Our Company Annual Report 2011 a Disciplined Approach a Proven Strategy We Are BHP Billiton, a Leading Global Resources Company
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Our Company Annual Report 2011 A disciplined approach A proven strategy We are BHP Billiton, a leading global resources company. Our purpose is to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. BHP Billiton Limited. ABN 49 004 028 077. Registered in Australia. Registered office: 180 Lonsdale Street, Melbourne, Victoria 3000, Australia. BHP Billiton Plc. Registration number 3196209. Registered in England and Wales. Registered office: Neathouse Place, London SW1V 1BH, UK. Each of BHP Billiton Limited and BHP Billiton Plc are members of the BHP Billiton Group, which is headquartered in Australia. Contents 1 Key information 3 4 Board of Directors and information Key 1 1.1 Our business 3 Group Management Committee 104 1.2 Chairman’s Review 4 4.1 Board of Directors 104 1.3 Chief Executive Offi cer’s Report 5 4.2 Group Management Committee 107 1.4 Selected key measures 6 5 Corporate Governance Statement 108 1.5 Risk factors 7 5.1 Governance at BHP Billiton 108 1.6 Forward looking statements 11 5.2 Shareholder engagement 109 2 Information on the Company 12 5.3 Board of Directors 109 2.1 BHP Billiton locations 12 5.4 Board of Directors – Review, Information on the Company 2 2.2 Business overview 14 re-election and renewal 115 2.2.1 History and development 14 5.5 Board Committees 117 2.2.2 Petroleum Customer Sector Group 14 5.6 Risk management 124 2.2.3 Aluminium Customer Sector Group 21 5.7 Management 125 2.2.4 Base Metals Customer Sector Group 23 5.8 Diversity at BHP Billiton 126 2.2.5 Diamonds and Specialty Products 5.9 Business conduct 126 Customer Sector Group 26 5.10 Market disclosure 127 2.2.6 Stainless Steel Materials Customer Sector Group 27 5.11 Conformance with corporate governance standards 127 2.2.7 Iron Ore Customer Sector Group 30 5.12 Additional UK disclosure 127 2.2.8 Manganese Customer Sector Group 32 and prospects review and fi 3 Operating 6 Remuneration Report 128 2.2.9 Metallurgical Coal Customer Sector Group 34 2.2.10 Energy Coal Customer Sector Group 36 Using this Remuneration Report 128 2.3 Production 39 6.1 Message from the Remuneration Committee Chairman 129 2.4 Marketing 43 6.2 Our approach to remuneration 129 nancial 2.5 Minerals exploration 43 6.3 Remuneration governance 140 2.6 Resource and Business Optimisation 43 6.4 Executive remuneration disclosures 141 2.7 Government regulations 43 6.5 Aggregate Directors’ remuneration 147 2.8 Sustainability 45 6.6 Non-executive Director arrangements 147 2.9 Employees 52 2.10 Organisational structure 52 Management Committee Group and of Directors 4 Board 2.11 Material contracts 53 2.12 Constitution 54 2.13 Reserves and resources 57 3 Operating and fi nancial review and prospects 80 3.1 Introduction 80 3.2 Our strategy 81 3.3 Key measures 81 3.4 External factors and trends affecting our results 84 Corporate Governance Statement Corporate 5 3.5 Application of critical accounting policies 87 3.6 Operating results 87 3.7 Liquidity and capital resources 99 3.8 Off-balance sheet arrangements and contractual commitments 103 3.9 Subsidiaries and related party transactions 103 3.10 Signifi cant changes 103 Remuneration Report Remuneration 6 BHP BILLITON ANNUAL REPORT 2011 | 1 Contents continued 7 Directors’ Report 150 8 Legal proceedings 158 7.1 Principal activities, state of affairs and business review 150 9 Financial Statements 160 7.2 Share capital and buy-back programs 151 Consolidated Income Statement 161 7.3 Results, fi nancial instruments and going concern 153 Consolidated Statement of Comprehensive Income 162 7.4 Directors 153 Consolidated Balance Sheet 163 7.5 Remuneration and share interests 153 Consolidated Cash Flow Statement 164 7.6 Secretaries 153 Consolidated Statement of Changes in Equity 165 7.7 Indemnities and insurance 154 Notes to Financial Statements 166 7.8 Employee policies and involvement 154 BHP Billiton Plc 235 7.9 Environmental performance 154 Directors’ declaration 239 7.10 Corporate Governance 155 Statement of Directors’ Responsibilities in respect 7.11 Dividends 155 of the Annual Report and the Financial Statements 240 7.12 Auditors 155 Lead Auditor’s Independence Declaration 241 7.13 Non-audit services 155 Independent auditors’ reports 242 7.14 Value of land 155 Supplementary oil and gas information – unaudited 244 7.15 Political and charitable donations 155 10 Glossary 250 7.16 Exploration, research and development 155 10.1 Non-mining terms 250 7.17 Creditor payment policy 155 10.2 Mining and mining-related terms 252 7.18 Class order 155 10.3 Chemical terms 253 7.19 Proceedings on behalf of BHP Billiton Limited 155 10.4 Units of measure 253 7.20 Directors’ shareholdings 156 7.21 GMC members’ shareholdings 11 Shareholder information 254 (other than Directors) 156 11.1 Markets 254 7.22 Performance in relation to environmental regulation 157 11.2 Share ownership 254 7.23 Share capital, restrictions on transfer of shares 11.3 Dividends 257 and other additional information 157 11.4 Share price information 257 11.5 American Depositary Receipt (ADR) fees and charges 259 11.6 Taxation 260 11.7 Ancillary information for our shareholders 264 2 | BHP BILLITON ANNUAL REPORT 2011 1 Key information 1.1 Our business information Key 1 We are the world’s largest diversifi ed natural resources company. Our corporate objective is to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. We pursue this through our consistent strategy of owning and operating large, long-life, low-cost, expandable, upstream assets diversifi ed by commodity, geography and market. This strategy means more predictable business performance over time which, in turn, underpins the creation of value for our shareholders, customers, employees and, importantly, the communities in which we operate. Information on the Company 2 We are among the world’s top producers of major commodities, including aluminium, energy coal, metallurgical coal, copper, manganese, iron ore, uranium, nickel, silver and titanium minerals, and have substantial interests in oil and gas. We continue to invest in the future. The Group is headquartered in Melbourne, Australia, and consists We operate nine businesses, called Customer Sector Groups (CSGs), of the BHP Billiton Limited Group and the BHP Billiton Plc Group which are aligned with the commodities we extract and market: as a combined enterprise, following the completion of the Dual • Petroleum Listed Company (DLC) merger in June 2001. • Aluminium BHP Billiton Limited and BHP Billiton Plc have each retained their • Base Metals (including Uranium) and prospects review and fi 3 Operating separate corporate identities and maintained their separate stock • Diamonds and Specialty Products exchange listings, but they are operated and managed as a single • Stainless Steel Materials unifi ed economic entity, with their boards and senior executive • Iron Ore management comprising the same people. • Manganese BHP Billiton Limited has a primary listing on the Australian • Metallurgical Coal nancial Securities Exchange (ASX) in Australia. BHP Billiton Plc has • Energy Coal a premium listing on the London Stock Exchange (LSE) in the UK and a secondary listing on the Johannesburg Stock Exchange in South Africa. In addition, BHP Billiton Limited American Depositary Receipts (ADRs) and BHP Billiton Plc ADRs trade on the New York Stock Exchange (NYSE) in the US. As at 30 June 2011, we had a market capitalisation of approximately Management Committee Group and of Directors 4 Board US$233.9 billion. For the FY2011, we reported net operating cash fl ow of US$30.1 billion, profi t attributable to shareholders of US$23.6 billion and revenue of US$71.7 billion. We have approximately 100,000 employees and contractors working in more than 100 locations worldwide. Corporate Governance Statement Corporate 5 Remuneration Report Remuneration 6 BHP BILLITON ANNUAL REPORT 2011 | 3 1 Key information continued 1.2 Chairman’s Review Dear Shareholder Our US$4.8 billion acquisition of Chesapeake Energy’s Fayetteville assets, followed by our recent US$15 billion acquisition of Petrohawk I am pleased to report that despite the challenges in the global Energy, provide us with a world-class on-shore shale gas and liquids economy, BHP Billiton performed well this past fi nancial year. resource in the US. Net attributable profi t (excluding exceptional items) of While the resources industry is critical for global economic US$21.7 billion was up 74 per cent, with net operating cash fl ows development and growth, our commitment at the community of US$30 billion and an underlying return on capital of 39 per cent. level is just as signifi cant. We create jobs, support local industry During the year, we invested about US$18 billion in growth and and invest capital in projects across communities and regions. exploration activities and returned US$15 billion to shareholders in dividends and capital returns. More recently, we committed As part of our commitment, we contribute one per cent of our US$15 billion to acquire additional tier one shale assets. pre-tax profi t, on a three-year rolling average, to community programs. This year, we allocated US$195.5 million to a wide There are several reasons underpinning these good results, range of community programs, some of which are detailed in but let me highlight two key factors. our Sustainability Report. The fi rst is the strength of our diversifi ed portfolio of tier one We also pay taxes and royalties to governments. Last year our natural resources. For many years, we have implemented our total tax and royalty expense (excluding the effects of exceptional strategy of investing in large, high-quality assets that deliver items) was US$12.3 billion, and while we recognise it is appropriate growth and superior margins throughout the economic cycle for countries to periodically review tax law, we also believe to create long-term shareholder value.