BHP : Operational Review for the quarter ended 30 September 2023 - Release

18 October 2023

Operational review for the quarter ended 30 September 2023

We remain on track to deliver full year production and unit cost guidance at all assets.

First quarter operational performance was highlighted by a 11% uplift in copper production from the previous year. After completing a typically busy quarter of planned maintenance particularly at our Australian assets, we are on track to achieve full year production and unit cost guidance. BMA in particular was impacted by planned maintenance, an extended longwall move and low opening inventory following drawdowns in the prior year.

Jansen Stage 1 in Canada is approximately one-third complete after a productive summer. In South Australia, we saw strong operational performance in the first full quarter of production for the new province, as we bring our copper assets together and progress further exploration drilling.

Mike Henry

BHP Chief Executive Officer

Summary

Operational performance

On track to deliver production guidance

FY24 production guidance remains unchanged. Copper production increased 11%, including record quarterly production at Spence. BMA production was lower due to maintenance, an extended longwall move and low inventory. We also executed major planned maintenance across our Australian business.

Social value

Operational decarbonisation

BMA entered into a new renewable power purchase agreement (PPA)which is expected to provide half the forecasted electricity demand of BMA's operations over five years from January 2026; andwe signed a memorandum of understanding (MoU) with Toyotato reduce GHG emissions from light vehicles in Australia.

Large, long-life,low-cost assets

3 Bt of iron ore shipped to China

In September, BHPrecognised the shipment of 3 Bt of high- quality iron ore to China. Since its initial investment over 30 years ago to the end of FY23, WAIO has delivered 15% average annual returns and, over the past decade, has increased production by >50% and lowered costs by >30%.

Growth

Progress in copper and potash provinces

We saw strong underlying operational performance in the first full quarter of production from the newly-integrated Copper South Australia, while our Jansen Stage 1 project remains on budget and on track to deliver first production by the end of CY26 (32% complete).

		FY24 YTD v	Q1 FY24 v	Current FY24
Production	Q1 FY24	FY23 YTD	Q4 FY23	guidance
Copper (kt)	457.0	11%	(4%)	1,720 - 1,910
Escondida (kt)	273.3	8%	(7%)	1,080 - 1,180	Unchanged
Pampa Norte (kt)	78.3	11%	14%	210 - 250i	Unchanged
Copper South Australia (kt)ii	71.7	44%	(6%)	310 - 340	Unchanged
Antamina (kt)	32.5	(12%)	(11%)	120 - 140	Unchanged
Carajás (kt)ii	1.2	-	(25%)	-	-
Iron ore (Mt)	63.2	(3%)	(3%)	254 - 264.5
WAIO (Mt)	62.0	(3%)	(3%)	250 - 260	Unchanged
WAIO (100% basis) (Mt)	69.4	(4%)	(4%)	282 - 294	Unchanged
Samarco (Mt)	1.2	7%	1%	4 - 4.5	Unchanged
Metallurgical coal - BMA (Mt)	5.6	(16%)	(34%)	28 - 31
BMA (100% basis) (Mt)	11.2	(16%)	(34%)	56 - 62	Unchanged
Energy coal - NSWEC (Mt)	3.6	38%	(24%)	13 - 15	Unchanged
Nickel - Nickel West (kt)	20.2	(2%)	(8%)	77 - 87	Unchanged

1. Production guidance for FY24 is for Spence only and excludes Cerro Colorado which is now expected to produce ~11 kt, up from previous guidance of ~9 kt, as it transitions to closure by 31 December 2023.
2. Q4 FY23 production volumes for the operations acquired from OZL are for the period of 1 May to 30 June 2023.

BHP | Operational review for the quarter ended 30 September 2023

Segment and asset performance | FY24 YTD v FY23 YTD

Copper

Production

457.0 kt 11%

Q1 FY23 410.1 kt

FY24e 1,720 - 1,910 kt

Average realised price1,2

US$3.63/lb 4%

H2 FY23 US$3.80/lb

Total copper production increased by 11% to 457 kt. Guidance for FY24 remains unchanged at between 1,720 and 1,910 kt.

Escondida 273 kt 8% (100% basis)

Increased production was primarily due to higher concentrator feed grade of 0.85%, compared to 0.83% in the September 2022 quarter. Concentrator feed grade is expected to be between 0.85% and 0.90% during FY24. Guidance for FY24 remains unchanged at between 1,080 and 1,180 kt, with production expected to be weighted towards the second half of the year.

Escondida successfully completed negotiations for a new collective agreement with the Union N°2 of Supervisors, effective for 36 months from 1 October 2023.

Pampa Norte 78 kt 11%

Production at Spence increased 19% to a quarterly record of 69 kt, largely as a result of improved concentrator performance and recoveries. The concentrator plant modifications, which commenced in August 2022, are now expected to be completed in FY24. Guidance for Spence remains unchanged at between 210 and 250 kt for FY24, subject to the remediation of the previously identified anomalies in the Spence Tailings Storage Facility.

Production at Cerro Colorado was 26% lower at 9 kt as it transitions towards closure by the end of December 2023. Production for H1 FY24 is now expected to be ~11 kt, up from a previous estimate of ~9 kt.

Copper South Australia 72 kt 44%

Production increased due to the additional 23 kt from Prominent Hill and Carrapateena. Pleasingly, integration of the Olympic Dam, Prominent Hill and Carrapateena assets has gone well, with strong operational performance and continued focus on safe and reliable production, in particular at Olympic Dam (record material mined since FY15) and Carrapateena (record development metres achieved in September). Planned maintenance was completed across the province. In addition, we upgraded a conveyor at Carrapateena, ahead of the planned commissioning of Crusher 2 in Q3 FY24.

Olympic Dam also delivered record gold production (for the second time in three quarters) and gold sales in the quarter.

Production guidance remains unchanged at between 310 and 340 kt for FY24.

Exploration drilling continued beneath the Olympic Dam ore body with eight active drill rigs and at Oak Dam with 10 operating drill rigs.

Other copper

Antamina copper production decreased by 12% to 33 kt reflecting planned lower copper feed grades. Zinc production was 9% higher at 36 kt, reflecting higher grades. Copper guidance of 120 to 140 kt and zinc guidance of between 85 and 105 kt remains unchanged for FY24.

Carajás produced 1.2 kt of copper and 0.8 troy koz of gold. Operations were suspended in August due to a geotechnical event, and are expected to recommence in Q2 FY24.

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Iron ore

Production

63.2 Mt 3%

Q1 FY23 65.1 Mt

FY24e 254 - 264.5 Mt

Average realised price1

US$98.04/wmt 2%

H2 FY23 US$99.88/wmt

BHP | Operational review for the quarter ended 30 September 2023

Total iron ore production decreased by 3% to 63 Mt. Guidance for FY24 remains unchanged at between 254 and 264.5 Mt.

WAIO 62 Mt 3% | 69 Mt (100% basis)

Production was lower due to tie-in activity for the Rail Technology Programme (RTP1), the ongoing ramp up and maintenance at the Central Pilbara hub (South Flank and Mining Area C), and the timing of track renewal maintenance.

South Flank remains on track to ramp up to full production capacity of 80 Mtpa (100% basis) by the end of FY24. The planned tie-in of the Port Debottlenecking Project (PDP1) continues to progress and remains on track to be completed in CY24.

Guidance for FY24 remains unchanged at between 250 and 260 Mt (282 and 294 Mt on a 100% basis). We are building inventory at the mines while we complete planned maintenance and with South Flank continuing to ramp up, volumes are expected to be weighted to the second half.

Samarco 1.2 Mt 7% | 2.5 Mt (100% basis)

Production increased as a result of higher concentrator throughput. Guidance for FY24 remains unchanged at between 4 and 4.5 Mt.

Coal

Metallurgical coal

Production

5.6 Mt 16%

Q1 FY23 6.7 Mt

FY24e 28 - 31 Mt

BMA 5.6 Mt 16% | 11.2 Mt (100% basis)

Lower production was due to planned wash plant maintenance at Goonyella, mining in higher strip ratio areas, an extended longwall move at Broadmeadow, and a stoppage at Peak Downs. This was partially offset by strong underlying truck productivity and favourable weather conditions. BMA also opened the period with low inventory levels compared with an inventory drawdown in the prior year due to wet weather.

Average realised price1

US$237.07/t 13%

H2 FY23 US$273.08/t

Guidance for FY24 remains unchanged at between 28 and 31 Mt (56 and 62 Mt on a 100% basis). Planned wash plant maintenance at Peak Downs and Caval Ridge and the ramp up of Broadmeadow from the longwall move will continue into Q2. Once completed, we expect underlying operating performance to deliver increased production in the second half.

In February 2023, we announced our intention to pursue options to divest the Daunia and Blackwater mines together with our joint venture partner Mitsubishi Development Pty Ltd. BHP confirms that Whitehaven Coal has been selected as the preferred bidder in the divestment process.

Energy coal

Production

3.6 Mt 38%

Q1 FY23 2.6 Mt

FY24e 13 - 15 Mt

Average realised price1,3

US$125.66/t 20%

H2 FY23 US$157.21/t

NSWEC 3.6 Mt 38%

Production increased due to favourable weather conditions and eased labour constraints, which enabled record annualised truck hours for the quarter. This was partially offset by planned wash plant maintenance completed in August.

Guidance for FY24 remains unchanged at between 13 and 15 Mt.

On 6 September 2023, the NSW Government announced a 2.6% point increase in coal royalties (from 8.2% to 10.8% for open cut mines), which will become effective from 1 July 2024, coinciding with the end of the legislated period for the domestic reservation policy.

We have submitted a consent modification to mine beyond FY26 to closure in FY30, and will take into consideration the increase to NSW royalties in the plans for closure.

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BHP | Operational review for the quarter ended 30 September 2023

Group & Unallocated

Nickel

Production

20.2 kt 2%

Q1 FY23 20.7 kt

FY24e 77 - 87 kt

Average realised price1

Nickel West 20.2 kt 2%

Production decreased marginally in line with higher stripping activity at Mt Keith mining operations.

Guidance remains unchanged at between 77 and 87 kt for FY24. The refinery shutdown planned for October 2023 will now largely be completed in February 2024, and as a result production is expected to be relatively flat across the remainder of the year.

US$20,354/t 14%

H2 FY23 US$23,652/t

Quarterly performance | Q1 FY24 v Q4 FY23

Copper

457.0 kt 4%

Q4 FY23 476.2 kt

Strong underlying operational performance, including record quarterly production at Spence, was offset by planned maintenance across Copper South Australia and lower concentrator and stacking grades at Escondida.

Iron ore

63.2 Mt 3%

Q4 FY23 65.3 Mt

Lower production at WAIO as a result of planned equipment maintenance and the ongoing ramp-up of the Central Pilbara hub, partially offset by favourable weather following Tropical Cyclone Ilsa in the prior quarter.

Metallurgical coal

Energy coal

5.6 Mt 34%

Q4 FY23 8.5 Mt

The low opening inventory position following drawdowns in Q4 FY23, along with planned wash plant maintenance at Blackwater and Goonyella, a higher strip ratio, a longer than planned longwall move at Broadmeadow and an unexpected stoppage at Peak Downs resulted in lower volumes at BMA.

3.6 Mt 24%

Q4 FY23 4.8 Mt

Lower volumes at NSWEC reflected planned wash plant maintenance, and a focus on additional stripping volumes which resulted in higher strip ratios.

Nickel

20.2 kt 8%

Q4 FY23 22.0 kt

Lower volumes in line with higher stripping activity at Mt Keith in the quarter.

Further information in Appendix 1

Detailed production and sales information for all operations in Appendix 2

The following footnotes apply to this Operational Review:

1. 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.
2. Does not include sales from assets acquired through the purchase of OZL.
3. Export sales only. Includes thermal coal sales from metallurgical coal mines.

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BHP | Operational review for the quarter ended 30 September 2023

Appendix 1

Average realised prices1

			Q1 FY24 v
	Q1 FY24	H2 FY23	H2 FY23
Copper (US$/lb)2	3.63	3.80	(4%)
Iron ore (US$/wmt, FOB)	98.04	99.88	(2%)
Metallurgical coal (US$/t)	237.07	273.08	(13%)
Hard coking coal (US$/t)3	242.52	276.22	(12%)
Weak coking coal (US$/t)3	190.74	250.38	(24%)
Thermal coal (US$/t)4	125.66	157.21	(20%)
Nickel metal (US$/t)	20,354	23,652	(14%)

1. 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.
2. Does not include sales from assets acquired through the purchase of OZL.
3. 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.
4. Export sales only. Includes thermal coal sales from metallurgical coal mines.

Current year unit cost guidance

	Current
	FY24 guidance1
Escondida unit cost (US$/lb)2	1.40 - 1.70	Unchanged
Spence unit cost (US$/lb)	2.00 - 2.30	Unchanged
WAIO unit cost (US$/t)	17.40 - 18.90	Unchanged
BMA unit cost (US$/t)	95 - 105	Unchanged

1. FY24 unit cost guidance is based on exchange rates of AUD/USD 0.67 and USD/CLP 810.
2. Escondida unit costs for FY24 onwards exclude revenue-based government royalties.

Medium term guidance

	Production	Unit cost
	guidance	guidance1
Escondida2	1,200 - 1,300 kt	US$1.30 - $1.60/lb3
Spence4	~250 kt
WAIO (100% basis)	>305 Mt	<_us24_17>

1. Medium term unit cost guidance is based on exchange rates of AUD/USD 0.67 and USD/CLP 810.
2. Medium term refers to FY25 and FY26.
3. Escondida unit costs for FY24 onwards exclude revenue-based government royalties.
4. Average of 250 ktpa over five years on the basis that remediation of the previously identified TSF anomalies does not impact operations.

Major projects

			Capital	First
			expenditure	production
Commodity	Project and ownership	Project scope / capacity	US$M	target date	Progress
Potash	Jansen Stage 1	Design, engineering and construction of an	5,723	End-CY26	Project is 32%
	(Canada)	underground potash mine and surface infrastructure,			complete
	100%	with capacity to produce 4.35 Mtpa.

Exploration

Minerals exploration and evaluation expenditure was US$105 m for Q1 FY24, of which US$93 m was expensed.

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