ending December 2021 (1H21).

A summary of which is as follows (1H21 vs 1H20):

• Copper production declined 12%

• Iron ore production increased 1%

• Metallurgical coal production declined 8%

• Energy coal production increased 5%

• Nickel production declined 15%

• Petroleum production increased 5% (discontinued operation)

Full year guidance slightly lower

In terms of full year production guidance:

• Copper production expected at the lower end of the 1590kt to 1760kt range

• Iron ore production guidance unchanged (249Mt to 259Mt)

• Metallurgical coal production guidance range lowered to between 38Mt and 41Mt from 39Mt to 45Mt previously

• Nickel production guidance unchanged (85kt to 95Kt)

Average realized commodity prices higher

While production in a number of BHP’s segments (such as copper, coal and nickel) has declined, the average realized prices for all its commodities increased in 1H21 when compared to 1H20.

These average realized price increases are as follows:

• Copper +30%

• Iron ore +9%

• Metallurgical coal +166%

• Nickel +30%

Iron ore remains the most accretive commodity to BHP earnings accounting for around 60% of group revenue and roughly 70% of group EBITDA (Earnings Before Interest Tax Depreciation & Amortisation).

Unified corporate structure

The BHP Group has proposed unifying its corporate structure from two parent companies (BHP Group UK and BHP Group Australia), with two share prices, into one under BHP Group Limited.

The move is aimed at creating a more simplified structure which would enable BHP to undertake certain transactions more timeously. This would include corporate actions such as mergers and demergers as well as capital raising transactions. The unification will also simplify the BHP Group Limited’s company laws, tax and allow for one annual general meeting as well as one share price globally.

The vote is subject to a shareholder vote this week (Thursday 20 January) with the aim of concluding the unification by the end of January 2022. Shares would halt trading on the 28th of January 2022, before resuming trade on a unified basis on the 31st of Jan 2022.

In terms of the secondary listing of the BHP Group on the Johannesburg Stock Exchange (JSE), shareholders will have their shares exchanged on a 1:1 basis for BHP Group Limited shares.

In summary:

• 1H21 copper, metallurgical coal and nickel production declined against the prior year’s comparative period

• Iron ore, thermal coal and petroleum production increased in 1H21 against the prior year’s comparative interim period

• Higher average prices were realized across all of BHP’s major commodities over the period (1H21 vs 1H20)

• Iron ore remains the most relevant contributor to group revenue and earnings

• The BHP Group has proposed unifying its corporate structure from two parent companies (BHP Group UK and BHP Group Australia), with two share prices, into one under BHP Group Limited