Capital Allocation Briefing
BGI Eco Tech AG
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07:46 20/03/24
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Issued by: | BHP Group Plc  |
Date: | 21 November 2018 Â |
To: | London Stock Exchange JSE Limited  |
For Release: | Immediately  |
Contact: | Helen Ratsey +44 (0) 20 7802 7540 Â |
 BHP - Capital allocation briefing  |
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UK Listing Authority Submissions
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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:
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·   Capital allocation briefing.
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The document may also be accessed via BHP's website - bhp.com
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NEWS RELEASE
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Release Time | IMMEDIATE |
Date | 21 November 2018 Â |
Release Number | 26/18 |
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Capital allocation briefing
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BHP will be holding an investor and analyst briefing today in Melbourne on BHP's Capital Allocation Framework.
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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. Â
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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
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Further information on BHP can be found at: bhp.com
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APPENDIX
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The following information is included in Peter Beaven's presentation slides.
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Latent capacity
Options | IRR2 (%) | Risk3 (1-5) | Timing4 | Capex (US$m) | Description |
WAIO | >100 | â—Ź | <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 | â—Źâ—Ź | <2 years | ~500 | Expansion of desalination plant to reduce groundwater usage and maximise concentrator throughput |
Escondida | >100 | â—Źâ—Ź | various | >500 | Concentrator debottlenecking, sulphide leach reprocessing of ripios, truck and shovel fleet upgrades |
Spence | ~60 | â—Źâ—Ź | 2-5 years | 250-500 | Reprocessing of ripios dumped since the beginning of the Spence operations |
Queensland Coal | >100 | â—Ź | >5 years | >500 | Investing in stripping capacity and pipeline of productivity initiatives to shift the bottleneck towards the coal handling plants |
Spence | >15 | â—Źâ—Źâ—Ź | >5 years | >500 | Processing lower grade hypogene material with increased recoveries, concentrator debottlenecking, in-pit semi mobile ore conveying |
Average/aggregate | >100 | ~US$4 bn | Up to ~2 Mt of incremental Cu eq. capacity with |
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1. Projects as presented in May 2018 at the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference; IRR: Returns at 2018 consensus price forecasts; ungeared, post tax, nominal return; Risk profile is based on a BHP assessment of each project against defined quantified and non-quantified risk metrics rated out of 5; 5 represents more risk; Timing: Represents potential first productionÂ
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Future options
Options | Description | Potential execution timing | Capex (US$m) | GIP | IRR1 (%) | Risk1 (1-5) | Investment Considerations |
Atlantis Phase 3 | Tie back to existing Atlantis facility unlocked through Advanced Seismic Imaging | Â <1 year | >500 | Feasibility | ~25 | Non- | -Â Â Â Â Â Â Resilient to price -Â Â Â Â Â Â Low risk, robust economics -Â Â Â Â Â Â Non-operated JV |
Ruby Petroleum | Tie back into existing processing facilities in Trinidad & Tobago | <1 year | >150 | Feasibility | -Â Â Â Â Â Â Similar scope to existing tie backs -Â Â Â Â Â Â Utilisation of existing facility capacity -Â Â Â Â Â Â 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 | â—Źâ—Ź | -Â Â Â Â Â Â Resilient to price -Â Â Â Â Â Â Improved Cu grades in the Southern Mine Area -Â Â Â Â Â Â Continued resource definition -Â Â Â Â Â Â Power network instability |
Scarborough | Tie back development to existing LNG facility | <5 years | <2,000 | Pre-Feasibility | >15 | Non- | -Â Â Â Â Â Â Tier 1 resource -Â Â Â Â Â Â Ability to process through North West Shelf -Â Â Â Â Â Â Oversupply of LNG driving low price market environment -Â Â Â Â Â Â 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 | â—Źâ—Źâ—Źâ—Ź | -Â Â Â Â Â Â Tier 1 resource -Â Â Â Â Â Â Proximity to existing operating assets -Â Â Â Â Â Â Geological definition required to de-risk -Â Â Â Â Â Â Risk of impact on market supply -Â Â Â Â Â Â Supply chain logistic complexities |
Resolution | Underground block cave with attractive grade profile and competitive cost curve position | >5 years | <3,000 | Conceptual | ~15 | Non- | -Â Â Â Â Â Â High copper grades -Â Â Â Â Â Â Resilient to price -Â Â Â Â Â Â Non-operated JV -Â Â Â Â Â Â Technical risk due to caving at the resource depth and tailings options. -Â Â Â Â Â Â Permitting requirements |
Jansen Stage 12 | Tier 1 resource with valuable expansion optionality | <5 years | ~5,000 | Feasibility | ~13 | â—Źâ—Źâ—Ź | -Â Â Â Â Â Â Tier 1 resource, stable jurisdiction -Â Â Â Â Â Â Operating costs of ~US$100/t (FOB Vancouver) -Â Â Â Â Â Â Unrivalled position of land -Â Â Â Â Â Â Risk of market oversupply -Â Â Â Â Â Â New commodity entry -Â Â Â Â Â Â Sensitive to price -Â Â Â Â Â Â 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 | â—Źâ—Ź | -Â Â Â Â Â Â Long term growth optionality and value generation -Â Â Â Â Â Â Risk of market oversupply -Â Â Â Â Â Â Complexities from project size -Â Â Â Â Â Â Significant capital requirement -Â Â Â Â Â Â Further de-risking required |
Average/ aggregate | Feasibility | ~17 | Aggregate unrisked value of ~US$15 bn spanning commodities and time periods |
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