Annual Report 2019 - BHP

Annual Report 2019

Our Charter

We are BHP, a leading global resources company.

Our Purpose

To bring people and resources together to build a better world.

Our Strategy Our strategy is to have the best capabilities, best commodities and best assets, to create long-term value and high returns.

Our Values Sustainability Putting health and safety first, being environmentally responsible and supporting our communities.

Integrity Doing what is right and doing what we say we will do.

Respect Embracing openness, trust, teamwork, diversity and relationships that are mutually beneficial.

Performance Achieving superior business results by stretching our capabilities.

Simplicity Focusing our efforts on the things that matter most.

Accountability Defining and accepting responsibility and delivering on our commitments.

We are successful when: Our people start each day with a sense of purpose and end the day with a sense of accomplishment. Our teams are inclusive and diverse. Our communities, customers and suppliers value their relationships with us. Our asset portfolio is world-class and sustainably developed. Our operational discipline and financial strength enables our future growth. Our shareholders receive a superior return on their investment.

Andrew Mackenzie Chief Executive Officer

May 2019

The Annual Report 2019 is available online at .

BHP Group Limited. ABN 49 004 028 077. Registered in Australia. Registered office: 171 Collins Street, Melbourne, Victoria 3000, Australia. BHP Group Plc. Registration number 3196209. Registered in England and Wales. Registered office: Nova South, 160 Victoria Street London SW1E 5LB United Kingdom. Each of BHP Group Limited and BHP Group Plc is a member of the Group, which has its headquarters in Australia. BHP is a Dual Listed Company structure comprising BHP Group Limited and BHP Group Plc. The two entities continue to exist as separate companies but operate as a combined group known as BHP.

The headquarters of BHP Group Limited and the global headquarters of the combined Group are located in Melbourne, Australia. The headquarters of BHP Group Plc are located in London, United Kingdom. Both companies have identical Boards of Directors and are run by a unified management team. Throughout this publication, the Boards are referred to collectively as the Board. Shareholders in each company have equivalent economic and voting rights in the Group as a whole.

In this Annual Report, the terms `BHP', the `Company', the `Group', `our business', `organisation', `we', `us', `our' and `ourselves' refer to BHP Group Limited, BHP Group Plc and, except where the context otherwise requires, their respective subsidiaries as defined in note 13 `Related undertaking of the Group' in section 5.2 of this Report. Those terms do not include non-operated assets.

This Annual Report covers BHP's assets (including those under exploration, projects in development or execution phases, sites and closed operations) that have been wholly owned and/or operated by BHP and that have been owned as a joint venture(1) operated by BHP (referred to in this Report as `assets', `operated assets' or `operations') during the period from 1 July 2018 to 30 June 2019. Our functions are also included.

BHP also holds interests in assets that are owned as a joint venture but not operated by BHP (referred to in this Annual Report as `non-operated joint ventures' or `non-operated assets'). Notwithstanding that that this Annual Report may include production, financial and other information from non-operated assets, non-operated assets are not included in the BHP Group and, as a result, statements regarding our operations, assets and values apply only to our operated assets unless stated otherwise.

(1) References in this Annual Report to a `joint venture' are used for convenience to collectively describe assets that are not wholly owned by BHP. Such references are not intended to characterise the legal relationship between the owners of the asset.

Contents

1 Strategic Report

1.1 Chairman's Review

4

1.2 Chief Executive Officer's Report

5

1.3 BHP at a glance: FY2019 performance summary

6

BHP at a glance: What we do

8

1.4 About BHP

9

1.5 Our performance

18

1.6 Our operating environment

23

1.7 Samarco

44

1.8 Tailings dams

47

1.9 People

50

1.10 Sustainability

55

1.11 Our businesses

66

1.12 Summary of financial performance

81

1.13 Performance by commodity

95

1.14 Other information

103

2 Governance at BHP

2.1 Governance at BHP

106

2.2 Board of Directors and Executive Leadership Team

109

2.3 Shareholder engagement

115

2.4 Role and responsibilities of the Board

116

2.5 Board membership

118

2.6 Chairman

118

2.7 Renewal and re-election

118

2.8 Director skills, experience and attributes

119

2.9 Director induction, training and development

121

2.10 Independence

121

2.11 Board evaluation

122

2.12 Board meetings and attendance

123

2.13 Board committees

124

2.14 Risk management governance structure

132

2.15 Management

133

2.16 Our conduct

134

2.17 Market disclosure

134

2.18 Remuneration

134

2.19 Directors' share ownership

134

2.20 Conformance with corporate governance standards

135

2.21 Additional UK disclosure

135

3 Remuneration Report

3.1 Annual statement by the Remuneration

Committee Chairman

138

3.2 Remuneration policy report

144

3.3 Annual report on remuneration

150

Forward looking statements

This Annual Report contains forward looking statements, including statements regarding trends in commodity prices and currency exchange rates; demand for commodities; production forecasts; plans, strategies and objectives of management; closure or divestment of certain assets, operations or facilities (including associated costs); anticipated production or construction commencement dates; capital costs and scheduling; operating costs; anticipated productive lives of projects, mines and facilities; provisions and contingent liabilities; and tax and regulatory developments.

Forward looking statements may be identified by the use of terminology including, but not limited to, `intend', `aim', `project', `anticipate', `estimate', `plan', `believe', `expect', `may', `should', `will', `continue' or similar words. These statements discuss future expectations concerning the results of assets or financial conditions, or provide other forward looking information.

These forward looking statements are not guarantees or predictions of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and which may cause actual results to differ materially from those expressed in the statements contained in this Annual Report. Readers are cautioned not to put undue reliance on forward looking statements.

For example, our future revenues from our assets, projects or mines described in this Annual Report will be based, in part, on the market price of the minerals, metals or petroleum products produced, which may vary significantly from current levels. These variations, if materially adverse, may affect the timing or the feasibility of the development of a particular project, the expansion of certain facilities or mines, or the continuation of existing assets.

Other factors that may affect the actual construction or production commencement dates, costs or production output and anticipated lives of assets, mines or facilities include: our ability to profitably produce and transport the minerals, petroleum and/or metals extracted to applicable markets; the impact of foreign currency exchange rates on the market prices of the minerals, petroleum or metals we produce; activities of government authorities in the countries where we are exploring or developing projects, facilities or mines, including increases in taxes, changes in environmental and other regulations and political uncertainty; labour unrest; and other factors identified in the risk factors set out in section 1.6.4.

4 Directors' Report

4.1 Review of operations, principal activities and state of affairs 164

4.2 Share capital and buy-back programs

165

4.3 Results, financial instruments and going concern

165

4.4 Directors

165

4.5 Remuneration and share interests

166

4.6 Secretaries

166

4.7 Indemnities and insurance

166

4.8 Employee policies

167

4.9 Corporate governance

167

4.10 Dividends

167

4.11 Auditors

167

4.12 Non-audit services

167

4.13 Political donations

168

4.14 Exploration, research and development

168

4.15 ASIC Instrument 2016/191

168

4.16 Proceedings on behalf of BHP Group Limited

168

4.17 Performance in relation to environmental regulation

168

4.18 Share capital, restrictions on transfer of shares and other

additional information

168

5 Financial Statements

5.1 Consolidated Financial Statements

170

5.2 BHP Group Plc

226

5.3 Directors' declaration

238

5.4 Statement of Directors' responsibilities in respect

of the Annual Report and the Financial Statements

239

5.5 Lead Auditor's Independence Declaration under

Section 307C of the Australian Corporations Act 2001

240

5.6 Independent Auditors' reports

241

5.7 Supplementary oil and gas information ? unaudited

248

6 Additional information

6.1 Information on mining operations

254

6.2 Production

263

6.3 Resources and Reserves

266

6.4 Major projects

290

6.5 Climate change data

291

6.6 Legal proceedings

294

6.7 Glossary

297

7 Shareholder information

7.1 History and development

304

7.2 Markets

304

7.3 Organisational structure

304

7.4 Material contracts

306

7.5 Constitution

306

7.6 Share ownership

310

7.7 Dividends

312

7.8 American Depositary Receipts fees and charges

313

7.9 Government regulations

313

7.10 Ancillary information for our shareholders

316

Except as required by applicable regulations or by law, BHP does not undertake to publicly update or review any forward looking statements, whether as a result of new information or future events.

Past performance cannot be relied on as a guide to future performance.

Agreements for sale of Onshore US

On 28 September 2018, BHP completed the sale of 100 per cent of the issued share capital of BHP Billiton Petroleum (Arkansas) Inc. and 100 per cent of the membership interests in BHP Billiton Petroleum (Fayetteville) LLC, which held the Fayetteville assets, for a gross cash consideration of US$0.3 billion.

On 31 October 2018, BHP completed the sale of 100 per cent of the issued share capital of Petrohawk Energy Corporation, the BHP subsidiary which held the Eagle Ford (being Black Hawk and Hawkville), Haynesville and Permian assets, for a gross cash consideration of US$10.3 billion (net of preliminary customary completion adjustments of US$0.2 billion).

While the effective date at which the right to economic profits transferred to the purchasers was 1 July 2018, the Group continued to control the Onshore US assets until the completion dates of their respective transactions. In addition, the Group provided transitional services to the buyer, which ceased in July 2019.

For IFRS accounting purposes, Onshore US is treated as Discontinued operations in BHP's Financial Statements. Unless otherwise stated, information in section 5 has been presented on a Continuing operations basis to exclude the contribution from Onshore US assets. Details of the contribution of Onshore US assets to the Group's results are disclosed in note 27 `Discontinued operations' in section 5. All other information in this Annual Report (other than FY2019 safety performance data) relating to the Group has been presented on a Continuing and Discontinued operations basis to include the contribution from Onshore US assets prior to completion of their sale, unless otherwise stated. FY2019 safety performance data in this Annual Report has been presented on a Continuing and Discontinued basis to include the contribution from Onshore US assets to 28 February 2019.

Unless otherwise stated, comparative financial information for FY2017, FY2016 and FY2015 has been restated to reflect the sale of the Onshore US assets, as required by IFRS 5/AASB 5 `Non-current Assets Held for Sale and Discontinued Operations'. Consolidated Balance Sheet information for these periods has not been restated as accounting standards do not require it.

BHP Annual Report 2019 1

2 BHP Annual Report 2019

Section 1 Strategic Report

About this Strategic Report

This Strategic Report in section 1 provides insight into BHP's strategy, operating and business model, and objectives. It describes the principal risks BHP faces and how these risks might affect our future prospects. It also gives our perspective on our recent operational and financial performance.

This disclosure is also intended to assist shareholders and other stakeholders to understand and interpret the Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS) included in this Annual Report. The basis of preparation of the Consolidated Financial Statements is set out in section 5.1. We also use alternative performance measures to explain our underlying performance; however, these measures should not be considered as an indication of, or as a substitute for, statutory measures as an indicator of actual operating performance, position or as a substitute for cash flow as a measure of liquidity. To obtain full details of the financial and operational performance of BHP, this Strategic Report should be read in conjunction with the Consolidated Financial Statements and accompanying notes. Underlying EBITDA is the key measure that management uses internally to assess the performance of the Group's segments and make decisions on the allocation of resources. Unless otherwise stated, data in section 1 is presented on a Continuing operations and Discontinued operations basis.

This Strategic Report in section 1 meets the requirements of the UK Companies Act 2006 and the Operating and Financial Review required by the Australian Corporations Act 2001.

We have excluded certain information from this Strategic Report, to the extent permitted by UK and Australian law, on the basis that it relates to impending developments or matters in the course of negotiation, and disclosure would be seriously prejudicial to the interests of BHP. This is because such disclosure could be misleading due to the fact it is premature or preliminary in nature, relates to commercially sensitive contracts, would undermine confidentiality between BHP and its suppliers and clients, or would otherwise unreasonably damage the business. The categories of information omitted include forward looking estimates and projections prepared for internal management purposes, information regarding BHP's assets and projects that is developing and susceptible to change, and information relating to commercial contracts and pricing modules.

References to sections beyond section 1 are references to other sections in this Annual Report 2019. Shareholders may obtain a hard copy of the Annual Report free of charge by contacting our Share Registrars, whose details are set out in our Corporate directory on the inside back cover of this Annual Report.

In this section

1.1 Chairman's Review 1.2 Chief Executive Officer's Report 1.3 BHP at a glance: FY2019 performance summary 1.4 About BHP

1.4.1 Our strategy 1.4.2 Our Operating Model 1.4.3 Managing performance 1.4.4 Transformation overview 1.4.5 Operations Services 1.4.6 Locations 1.5 Our performance 1.5.1 Financial KPIs 1.5.2 Non-financial KPIs 1.5.3 Our contribution in FY2019 1.6 Our operating environment 1.6.1 Market factors and trends 1.6.2 Commodity performance overview 1.6.3 Exploration 1.6.4 Risk management 1.7 Samarco 1.8 Tailings dams 1.9 People 1.9.1 Our people 1.9.2 Employees and contractors 1.10 Sustainability 1.10.1 Our approach to sustainability 1.10.2 Safety 1.10.3 Health 1.10.4 Protecting the environment 1.10.5 Engaging with communities 1.10.6 Respecting human rights 1.10.7 Indigenous peoples 1.10.8 Climate change 1.11 Our businesses 1.11.1 Minerals Australia 1.11.2 Minerals Americas 1.11.3 Petroleum 1.11.4 Commercial 1.12 Summary of financial performance 1.12.1 Group overview 1.12.2 Financial results 1.12.3 Debt and sources of liquidity 1.12.4 Alternative performance measures 1.12.5 Definition and calculation of alternative

performance measures 1.12.6 Definition and calculation of principal factors 1.13 Performance by commodity 1.13.1 Petroleum 1.13.2 Copper 1.13.3 Iron Ore 1.13.4 Coal 1.13.5 Other assets 1.14 Other information

BHP Annual Report 2019 3

1.1 Chairman's Review

Dear Shareholder,

I am pleased to provide our Annual Report for FY2019.

During the year, our relentless focus on strengthening our portfolio, capital discipline, culture and productivity delivered a solid set of financial results. Higher prices and record production from a number of operations contributed to strong operating cash flows and enabled BHP to announce a record final dividend of 78 US cents per share.

We completed the sale of our Onshore US oil and gas business in October 2018. Net proceeds of US$10.4 billion were returned to shareholders through a combination of an off-market buy-back in December 2018, and a special dividend in January 2019. These returns, when added to dividends announced in respect of FY2019, delivered record annual cash returns to shareholders.

We continued to invest in our future through the disciplined and transparent application of our Capital Allocation Framework. BHP currently has six major projects under development in petroleum, copper, iron ore and potash. All of them are on schedule and budget.

While we made strong progress in FY2019, we achieve nothing if it is not done safely. Tragically, in December last year, our colleague Allan Houston died at BMA's Saraji Mine in Queensland. I offer my condolences to Allan's family, friends and colleagues. We have shared the findings of the fatality investigation across the organisation and we will continue our work to improve safety tools and behaviours.

The collapse earlier this year of the Brumadinho tailings dam, owned by Brazilian company Vale, was a tragic event for the industry. Unfortunately, we know too well the toll these events take on communities. We have responded to a Church of England Pensions Board request for information on our own tailings facilities ? a request sent to around 700 mining companies. We held investor briefings in Sydney and London to talk openly about how we manage our tailings storage facilities. We are working closely with industry and other stakeholders to achieve more consistent disclosure. We will also participate in setting new international and independent tailings management standards to improve transparency and accountability across the industry.

Throughout FY2019, I met with many of our shareholders and stakeholders. These discussions have renewed our commitment to deliver on the five key priorities for BHP ? safety, portfolio, capital discipline, culture and capability, and social value. I strongly believe our focus on these key areas will create value for shareholders and make a positive contribution to society.

To strengthen our operating performance, this year we established a dedicated Transformation Office to focus on workforce capability and technology deployment. Our transformation efforts will make BHP safer and our operations more efficient and reliable. These efforts will develop workforce capability so that our people are equipped for the rapid pace of change that lies ahead. Coupled with a lean and agile management culture, transformation has the potential to unlock significant value in the short and medium term.

We also take a structured and rigorous approach to Board succession. In FY2019, we welcomed two new Board members, Ian Cockerill and Susan Kilsby, who joined us in April 2019. Ian and Susan are both excellent additions to the Board and will help ensure we have the right balance of attributes, skills, experience and diversity necessary for the Board to govern BHP effectively.

Carolyn Hewson, a Board member for over nine years, will be retiring from the Board, as planned, at this year's Annual General Meeting. On behalf of her colleagues on the Board, and the many employees she has closely interacted with over this term, I thank Carolyn for her counsel on the Board and as Chairman of the Remuneration Committee. Carolyn has made an outstanding contribution to BHP and we wish her the very best for the future.

The progress our people have made to our five focus areas has positioned us well for the future. I am confident that BHP, led by Andrew Mackenzie and the leadership team, has the right assets and capability to deliver strong shareholder value and returns.

Thank you for your continued support of BHP.

Ken MacKenzie Chairman

4 BHP Annual Report 2019

1.2 Chief Executive Officer's Report

1

Strategic Report

Governance at BHP

Remuneration Report

Directors' Report

Financial Statements

Dear Shareholder,

BHP's commitment to simplification, capital discipline and culture laid the groundwork for a solid performance in FY2019. From these strong foundations, we are confident in the long-term outlook, with significant opportunities ahead to further transform our business and deliver value and returns for our shareholders.

While our performance is a key indicator of success, how we operate is equally critical.

This year, we changed Our Charter to revise our company purpose. Our purpose is: to bring people and resources together to build a better world. We also added social value as one of our five company priorities. These changes recognise that we work with a range of stakeholders to make a positive contribution to the world. We know we must build trust and forge mutually beneficial partnerships for the long term, because the value we create together is central to shareholder value.

As always at BHP, the health, safety and wellbeing of our people remains our highest priority.

In December 2018, our colleague Allan Houston died at BMA's Saraji Mine in Queensland. He remains in our thoughts as do his colleagues, family and friends. After a lengthy and thorough investigation, we could not determine the direct cause of the incident but the investigation identified several areas for improvement, which we shared across the organisation.

There was a slight rise in total recordable injury frequency to 4.7 per million hours worked. However, we reduced the number of events with the potential to cause a fatality by 7 per cent, which is a critical indicator of our future safety performance across our business. This result is positive, but there is more we can and will do.

Our FY2019 financial performance from continuing operations was strong. Higher prices and solid underlying performance contributed to EBITDA of US$23 billion at a margin of 53 per cent. Underlying attributable profit was US$9.5 billion.

We have generated consistently strong operating cash flows over the past few years and delivered a further US$17 billion in FY2019. We used this cash to progress attractive growth projects, pay down debt and deliver record cash returns to shareholders.

The final dividend declared for FY2019 was a record 78 US cents per share ? or US$3.9 billion in total. This is in addition to the $US17 billion we already returned to shareholders during the year.

With the approval of the Ruby oil and gas development in August 2019, we now have six major projects under development. All of these are on schedule and budget. We also had further exploration success in copper and oil and are confident we have a rich set of options to grow value in the future.

In July 2019, we announced a five-year US$400 million Climate Investment Program to find the best technologies, investments and solutions to reduce greenhouse gas emissions across our value chain.

We are well positioned for future success. We have plans to maximise the value of our assets through our transformation programs and disciplined investment. We will invest in our culture and capabilities so our workforce is more inclusive and diverse and ready for the challenges of tomorrow. Their hard work has secured a strong outcome for BHP this year and I thank them for their energy and commitment.

Thank you also to our shareholders, suppliers, customers and the communities in which we operate. We are a better company because of your trust and support.

Andrew Mackenzie Chief Executive Officer

BHP Annual Report 2019 5

Additional information

Shareholder information

1.3 BHP at a glance: FY2019 performance summary

Safety is our top priority

Disappointingly, our total recordable injury frequency (TRIF) increased by

7%

from last year (1) (2)

We created value for the community

We made a social investment of

US$93.5 million

to communities around the world (3)

4.4

in FY2018

4.7

in FY2019

Strong financial performance was achieved this year

Attributable profit (4) of

US$8.3 billion

Underlying EBITDA (5) (6) of

US$23.2 billion

US$10.0 billion

free cash flow (4) (6) in FY2019

US$ billion 10 7.5 5 2.5 0 -2.5 -5 -7.5

US$ billion 25 20 15 10 5 0

US$ billion 14 12 10 8 6 4 2 0

FY2015 FY2016 FY2017 FY2018 FY2019 FY2015 FY2016 FY2017 FY2018 FY2019 FY2015 FY2016 FY2017 FY2018 FY2019

For more information on alternative performance measures, refer to section 1.12.4.

We created value for our shareholders

Total dividends (7) of

235 US cents

And basic earnings per ordinary share (4) of

160.3 US cents

We strengthened our balance sheet

We reduced our net debt (6) to

US$9.2 billion

in FY2019, a reduction of US$16.9 billion in three years

(1) TRIF is calculated based on the number of recordable injuries per million hours worked. Refer to section 1.5.2.

(2) FY2018 TRIF data includes Continuing operations and Discontinued operations (Onshore US assets). FY2019 TRIF data includes Discontinued operations (Onshore US assets) to 28 February 2019 and Continuing operations.

(3) FY2019 social investment figure includes Discontinued operations (Onshore US assets) to 31 October 2018 and Continuing operations.

(4) Includes data for Continuing operations and Discontinued operations for the financial years being reported. (5) Includes data for Continuing operations for the financial years being reported. (6) For more information on alternative performance measures, refer to section 1.12.4 (7) Includes a special dividend of 102 US cents which was paid from the proceeds from the disposal of Onshore US.

For more information about our financial performance in FY2019, see section 5.

6 BHP Annual Report 2019

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