BHP BILLITON LIMITED DESCRIPTION OF BUSINESS AND FINANCIAL STATEMENTS Contents Section A Description of business Page Key information 2 Information on the company 9 BHP Billiton Limited Group 9 Reserves 13 Minerals 27 Petroleum 40 Steel 52 Transport and Logistics 56 Corporate Services 57 Information on the BHP Billiton Plc Group (formerly the Billiton Plc Group) 58 Group 71 Abbreviations 72 Definitions 73 Operating and financial review and prospects 75 Directors, senior management and employees 87 Major shareholders and related party transactions 96 Financial information 97 The offer and the listing 99 Additional information 100 Section B Financial statements 111 Statement of Financial Performance 112 Statement of Financial Position 113 Statement of Cash Flows 114 Notes to financial statements 115 Directors’ declaration 201 Independent audit report 201 Financial summary 1997–2001 202 Glossary of terms 204 BHP BILLITON LIMITED DESCRIPTION OF BUSINESS AND FINANCIAL STATEMENTS 2001 1 DESCRIPTION OF BUSINESS BHP BILLITON LIMITED KEY INFORMATION Exchange rates The BHP Billiton Limited Group publishes its financial statements Fluctuations of the A$ relative to the US$ are significant to the BHP in Australian dollars (A$ or $). Unless otherwise specified or the Billiton Limited Group. The price of crude oil is determined by context otherwise requires, all dollar amounts are expressed in A$. reference to the US$ and other commodities produced by For the convenience of the reader, this Annual Report contains the BHP Billiton Limited Group are predominantly priced in US$. In translations of certain A$ amounts into US dollars (US$) at a the financial period ended 30 June 2001, approximately 76% of the specified exchange rate (as at 30 June 2001). These translations BHP Billiton Limited Group’s sales revenue was denominated in, or should not be construed as representations that the A$ amounts was linked to, the US$. However, the majority of the BHP Billiton actually represent such US$ amounts or could be converted into Limited Group’s operating costs were denominated in A$. Excluding US$ at the rate indicated. Unless otherwise stated, the other factors such as the effect of currency hedging, declines in the translations of A$ into US$ have been made at the rate of A$ relative to the US$ are likely to have a favourable effect on the US$0.5100 = A$1.00. BHP Billiton Limited Group’s results of operations with increases in The following tables set forth, for the periods and dates indicated, the A$ relative to US$ likely to have an adverse effect. Refer information concerning the rates of exchange of A$1.00 into US$ ‘Operating and financial review and prospects’. based on the noon buying rate in New York City for cable transfers The BHP Billiton Limited Group manages its exposure to foreign in foreign currencies, as certified for customs purposes by the currency and interest rate fluctuations through a Market Risk Federal Reserve Bank of New York. Management Policy approved by the Board of Directors. Refer At period Average High Low ‘Information on the company – BHP Billiton Limited Group - Period ended end (a) rate (b) Market Risk Management Policy’. US$ per A$1.00 The BHP Billiton Limited Group manages its foreign currency 31 May 1997 0.7630 0.7839 0.8180 0.7572 translation exposures so that US$ net assets provide a natural 31 May 1998 0.6260 0.6916 0.7616 0.6215 hedge against the effect of variations in the exchange rate on the 31 May 1999 0.6528 0.6214 0.6712 0.5550 A$ value of US$ denominated debt. 30 June 2000 (c) 0.5971 0.6266 0.6703 0.5685 30 June 2001 0.5100 0.5320 0.5996 0.4828 In addition, fluctuations in the A$/US$ exchange rate will affect (a) The exchange rate on 29 August 2001 was US$0.5300 = A$1.00 the US$ equivalent of the A$ price of BHP Billiton Limited’s (b) The average of the exchange rates on the last day of each month Ordinary Shares on the Australian Stock Exchange and, as a result, during the financial period. are likely to affect the market price of BHP Billiton Limited’s (c) 13 months ended 30 June 2000. The BHP Billiton Limited Group American Depositary Shares (ADSs) in the US. Such fluctuations announced on 17 December 1999 that the financial year end for the would also affect the US$ amounts received by holders of ADSs on BHP Billiton Limited Group would change from 31 May to 30 June with effect from 30 June 2000. conversion by the Depositary of cash dividends paid in A$ on the Ordinary Shares underlying the ADSs. At period Average High Low Month ended end rate US$ per A$1.00 28 February 2001 0.5248 0.5338 0.5440 0.5213 31 March 2001 0.4881 0.5031 0.5292 0.4881 30 April 2001 0.5096 0.5016 0.5178 0.4828 31 May 2001 0.5068 0.5199 0.5290 0.5068 30 June 2001 0.5100 0.5180 0.5276 0.5062 31 July 2001 0.5057 0.5089 0.5162 0.5048 2 BHP BILLITON LIMITED DESCRIPTION OF BUSINESS AND FINANCIAL STATEMENTS 2001 DESCRIPTION OF BUSINESS BHP BILLITON LIMITED KEY INFORMATION CONTINUED Forward-looking statements This Annual Report contains certain forward-looking statements, Without limiting the foregoing, this Annual Report contains including statements regarding: (i) estimated reserves and forward-looking statements relating to the combination of the resources; (ii) certain plans, strategies and objectives of operations of the BHP Billiton Limited Group and the BHP Billiton management; (iii) closure or divestment of certain operations or Plc Group through the implementation of a Dual Listed Companies facilities (including associated costs); (iv) anticipated production or (DLC) structure. These forward-looking statements may later prove construction commencement dates; (v) expected costs or to be inaccurate due to circumstances and risks, known and production output; (vi) the anticipated productive lives of projects, unknown, the effect of which cannot be foreseen. Refer ‘Key mines and facilities; and (vii) contingent liabilities. Such forward- information – Risk factors’ and ‘Additional information – Dual looking statements are not guarantees or predictions of future Listed Companies structure (DLC)’. performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of BHP Billiton Limited, which may cause actual results to differ materially from those expressed in the statements contained in this Annual Report. For example, future revenues from operations, projects or mines described in this Annual Report will be based, in part, upon the market price of the minerals, metals and/or petroleum produced, which may vary significantly from current levels. Such variations, if materially adverse, may impact the timing or feasibility of the development of a particular project, or the expansion of certain facilities or mines. Other factors that may affect the actual construction or production commencement dates, costs or production output and anticipated lives of operations, mines or facilities include the ability to profitably produce and transport the minerals, petroleum and/or metals extracted therefrom to applicable markets, the impact of foreign currency exchange rates on the market prices of the minerals, petroleum and/or metals produced, activities of government authorities in certain of the countries where such projects, facilities or mines are being explored or developed, including increases in taxes, changes in environmental and other regulations and political uncertainty and other factors identified in the risk factors listed above (Refer ‘Key information – Risk factors’). The BHP Billiton Limited Group can give no assurances that the estimated reserve and resource figures, closure or divestment of such operations or facilities (including associated costs), actual production or commencement dates, cost or production output, or anticipated lives of the projects, mines and facilities discussed herein will not differ materially from the statements contained in this Annual Report. BHP BILLITON LIMITED DESCRIPTION OF BUSINESS AND FINANCIAL STATEMENTS 2001 3 DESCRIPTION OF BUSINESS BHP BILLITON LIMITED KEY INFORMATION CONTINUED Risk factors The BHP Billiton Limited Group believes that, because of the Reserve estimation international scope of its operations and the industries in which it Estimations of the BHP Billiton Limited Group’s ore reserves may is engaged, numerous factors have an effect on its financial change substantially if new information subsequently becomes condition and results of operations. The following describes some available. of the material risks that could affect the BHP Billiton Limited Fluctuations in the price of commodities, variation in production Group. In addition, some risks may be unknown to the BHP Billiton costs or different recovery rates may ultimately result in the Limited Group and others, currently believed to be immaterial, BHP Billiton Limited Group’s estimated reserves being restated. could turn out to be material. If such a statement were to indicate a reduction in proven or Commodity prices probable reserves, it could produce a material and adverse effect on The prices obtained for the BHP Billiton Limited Group’s the BHP Billiton Limited Group’s financial condition and prospects. commodities are determined by, or linked to, prices in world Health, safety and environment markets which, particularly in the petroleum industry and certain sectors of the minerals industry, have historically been subject to The very nature of the industries in which the BHP Billiton Limited substantial variations because of fluctuations in supply and Group operates means that its activities are highly regulated by demand. The BHP Billiton Limited Group expects that volatility in health, safety and environmental laws. As regulatory standards prices for most of its commodities will continue for the foreseeable and expectations are constantly developing, the BHP Billiton future. Such volatility creates the risk that revenues or profits will Limited Group may be exposed to increased litigation, compliance be materially and adversely affected by unforeseen declines in the costs and unforeseen environmental remediation expenses.