Andrew Mackenzie - Chief Executive Officer Peter Beaven - Chief Financial Officer

Paul Young - Deutsche Bank Menno Sanderse - Morgan Stanley Lyndon Fagan - JPMorgan Clarke Wilkins - Citi Glyn Lawcock - UBS Hayden Bairstow - Macquarie

Welcome everyone to our results for the 2017 financial year. I am presenting from Melbourne. And Peter Beaven, our Chief Financial Officer, joins us from London. Now, as usual, before I begin, please note the disclaimer and its importance to this presentation. At BHP, our purpose is to create value for shareholders. This is at the center of everything we do. Over the last 5 years, we have laid strong foundations that will support shareholder value for years to come. We have reshaped the portfolio, created a connected culture, enhanced our capital allocation framework, reinforced the balance sheet and unwound almost a decade of cost inflation. The benefits of these foundations are clear in our 2017 financial year results. With our continuing and relentless focus on cash flow, capital discipline and shareholder value and returns, we will carry this momentum forward into 2018 and beyond. We will further reduce costs. And over the next 2 years embed additional productivity gains of $2 billion. We will continue to strengthen our balance sheet with a net debt range of $10 billion to $15 billion in the medium-term. We will maintain capital discipline with capital and exploration expenditure over the next 2 years of less than $8 billion per annum. And lastly, we have classified our onshore U.S. as non-core. However, with value as our guide, we will be patient as we pursue options to exit our position. But first our results, over the 2017 financial year, our performance was strong. Through our productivity agenda and further cost reductions, we have offset lower volumes combined with better prices. We achieved a substantial increase in underlying EBITDA to over $20 billion at a margin of 55%. And we have improved operational efficiency and capital discipline and still delivered free cash flow of $12.6 billion. That’s our second highest on record and allowed us to reduce net debt by $10 billion. We invested for the future and the Board determined dividends of $4.9 billion. And this includes an amount over our minimum payout ratio of $1.1 billion. Before I hand over to Peter to go through our financial performance in detail, let me start with safety and Samarco. Tragically, one of our colleagues, Rudy Ortiz Martínez died at Escondida during the year and just 2 weeks ago, another colleague, Daniel Springer was fatally injured at Goonyella Riverside. These deaths are heartbreaking, heartbreaking reminders at health and safety must come first in everything we do and we work tirelessly to make our workplace as safer. And to this end, our safety field leadership program is currently being rolled out across the business. And when this is combined with our technology initiatives, this will drive higher levels of safety across all our assets. The health and safety of our workforce is our top priority. We hold that our workplace can be free from fatality and serious injury and we will not rest until this is a reality. At Samarco, BHP remains committed to the recovery of the communities and of the ecosystems affected by the down failure. With the support of both BHP and Vale, the Renova Foundation continues to deliver, to deliver the social environmental remediation programs that were outlined in the framework agreement and substantial progress has been made. Samarco, Vale and BHP are in constructive negotiations with the Federal Prosecutors Office so as to settle the major outstanding civil claims and of course restart remains a focus for Samarco and its owners and is extremely important to the community. However, we will be patient as we work to find the right long-term solutions. With that, I will now hand over to Peter. Welcome, Peter.

Thanks Andrew. This is the strong set of financial results. Our ongoing focus on productivity and portfolio simplification means that we fully captured the benefit of higher prices. In the 2017 financial year, we generated EBITDA of $20.3 billion, up 64%. We achieved the margin of 55%, highest since 2008 and our underlying attributable profit was $6.7 billion, more than 5x last year. As previously announced we reported four exceptional items related to withholding tax on Chilean dividends, the industrial action at Escondida, ongoing funding for Samarco and proceeds from the cancellation of the Caroona coal license, including these our attributable profit was $5.9 billion. The EBITDA waterfall chart which I present each period clearly shows the significant contribution that higher realized prices made to our results. Through our actions, we converted all of this upside to our bottom line. This period we reduced unit costs by a further 4% on a copper equivalent basis which supported $1 billion reduction in controllable cash costs. When combined with the ongoing release of latent capacity we delivered $1.3 billion of productivity gains this year taking the total of the past 5 years to more than $12 billion. All major commodities in our portfolio again made a meaningful contribution to these strong results. Our iron business generated high margins and record volumes resulting in EBITDA of $9 billion. EBITDA from petroleum was up 11% to over $4 billion despite a 13% decline in volumes. We look forward to reversing the production decline and encouragingly petroleum delivered reserve replacement above the 200% over the past 12 months. And this doesn’t include our recent drilling successes or the tray on resource in Mexico. The productivity push in our coal business positioned us to convert higher prices into cash and even including the impact of Cyclone Debbie, coal created EBITDA of $3.8 billion. Lastly in copper despite the strike at Escondida and extended power outage at Olympic Dam, we delivered another $3 billion in EBITDA. This strong performance have led to outstanding cash generation. Net operating cash flow over the period was $16.8 billion, up 58% and as the chart on the right illustrates free cash flow of $12.6 billion was the second highest ever, well above most years of the mining boom and its high pricing environment. It’s a remarkable result, yet as I will discuss in a moment, we have many opportunities for further improvement. But before I do, let me explain how we have applied our capital allocation framework over the past 12 months. We have a very clear framework and it’s embedded in every investment choice we make, but any framework is only as good as the outcomes it produces. So here, again we have shown how we have allocated capital in line with our stated priorities. We invested $1.2 billion to maintain safe and reliable operations. We preserved our balance sheet strength and under the 50% dividend payout ratio we paid out $2 billion. With the remaining $13 billion we invested $4 billion in high returning organic development. We returned an additional $900 million to our shareholders and consistent with our bias to debt reduction we allocated the majority to further strengthening the balance sheet. Over the period we reduced net debt by almost $10 billion to $16.3 billion, gearing decrease to 20.6% and following our bond repurchase, our average debt maturity has been extended to over 9 years. We have also launched a further bond repurchase for up to $2.5 billion. We are targeting short dated euro, sterling and U.S. dollar notes in order to generate higher returns on some of our surplus cash and yet further extend the maturity profile of our debt. Our balance sheet strategy has not changed. We seek to maintain a strong balance sheet through the cycle. And over the medium-term, we expect this to translate to net debt levels of between $10 billion and $15 billion. We have a broad suite of high-quality projects which will grow shareholder value and provide excellent returns. But our capital allocation framework means that we only invest in the best of these. Combined with our ongoing focus on capital efficiency, we expect annual capital and exploration expenditure to remain below $8 billion in both the 2019 and 2020 financial years. We have learnt to thrive on lower levels of CapEx. In 2017 including both organic development and maintenance spend, we invested just over $5 billion. This is marginally below our guidance primarily due to strike related interruptions at Escondida. For the 2018 financial year, we now expect to invest $6.9 billion slightly above prior guidance due to the rollover of last year’s under spend at Escondida and an increase in onshore U.S. development based on the competitive economics of the wells we are drilling. The spend will be balanced between maintenance, improvement and investment for the future. Maintenance capital is expected to increase to $2 billion due to a $300 million increase in the third stripping at Escondida and the smelter rebuild at Olympic Dam. And highest spend on major projects reflects the recent approvals of Mad Dog Phase 2 and the Spence Growth Option. We are also spending around $300 million on Jansen as we look to complete both shots. Let me discuss Jansen further. We are always focused on cash flow and capital discipline and we must build both short and long-term shareholder value. So, we are very happy that we have multiple value creating options, which span both commodities and timeframes. The Jansen project is one of those options. Demand for potash is growing. It can provide excellent margins for well-placed assets and we have a large resource, which has the potential to provide a low cost long life expandable mine. While timing is uncertain, we have no doubt that the world will need new potash supply. And when it does, we believe Jansen is best placed. But Jansen will not proceed unless it passes our strict capital allocation tests. And as we complete the shots, we continue to thoroughly investigate all opportunities to further improve its economics. We have done this successfully with multiple options over the past 4 years. We could delay sanction to better time first production, bring in a partner to add expertise, secure off-take or share risk, divest to crystallize value and optimize the design to further improve the investment case. So, while Jansen is an important option in our portfolio, there is no rush and as with every other project, Jansen will be assessed in accordance with our capital allocation framework. There are no exceptions. As we continue to work on improving the risk return metrics of the project, we will not be seeking board approval in the 2018 calendar year. So, now to my favorite chart, I think this chart is extremely important high return our capital is a critical metric and is presented here by asset. Over the past 12 months, our return our capital employed improved 10%, it’s a sharp increase from the prior year, but there is still much more to be done and this is where we are focusing our efforts everyday and why we are also confident about the future. BHP has assets that provide outstanding returns today, but they can get even better. Western Australia iron ore generated over 25% returns last year. It’s a great asset, but can improve further. We can reduce unit cost to less than $13 per ton. At Queensland Coal, lower costs and further release of latent capacity by increasing truck utilization and unlocking the full potential of Caval Ridge will see an improvement in returns. And our conventional petroleum assets continue to deliver strong returns despite low oil prices. Our pipeline of high return, low-risk Brownfield projects will offset natural field decline and ensure that conventional continues to make a significant contribution. These assets account for half our capital employed. The improvements we expect are embedded in operational plans and our track record in delivering these should give you confidence. Across our copper assets, Spence is performing well following completion of the Recovery Optimization project. But Escondida and Olympic Dam are currently generating returns below the company average. At Escondida, after a period of significant investment to address grade decline, the new desalinization plant is now commissioned and the Los Colorados concentrated is ramping up and bringing incremental capacity of 200,000 tons. Supported by improved productivity, we can now harvest cash flows from Escondida over the next decade. At spot prices, we would expect Escondida’s return on capital to grow from the 6% on this chart to over 14% in 2018. Olympic Dam is largely a fixed cost operation. So the secret to improving returns is to increase volumes from the existing footprint. To achieve this, we are today accessing high grade ore in the southern mining area and progressing options to debottleneck the current operation. Combined, this can increase copper production to 280,000 tons with potential upside to 330,000 tons, which would drive considerable improvement in returns. But first, we must secure asset integrity and to this end have a significant maintenance program this year. So together, these plants will substantially lift returns in the near to medium term in copper. Now, to the right of this chart, we have three assets, all projects with negative returns. And these represent a quarter of our capital. I have already talked about the importance of creating high-quality options to grow shareholder value in the future. And Jansen and exploration both sit in this category. At Jansen as I just mentioned, we are considering multiple ways to maximize the value of the project from improvements in capital efficiency to better timing first production. And through these actions, we will both reduce risk and improve returns, but the project will only proceed if it passes through our capital allocation framework. In exploration, our recent successes have de-risked future wealth and giving us confidence to continue our countercyclical investment. With our exploration program targeting prospects that would work economically at less than $50 per barrel, we are confident of this investment delivering attractive returns. Our onshore U.S. assets require different solution and Andrew will elaborate on this shortly. And suffice to say, current returns in this capital are clearly not acceptable. As you can see, we are making strong progress on returns. But as always, there is room for improvement. Individual asset plans and disciplined capital allocation give us confidence that we can maximize cash flow and significantly increase our return on capital. Back to you, Andrew.

Thank you, Peter. As you just heard, Peter, along with the rest of the organization is incredibly focused on squeezing the most out of each dollar of existing and future capital. And to this end, we fundamentally changed the way we think about capital allocation and the process that supports this to make sure this disciplined remains entrenched throughout the cycle. So, on this note, let me now turn to our views on markets. Our economic and commodity outlooks remain largely unchanged certainly as we go further forward. Today, we have released our prospects blog which is up in our website and provides detailed insights on how we see the markets. We increasingly aim to communicate with investors via digital and social media. BHP is a company of the future and our economists are ready and waiting to dialog with you all through that medium. But let me first make a few quick comments before I discuss our strategy. We continue to believe that population growth continued urbanization and better living standards will increase demand for our commodities over the long-term. And we remain especially positive on the outlook for oil and copper field and grade declines will result in a sharp reduction in their base supply. The near-term however remains uncertain. Some of our commodities are trading above industry marginal costs which cannot continue indefinitely. Nonetheless, we do expect a number of our commodities to perform well over the coming year. And where prices do come down in the medium term, we expect it will settle comfortably above their more recent lows. We are well placed for these conditions. As I mentioned at the outset, we have laid strong foundations to grow value and support shareholder returns for decades to come. We are simply with half the assets we had before and our portfolio now truly focused on Tier 1 assets with common characteristics. We are more connected with an operating model that analyzed to fully leverage on expertise and create a workforce that acts as a global community. We now have multifunctional teams that connect across the organization globally to share best practice and importantly to make us safer above all to solve the problems together everyday. We are more efficient with unit costs down more than 40% and that’s what kept margins strong. And we are leveraging technology because the scale of our ore bodies allows us to maximize returns from numerous technology breakthroughs and we intend to be an industry leader in this area and are investing sensibly to capitalize on this great opportunity. It is distinctive enabler such as those that allow us to maximize value and returns from our assets and let me share about one example of a myriad. Our team at Jimblebar in Western Australian iron ore identified that Cerro Colorado in Chile had reduced its use of explosives and blasts with a minimum impact on fragmentation how much rocks get broken, the technique which replicated at Jimblebar and saved almost $4 million per annum. Examples such as this would not be identified and acted upon so quickly without the engaged and connected workforce that we have now created. And as I have said there are many, many more as well. Earlier this year in Barcelona, I outlined how BHP would put our strategy into action and in 2017 we continued to make great progress against the plans I outlined there. Firstly, cost efficiency. Our productivity remains strong and is getting stronger a further $1.3 billion this year takes our annualized gains over the last 5 years to more than $12 billion. Secondly latent capacity, we have made small, high return in some cases very high return low risk investments in our existing assets, but fully utilized our installed infrastructure and make the most of what we have. Thirdly, major projects, we completed two development projects over the year and approved the execution of two more after significant reductions in our capital Mad Dog Phase 2 and just last week the Spence Growth Option, both of which represent capital efficient counter cyclical investments in attractive commodities. Fourth, exploration, we have had positive drilling results in the Caribbean and in the Gulf of Mexico. And additionally the successful bid for Trion in the Mexican Gulf of Mexico provides us with further opportunity. Just this month at Wildling, we encountered that’s in the U.S. Gulf of Mexico, we encountered oil in multiple horizons which appear to be in communication with our neighboring discoveries at Shenzi North and Caicos. And while it remains early days and appraisal is still underway, there are encouraging indications of this being a significant commercial discovery. Taken together, these successes have the potential to add valuable reserves to support our conventional petroleum business in the years to come. Next, technology. Our global technology function has rapidly deployed high value capital efficient programs to unlock resource and lower costs even further. Now, as Peter said, I will turn to and finally, onshore U.S. This business was free cash flow positive over the year and we are proud of this achievement. But as Peter has mentioned some of our assets and projects have not delivered the return we or our shareholders expect. Peter has touched on the detailed plans for many of our assets. So, let me now take a momentum to discuss onshore U.S. As I have said previously, the shale acquisitions were purely timed. We paid too much and the rapid pace of early development was not optimal. When we entered the industry, our objective was to leverage our systems and scale and become an industry leader in shale and then replicate the opportunity around the world. However, following a global endowment study about 2 years ago, it became apparent to us that the opportunities to replicate U.S. shale oil elsewhere did not exist. So, since then, we have quickly improved our capability within the U.S. significantly lowered investment levels and we have also reduced our footprint through a series of divestments as well as optimizing our remaining position through a number of acreage trades and swaps. This sharpened focus informed our regular portfolio review and we have now concluded that all these shale assets are non-core. We have used extensive input from independent advisors and we are now pursuing options, several of which are outlined in this slide, to exit our quality acreage. However, all options will take time. We will be disciplined and use this time productively to maximize the value of this acreage through larger completions, acreage consolidation and midstream solution in the Permian, gas hedging in the Haynesville and further well tests to assess prospective resource across all the fields. We will be guided by value. We know and will know what the acreage is worth in our hands and are prepared to be patient. So to conclude, our investment case is built on cash generation, capital discipline and above all, value and returns. In the 2017 financial year, we made great progress. We delivered free cash flow of $12.6 billion, our second highest on record. We delivered a $10 billion reduction in net debt. We delivered cash returns to shareholders of $4.4 billion. And we delivered an increased return on capital employed to 10%. While we are heading in the right direction, our plans for the future will deliver much more than this. And in 2018, we expect further strong free cash flow, average returns from our development spend of 20% and at 2017 financial year prices, another step up in our return on capital. Beyond this, we will continue to maximize cash flow with further cost reduction. We will always maintain discipline with a focus on only highly capital efficient investments and I repeat value on returns will remain at the heart of what we do everyday. We have delivered a strong result today, which reflects the consistent and disciplined execution of our strategy and we have everything in place to build significant value well into the future. Thank you. Okay. I think we’ll wait a little bit and I presume the lines are now open for questions.

Your first question comes from Paul Young from Deutsche Bank. Please ask your question.

Hi, Paul.

Hi, Andrew and hi, Peter. First question is on the CapEx ceiling, it’s great to see the CapEx ceiling of $8 billion for FY ‘20 and Peter, glad to see the approval of [indiscernible] loss. Question, does this CapEx ceiling account for only the high returning plus 15% IRR project, i.e., does it exclude spend on Jansen out of that timeframe? And then also I have the question on just the cost out, can you breakdown the $2 billion of productivity gains by division? And just further to that, Andrew, clearly, there is a huge opportunity in frac automation and production creep in the Pilbara beyond Jimblebar and also in the Bowen Basin in particular. Can you provide some guidance on just your vision for frac automation in both basins and also there the opportunity to creep production particularly in the Bowen Basin? Thanks.

Okay. Look, the $8 billion ceiling includes all capital and exploration, Paul. It’s not just selected projects. I don’t know, if you want to add anything to that part and then I will come back on the cost out.

Yes, just the question on Jansen, it is included, Paul, but as I say, it’s just the completion of the shaft that we are assuming at this point in time, obviously, if Jansen won’t go forward unless it passes the capital allocation framework and so nothing has changed there.

Paul, you are right, I mean, Peter mentioned that we see potential to take our costs in the Pilbara to significantly below $13 per ton and next year or this year, we expect to do better than $14. And there are equivalent benefits that we think will come through over in Queensland as well. And automation does play a role and we are pushing that hard, not just of our trucks, but also of our drills and we see a steady ramp up in the use of automation over the next 5 years which will enable further cost reductions, but the achievements that we expect have made and we expect to make going forward are much more broad than that. We have set ourselves some very high targets for the availability and utilization of plant and equipment, truck hours if you like, high targets on the cost of maintaining plant and equipment. We have a big drive going on through the way in which we handle maintenance and we also have some new activity as well in making the efficiency of all capital, including some of the minor capital programs more efficient. But we continue to work on our culture and therefore the approach of our people to the work and their own personal productivity, we work on the efficiency of our supply chain with our new global supply organization and we have always had a leading marketing organization, but we believe there are more efficiencies that are present possible there. So, we have always worked in the areas of equipment productivity, people productivity, supply chain productivity, capital productivity and marketing productivity and we have renewed weaker in this area and a lot of that is enabled by the fact that we now have a highly effective enterprise wide system that we use for almost all functionality of our business, but particularly powerfully in the area of work management. And I will have to add that of course above all of that, the most important target we have beyond productivity and before productivity is to make further improvements in safety and eliminate forever the need for me to start these presentations with the communication of a fatality or a life changing and serious injury.

Andrew, I appreciate a lot. Just as far as almost thinking mapping out there obviously relate to production creep in the Bowen Basin in particular beyond the Caval Ridge, I mean, you outlined quite a few very high returning project in my – at Blackwater, Daunia in particular, where do you think this will relate as far as opportunity to create production and what level in the Bowen Basin?

Well, we gave in some general production guidance for this year which says that we will increase on our copper equivalent basis 7% year-on-year, now we had a difficult year just passed particularly because of the strike at Escondida and some of the outage at Olympic Dam although we are a holding a major shutdown at Olympic Dam this year. I would rather get back to you or have Adrian get back to you on some of the more details as much as we are able to provide on the Bowen Basin itself.

Your next question comes from Menno Sanderse from Morgan Stanley. Please ask your question.

Hi Menno.

Yes. Hi, good morning. No problem. Two questions, first one on Olympic Dam, obviously the opportunity is big, but for the company has to deal with some issues of your making and some issues of that it can control, can you just help us understand how this investment you are going to make is generally going to stabilize this business. And the second point comes back on the $8 billion ceiling, it is quite a significant step up of over $1 billion versus what we do – [indiscernible] do this year, what type of projects are included in that, because for the iron ore, replacement mines are captured in the maintenance CapEx, so I am trying to see what’s going to bridge that $1 billion gap?

Okay. I will answer the second question briefly and then as with Paul’s question hand over to Peter for some of the detail. Well, all projects are in the – including as Peter mentioned in his presentation quite a step up in our investment in shale which we can explain why. But I will let Peter go through all the details as the Chief Financial Officer, sorry I apologize forgotten what was the first part of your question again?

Olympic Dam and…?

Olympic Dam, well, we really are determined to put the asset integrity and therefore the operational efficiency of Olympic Dam on a different path. Jacqui McGill and her team have made good progress, but still not sufficient. And we are taking a very large, I think it’s almost a five months shut to correct a number of problems and really get that set for the long-term which will then justify the investment that Peter just tried that we go into the high grade Southern mining area we further improve the efficiency of the bottleneck which in the Olympic Dam is a hoist, so that we can get our production up from on a good day 200,000 tons a year to nearly 330,000 tons a year. At relatively literal increase in costs and as Peter said most of the costs are fixed, we think this is still a great opportunity for the short-term, medium-term and long-term to grow copper production into our copper market that we think will see quite a shortage of new Greenfield projects coming on in the early part of the 2020s and its targeted to do that. But as always Peter may want to add to that as well, but maybe Peter if you start off with just a little bit more detail breakdown of what sits under the $8 billion. I think you will probably say this Peter, but I just want to add that is not a spend up to number Menno, we will always hope through our position on capital efficiency to spend less than that is just giving the market medium-term guidance of a limit above which we will not go. Peter?

So Menno just in terms of the increase on this year’s capital guidance, just recall that in fact Mad Dog 2 will be in full go. SGO will be in full flight at this and as we get forward into ‘19 and into ‘20. And sorry South Flank in fact although it’s included in the $4 per ton, it’s still a project and as we have said earlier the $4 per ton is not smooth, expected lot less than $2 a ton at the moment, but that will increase as South Flank comes on for the next 3 years. We will start to spend a bit on it this year. I think the other thing is BFX, as Andrew is talking about a moment ago this is the expansion of de-bottleneck – the big de-bottlenecking of Olympic Dam. That is a bigger project than some of our other de-bottlenecking, typically our de-bottleneckings are about the 200 mark, BFX is going to be bigger than that. There is a fair amount of work that we need to do. It’s a great project, no doubt I think, but nevertheless it’s a little bit more than those others. We are going – assuming that we are going to be exiting shale as Andrew mentioned earlier, but in the meantime we got to look after that business. And we are going to run it for maximum value so we should continue to spend I think wisely, judiciously, carefully, but I think we should continue to spend and we are assuming that we continue to spend certainly this year. And to the extent we still have that business next year we have made some assumption that we will continue to run it well. And then as we gather in one maybe just to highlight is that we are going to – we still got to replace [indiscernible] as water source. In Escondida we have replaced [indiscernible] so we just need to put that extra additional modules in the next 3 years of desal water into Olympic – into Escondida. It’s is not very much money, but its part of the increase. As Andrew said a moment ago it’s not that we need to spend up to this, but it’s just that we are just giving clarity some guidance if you like for the medium-term, hopefully that’s helpful.

Thank you.

And I hope that answers your question. Just a couple of more points from me, our investments in shale of course they passed the capital allocation framework test with flying colors. But they are obviously designed to add value, profitability and marketability to our shale assets. And just on South Flank, we expect cost per annual ton of about $30 to $40. Is there anything more we can help you with?

No, that’s great. Thank you.

So can I take the next question?

Your next question comes from Lyndon Fagan from JPMorgan. Please ask your question.

Hi Lyndon.

Hi Andrew. Thanks for [indiscernible] and great to see the company addressing a couple of overhangs on the stock bang U.S. onshore and Jansen, but I would like to explore those two in a bit more detail. I guess if we start with Jansen the wording in the presentation says that the project will only proceed if it passes free capital allocation test, but I guess what 70% drove $2.6 billion project, it’s that investment speaking in spend and I guess I am still a little unclear as to why we are still going ahead with that and I guess what changes have they made to limit these type of I guess early by spend. And I guess the next one is just on the U.S. onshore, if we look at the scenario is this the business [indiscernible] run on just wondering if there is still applicable or whether you are running it’s a cash [indiscernible] and if was to be at the merger whether that would be the U.S. market? Thanks.

Okay. Let me deal with the first share one for us Lyndon. Look, our preference would be I think to sell the businesses through a relatively small number off-trade sales. There is an execution risk around that and so in the interest of making sure we can do things relatively quickly I don’t want to eliminate other ways in which we could exit these businesses including things like de-mergers, IPOs or vending into special vehicles and so on. We will look at everything in order to decide what is the right way through this. But for now we think that probably trade sales is where we would prepare to what we think we have the best opportunity of restoring and maintaining value for our shareholder. I mean yes, I can understand why you might say that we should kind of run it for cash. But one of the features of shale which I think we have grown to like a bit less with time and see a bit more of a [indiscernible] there are a quite pro-cyclical you have to continue to invest to actually maintain the value of those businesses. In this case we are very fortunate that we have investments that we can make that we think performed very well on the capital allocation framework. And as I said won’t just add profitability and value they will add marketability to these assets. But as always we will – we review this very, very regularly through the lens of the capitalized allocation framework. And because of the short-term nature of shale we do that with a much greater frequency right to the very top of the company. Peter, I would like to kind of give most potash over to Peter, he handled in his presentation. It is a capital allocation issue, but I would just point out that once we have completed the shafts we will have totally de-rest the project, we will have dealt with all the difficult parts of it and we will only be 3 years away from first potash when we think its appropriate to make the right kind of cyclical investment. And that’s the big question which will be determined by how it looks and we have said today that we wait at least another couple of years. And if we need to wait longer, we will wait longer and over deputed know there is lots of things that we can do in that interim to add significant value to what we have already done in potash. But Peter over to you?

Yes. Thanks Andrew. Just a couple of things to add, the shafts underway and in the event we didn’t finish those shafts what would happen is in fact that they would collapse on themselves and then we would lose the shafts which doesn’t make any sense at all. So we should spend the remaining $500 million or so to finish those shafts probably by the end of 2019 and at that point we have an option which is good to go time to do well for the market as Andrew said a moment ago we have confidence that the market will balance and there will be additional potash required and so that’s really the basis of that money that we are spending allocating today and in the next couple of years. In terms of the question about what would we change, it just – I wouldn’t comment, let me just say what we would like to have is options. It’s good to have options. The key there obviously in the way we would think is that we would like to have options that are low cost to hold and that have obviously lots of upside potential and so on. So that will really just give you an inside is not through all obvious, but that’s certainly the way we would think about holding and adding options to this organization today.

And let me just stress, it’s an option and if it takes longer it takes longer. And there are many ways as we wait or we think about the option and we gave a lot of examples on this slide as to how we have done things in the past that we can add value while we wait. I would kind of remind you that both the Spence Growth Option and Mad Dog 2 which were sanctioned this year, we were first ready to consider those projects probably 5 years ago and we have waited and improved and waited and improved. And over the same period, you have seen us exit projects like Browse – sorry exit like Browse and [indiscernible] for lot more money than we spent in setting them up and bring in partners. And I could go further back and show on how we have done them. And in some cases of course you have seen on the slide a complete regroup to some of the things we have just been talking about how we can replace capital with productivity and things like – no, that’s not as relevant here, but what I want to say we will wait as long as it takes and we will look at every way in which we can to maximize the value of this option. The reason or commitment to proceed be on the shafts and there won’t be until that passes our straight to capital allocation test we have been very disciplined as the management team that’s why we are talking today about thriving on capital under $8 billion. It wasn’t so long ago that the thriving capital level of this company was much higher and we brought it down through the discipline of Peter and his team and the culture of discipline that comes from the very top around capital. And that applies with even more rigor as it relates to the potash option which is still a nice thing to have given some of the uncertainty in the longer term. And given that we do think some time in the 2020s, we are going to see a requirement in that market for some form of new Greenfield production and the same way as we think that’s not so true for copper. Next question?

Our next question comes from Clarke Wilkins from Citi. Please ask your question.

Hi Clarke.

Hi, how are you. Just a couple of questions, first off, I think could be sort of non-core shale divested, what about the other sort of assets in petroleum that are some non-operated and are also require immature to [indiscernible] but is there any sort of proposal prices underway to look at divesting those, also just in regards to Olympic Dam I think that can maybe you sort of talked about latent capacity of 330,000 tons they are potentially being unlocked, is it possible just they are going to be more detail about what needs to be done there in terms of smelt refinery, obviously the power constraints we have [indiscernible] at the moment and how can you unlock that sort of latent capacity at Olympic Dam and what’s the timeframe are you looking at for that?

Okay. I am going to give Peter the second question on Olympic Dam, he used to run copper and it’s a very much a capital thing that he looks after through the his chairing of the investment committee. Let me go and come back to then to conventional petroleum Clarke. Look, this is a great business, it has been a great business for this company for over 60 years. It has phenomenal returns, EBITDA margins of 66% and we are good at it. We have some of the lowest costs in the industry about $10 a barrel. And look at the success of this year in terms of exploration, potentially two very significant discoveries one in Trinidad and one in the Gulf of Mexico and getting to the front of the queue as private industry goes back into Mexico to win the Trion bid. And if you put those three together then you have the opportunity to provide competitive options to extend the track record of petroleum within BHP for a few decades to come. And I wouldn’t put it more than a few decades, because clearly one of the questions we ask ourselves is the changing market for oil. A year ago we wrote a blog where we signaled which is now becoming much more widely shared and more rapid penetration of electric vehicles and we see that starting to take off perhaps as early as late 2020s and starting to have a lot of uncertainty into the market around 2040, 2050 onwards. But until then of course there could be lot of really good money to be made in conventional oil if you have got areas where you can move fast and the Gulf of Mexico both sides Mexican and U.S. and Trinidad have been chosen as fast moving provinces of when we get something like Trion or like [indiscernible] and like Wildling, we can put them quickly on to production and so on. So this is a business that is a great business and one that we are good at. We have been pivoting back towards it, since we have been reducing our footprint in shale for better part of 2 years or 3 years and you see some of the fruits of that pivot today and we do…

Quick extension there, I think the question is more targeted I think that conventional side of business like there is value added in terms of the exploration [indiscernible] your non-operated assets in Australia like [indiscernible] etcetera where there is not a lot of great in mature assets non-operated, do they really belong in the BHP portfolio rather than sort of your assets in Mexico?

Well, they are very strong cash generators. And we like cash. And but what I will say to you is that every year we do a thorough review of the portfolio. It starts about now and runs a course of the financial year. And we have just kicked that this year’s review off and we start the review with a fairly detailed announces of what we do that if you like how we play to win things like productivity and safety and capital discipline and some very wide ranging look at future scenarios out to 2040, 2050 how the world might turn out. And then as we get beyond Christmas and through that we go through the Board cycle, we then we direct that at the portfolio. And I can assure you that the assets that you are calling into question that we will examine very hard. As we will many other parts of the portfolio some of which may be a more controversial than others, but everything will get a good going over to make sure they are fit for purpose for the longer term. And we do that every year. And I expect this year’s process to be particularly rigorous in that regard.

Your next question comes from Glyn Lawcock from UBS. Please ask your question.

Hi Glyn.

Good morning Andrew and Peter. Just two quick questions, firstly just on the balance sheet target, the $10 billion to $15 billion above the one of your peers came out with the target and it goes from [indiscernible] get back into that range, just wondering firstly [indiscernible] of free cash flow at spot [indiscernible] things it would you could end up net pay cash within 12 months, would you sit there or would you want to get back to within the 10 to 15? That’s the first question. And then the second question, while you have announced Spence, it was right, I mean, every metric was worth than what it was around the site 18 months ago have made to production everything? I know that the capital was 12% higher due to FX, would you consider hedging the currency, because I mean, the 3-year build, if the currency continues to move against you, that returned you talk about a 16% window and we could end up with another forward investment decision? And also would you hedge oil given the similar payback nature of U.S. oil versus U.S. gas? Thank you.

Okay, there is a lot in that. Let me ask Peter to start, because it was a very distinct question on the balance sheet and whether we would run that cash and may comment a little bit on Spence and then I will maybe add something at the end. So, Peter, you talk about the balance sheet and the 10 to 15 and the net cash.

So, Glyn, obviously, the capital allocation framework as always will be the guide as to what happens in a year’s time if we make as you say free cash flow that’s spot number that Andrew mentioned a moment ago, whatever proceeds we get from whatever assets. In the event that we get, so we will want to sit within the 10 to 15, I mean, we didn’t want to go to net cash and we think that’s not an efficient balance sheet, we don’t think that’s a necessary balance sheet for a company as strong as BHP. So, we are very anxious to ensure that we have a safe balance sheet, but also an efficient one. So, just on SGO, a couple of comments on that, I mean, Glyn, I think the basics of the underlying operating characteristics, the production, the OpEx and so on and so forth, anything much has changed. Yes, the FX has changed a little bit. We thought about hedging and we had a good discussion around that, because we want to hope in ourselves up to all of the conversations we should have on these things. It tends to be though that you have got a currency that sort of rolls with copper. I know that these things are slightly – there is a variation to the timing on these things, but that – we felt it was a natural hedge. But the other thing is that there is a large amount of the cost in fact in U.S. dollars and so that’s the amount that you could hedge and so practically it was a little less. It’s an interesting question, but I think that’s a strong project. We don’t think it’s going to have any issue providing very strong returns to shareholders. It’s not by any means a marginal project or anything else like that. Last thing just on the oil versus gas, every time we look at a rig, we did it on a quarterly basis, if not more and more common than that. We take a look at the hedge position. We have had a position on gas that we should hedge it and we have done that for the 4 rigs in Haynesville. And oil, it’s a little bit more interesting that we are probably trading in the bottom of where we consider the range to be, curve is a little steeper, so you just got to be a little bit more careful about giving away upside in order to protect downside, particularly where it’s been a fairly – the base have had a good run with that in that market. So, that’s kind of how we feel about oil, but every time we look at a rig, for sure, we have a good robust conversation around it.

Thanks Peter. I don’t think I have got anything to add to that, Glyn. So is there any more questions?

That’s fine. Thanks, Andrew and Peter.

Your next question comes from Hayden Bairstow from Macquarie. Please ask your question.

Hi, Hayden.

Hi, Andrew. Just a question on the ROCE chart, I just want to get an understanding your future capital is also expected to return to 20%, should we be thinking about a target of all these assets that you want to get them all to 20% or is it cost reduction in double and also lift that bar for your 2022 target of getting the group level to 20%, because obviously you are getting rid of shale improves you to about 15% straightaway, but then do you need to think about lifting the bar everywhere or are you going to accept lower returns to somebody that says are we going to get to a 20% plus ROCE?

Well, I think Peter can handle that a bit more, but I haven’t said very much recently. So I will just make a few comments. We don’t have some particular bar, because we strongly believe that there is a lot of variation and risk depending on the projects we are doing and so we do risk weight everything according to what we think is the likely variability of the outcome and had that discussion just a moment ago on SGO. So that makes coming up with some sort of fixed ROCE, very difficult, because we deal with a wide range of risks on our projects, of course, but we do want to push them to high numbers and the capital allocation framework tends to push that, but it is looked at also on a risk weighted basis. So sentimentally, we are exactly where you are Hayden, we want to be in that area, but we would rather not sort of start get going down the line which is of hurdle rates when we think we have such a variety of risk of the projects that we are considering and we optimize our portfolio in the dimensions of right weighted return, risk weighted NPV and risk weighted capital efficiency, Peter does that and both from time-to-time and then project by project as it comes through the IC, I mean, Peter, you can maybe add the detail.

I think pretty decent answer to that, Andrew. I mean, I wish we could have everything well over 20% every single year, but we have this thing called price and it has quite a big impact. So, no doubt, as we have also got cost basis, accounting cost basis, which is part of the equation here. So, we have got to take that into account. Look, overall, the important thing is directionally we know what is really good, we know that, that’s got to get better, we know that the stuff that’s in the middle that really needs to lift and that’s Escondida in particular, Olympic Dam in the nearer term. And the stuff at the bottom, either its good quality projects or its shale and as you say, that’s $17 billion out of the 80 odd we have got to be better on that and so we need to monetize. There is good quality ground, but it’s worth more than somebody else has and we can deploy that capital better in the capital allocation framework including as Glyn said a moment ago for sure returning that cash back to shareholders.

On that point, Peter, it’s a good point to add, I have got a pass mark from the CFO just I think and we end on the subject matter of returns to shareholders which seems very appropriate. So, thank you for watching and listening and looking forward to meeting many of you in the coming weeks. Thank you.