必和必拓 (BHP) 2017 Q2 法說會逐字稿

Welcome, everyone. It's good to be back in London. I'm here to present our interim results for the 2017 financial year. And Peter, Peter Beaven, our Chief Financial Officer, is joining us from Melbourne.

Before we begin, please note the disclaimer, and its importance to this presentation.

Today, we've announced a strong, very strong, set of results. Several years of considered and deliberate effort to improve productivity and to redesign our portfolio and operating model have positioned us to take full advantage of this period of higher and more stable prices.

While the outlook appears more uncertain, our suite of tier 1 assets, our strong culture of safety and productivity, and disciplined capital allocation framework all give us confidence that we're well placed to substantially grow shareholder value, going forward.

Before I talk about our plans, Peter and I are going to run through our half-year performance. And I'm going to start with safety.

Over the period, our lead health and safety indicators improved; however, it was with deep sadness that we learned of a colleague's death at Escondida.

As you know, for us, health and safety is, and always will be, our top priority and so I'm going to discuss this in more detail, shortly.

As I said at the outset, our performance over the half year was strong. Our sharp focus on the things that matter most, safety, volume, and cost, has allowed us to fully benefit from higher commodity prices.

Unit cash costs declined across major assets and contributed to a 65% increase in underlying EBITDA to $9.9 billion, and an EBITDA margin of 54%. And while overall volumes declined, several one-off events, and the deliberate deferral of onshore US activity, mask the underlying positive trend.

Substantial work has been done across the organization to drive productivity and unlock latent capacity for the years to come.

Improved operational and capital efficiency delivered a strong net operating cash flow of $7.7 billion, and free cash flow of $5.8 billion. The strict adherence to our capital allocation framework optimized the use of this cash.

We further strengthened the balance sheet, with net debt at the end of the period down to $20.1 billion.

And, after careful consideration, the Board has announced an interim dividend of $0.40 per share. That includes $0.10 per share over the amount determined by our minimum 50% payout policy.

Our dividend policy allows us to recognize the importance of shareholder returns, along, of course, with investment and value creation through the cycle.

Now, before I hand over to Peter to go through our financial performance in more detail, as I said, I'd like to come back to safety and say a little bit about progress at Samarco.

The tragic loss of a colleague, Rudy Ortiz Martinez, at Escondida is a terrible reminder to us all of why health and safety must come first in everything we do. And so, we've renewed efforts to help all our people understand our risks and the critical controls that have to be in place to protect everybody who enters one of our sites.

Leaders, including myself and the rest of the Executive team, now spend even more time in the field, where we engage our workforce on safety and verify that controls to prevent fatalities are in place and are effective.

Of course, our goal is zero fatalities; and, to that end, we're encouraged by improvements in lead indicators for safety performance. Total recordable injury frequency declined for the period to 3.9 for every 1 million hours worked. And the slide shows that that's the lowest on record.

We achieve nothing if we do not achieve it safely.

In Brazil, we remain committed to the long-term habilitation, always have been, of the communities and the environment affected by the terrible tragedy at Samarco. And while the impacts of this tragedy continue to weigh heavily, I am heartened by the ongoing effort; and 15 months on, I'm pleased by the significant progress made across many fronts.

The Renova Foundation, established by Samarco, Vale, and ourselves in June last year, has assembled a specialized team to deliver social and environmental remediation programs. And their approach is well planned and executed, and focused on the engagement with the communities.

And each of those communities, those most severely affected by the dam failure, have now voted on their preferred relocation sites. And the residents of the largest community of Bento Rodrigues have recently approved the design of their new town.

The legal claims are ongoing, and they'll take years to fully resolve, however, we've been encouraged by recent developments.

Just this last month, Samarco, Vale, and BHP Billiton have entered into a preliminary agreement to a process to negotiate the civil claims that have been raised by the federal prosecutors, and to conclude this by the end of June. This constructive involvement of the federal prosecutors gives us an opportunity to secure further legal and cost certainty.

We, Vale, and the Brazilian community all aim to restart Samarco's operations. But, as we've said previously, this will only occur if it is safe and makes economic sense to do so.

Restart also requires the restructure of Samarco's debt, and the completion of commercial arrangements with Vale for the use of its infrastructure, which required for the restart, and all licenses and approvals. So there are many steps to complete; and while technically possible this calendar year, that's going to require a considerable effort from all parties.

With that, I will now hand over to Peter to discuss our financial performance. Welcome, Peter.

Thanks, Andrew. What a difference a year can make. Happily, we saw significantly higher prices. However, the strong set of financial results has been many years in the making.

We've extended our sector-leading margins; we've generated strong cash flow; we reduced net debt; and, in line with our financial performance, increased our dividends.

We delivered an EBITDA margin of 54%. And that's our highest margin since 2011, when our commodity prices were, on average, 50% higher. That's testament to our productivity efforts.

We reduced unit costs at our major assets, and embedded a further $1.2 billion of productivity gains.

In the half, our diversified portfolio generated EBITDA of $9.9 billion, up 65%, with strong contribution from all four of our major commodities.

We're proud of the contribution we make to our host countries. During the half, we paid an effective tax rate of almost 35%; and including royalties, this was over 44%.

Our underlying attributable profit was $3.2 billion. Rising prices clearly helped.

And coupled with cost savings and further non-core divestments, our return on capital for the half was 9.2%.

We fully captured this increase in commodity prices with a higher conversion into EBITDA and free cash flow.

Reflecting the strong free cash flow of $5.8 billion, and the importance we place on shareholder returns, the Board approved a dividend of $0.40 per share: $0.30 per share through our dividend payout policy, and an additional payment of $0.10 per share, or $532 million.

Let's look at more detail at our operating performance. After nine consecutive periods of weaker prices, the cycle turned and higher prices improved our underlying EBITDA by $3.5 billion. But with higher commodity prices typically comes currency and inflation pressures, which, combined, reduced EBITDA by $430 million.

The deliberate decision to defer onshore US shale activity for value, and natural field decline, reduced EBITDA by $200 million. And that was partly offset by record production at Western Australia Iron Ore.

We reduced controllable cash costs by $1.1 billion. And this reflected lower costs across the Group and better recoveries at Escondida, which I'll touch on, shortly.

Over the last four years, we've embedded more than $11 billion of productivity gains. It preserved our margins when prices fell. In fact, without these gains our margin this period would have been below 30%.

Unit costs have now fallen over 40% since the 2012 peak, and we continue to deliver further savings across the Group.

At Western Australia Iron Ore, costs fell to $15 per tonne, a reduction of 5% in local currency. This included over $1 per tonne related to the write-off of low-grade stock piles at Yandi, exploration and additional costs of the accelerated rail maintenance program. We now expect this to complete six months ahead of schedule.

In spite of these factors, our iron ore business generated the highest margins in the Pilbara, due to best-in-class price realizations and lower all-in costs.

At Queensland Coal, costs were $56 per tonne, 8% lower in local currency terms, reflecting reduced labor costs and increased equipment and wash plant utilization. This decrease was despite additional trucking costs to utilize latent capacity at Caval Ridge while coal prices were high, and the loss of lower-cost tonnes from the Crinum closure.

At Escondida, unit costs fell 37%, and reflected the continued focus on cost efficiencies and two inventory movements. $275 million related to improved recoveries, following completion of the Bioleach Pad extension project; and $120 million reflected a buildup of low-strip ratio ore in preparation for the completion of Los Colorados extension project.

And finally, in petroleum, conventional unit costs fell by 10% to below $9 per boe, due to a decrease in workovers.

And in shale, drilling and completion costs were 25% lower, reflecting optimized well designs, operational efficiencies, and procurement savings.

However, a stronger Australian dollar and Chilean peso are returning with rising prices. So, in spite of progress on costs, in US dollar terms we have slightly increased unit cost guidance for the 2000 (sic) financial year at Western Australia Iron Ore; Queensland Coal; and several of our operated copper assets, where costs are also being impacted by the power outage and unplanned maintenance at Olympic Dam.

While it's too early to assess the impact of the current industrial action at Escondida, we have an obligation to protect its competitive future.

Our total operating unit costs are expected to decrease compared to 2016. And, as we look ahead, we expect further productivity improvements. These ongoing cost reductions are evidence that our simplified operating model is delivering results.

A leaner management structure, supported by integrated global functions, is better leveraging cost savings, initiatives, knowledge sharing, and capital efficiencies. The changes to the way we operate have built a solid foundation. But we have much more to do.

Now let me talk more about cash generation and our balance sheet. We efficiently converted high commodity prices into cash flow. Our free cash flow was $5.8 billion for the half, and every one of our business segments contributed significantly to this result. Importantly, US onshore was also free cash flow positive for the period.

We reduced capital and exploration expenditure by 38% to $2.7 billion, reflecting significant improvements in capital productivity and our continuous efforts to release latent capacity and lower capital cost.

We strengthened the balance sheet. Net debt is now $20.1 billion.

The range of internal credit metrics we use to measure the strength of our balance sheet all moved in the right direction. Our gearing ratio is 24%, and we have a solid A-rating.

In this half year, we reduced net debt by $6 billion. I'll go through the net debt reduction in more detail. We generated $5.8 billion of free cash flow; we paid $700 million of dividends to shareholders. We recognized a $600 million finance lease for Kelar, a gas-fired power station in Chile, with a $2 billion non-cash decrease in the fair value of our debt book, reflecting exchange and interest rate movements. Of course, this was entirely offset by movements in the associated swaps, included in other financial assets and liabilities on the balance sheet.

Even though our balance sheet is strong, near-term uncertainty is increasing. And when we changed our dividend policy, we also pledged to invest more counter-cyclically.

And so, with commodities like iron ore and coal trading above long-term forecasts, we had a bias towards further debt reduction. To this end, today, we have launched a bond repurchase for up to $2.5 billion, targeting short-dated US dollar notes, in order to generate higher returns for some of our surplus cash and extend the maturity profile of our debt.

Finally, looking at our capital allocation, this time last year we first presented our enhanced capital allocation framework. One year on, it's embedded in every investment decision we make. It drives discipline and how we allocate capital, and it links cash returns to shareholders to the performance of the business.

The slide shows the outcome of our capital allocation. Over the last six months, we generated $7.7 billion of net operating cash flow. We maintained the safe integrity of the business, and our balance sheet remains strong in a broad range of potential future conditions. We've paid the dividend determined by our payout ratio policy.

And so, this resulted in excess cash of $6.4 billion. We invested $2.1 billion in higher-returning growth projects, and we paid an additional dividend of $300 million; and, as we previously guided, we had a bias to debt reduction. So we allocated $4.7 billion to the balance sheet.

Acquisitions and divestments are an important part of the capital allocation framework, and in this period we continued to simplify the portfolio. And we received $730 million from the divestments of non-core shale acreage; half of our stake in Scarborough; IndoMet; New Mexico Coal; and the Coruna lease cancellation.

This half, the total dividend of $0.40 per share is significantly above the $0.14 per share paid as the final dividend for the 2016 financial year. This reflects the importance of cash returns to our shareholders, and confidence in our current and future performance.

The Company is stronger. However, rising global uncertainty requires we maintain a conservative bias towards our balance sheet. Having said that, this financial year, we expect to allocate $4.2 billion towards organic growth and exploration as we progress our rich pipeline of additional growth options.

While these projects have the potential to support healthy growth rates in the future, we remain committed to our value-over-volume approach. All investments must compete for capital, and are tested against additional cash returns to shareholders to make sure we optimize the use of cash.

We recognize the importance of cash returns to our shareholders, and at the right time, and in accordance with our capital allocation framework, we'll consider additional dividends and buybacks.

I'm pleased to say that competition for capital is more rigorous than ever.

Back to you, Andrew.

Thank you, Peter. Our long-term views on commodity markets are largely unchanged. We remain optimistic about the future.

Population growth and better standards of living are expected to drive increased demand for our commodities, and the urbanization of the next generation of emerging markets, such as India, will build new demand centers. And the global transition to lower emissions energy in response to climate change presents both risks and opportunities for us.

In the near term, however, challenges remain. After a period of weak prices, several of our commodities currently trade above long-term forecasts. In addition, there has been a marked rise in both geopolitical uncertainty and protectionism. Combined, they have the potential to inhibit trade, international trade, which is the life-blood of the global economy, and so weigh on business confidence and restrain job creation and investment.

The changes that we have worked tirelessly to implement allow us to navigate these uncertainties with both strength and agility.

The demerger of South32 and over $7 billion of asset sales have shaped a portfolio that is now true to our strategy. Our assets are large, long life, low cost, and provide diverse exposure to a mix of commodities with attractive fundamentals.

The improvements in productivity that we have locked in preserve our margins and allow us to fully benefit from higher prices.

A strong balance sheet, reinforced by a disciplined capital allocation framework, insulates our operations and allows us to invest throughout the cycle.

And, with vast improvements in capital productivity, our future growth options are now more competitive than ever. And these are options that span time horizons and commodities.

However, with a focus on value, and in line with our capital allocation framework, as Peter described, we always test these against additional cash returns to shareholders and will only develop them when the time is right.

As I outlined in May last year, we have a unique set of opportunities and a clear roadmap to improve returns and grow value by 70%. And since my last update at the AGMs, we have made significant progress.

Our productivity momentum is still strong. In this half, we delivered a further $1.2 billion; and that follows the $11 billion of annualized gains that we embedded over the last four years.

We had released low-cost latent capacity across the portfolio. At Spence, the recovery optimization project has already ramped up. Escondida's Los Colorados extension will be commissioned in June. And the Caval Ridge Southern Circuit is expected to be approved shortly.

In onshore US, after the success of our gas hedging pilot in the Haynesville, we've expanded the program. And across all our shale acreage, we continue to lower development costs and consolidate our position so as to profitably unlock the value of these world-class resources.

Our major growth options have progressed. Mad Dog 2 was approved earlier this month. And in December, we were the successful bidder for the Trion discovered oil resource in Mexico.

At exploration, we've had positive results at Caicos in the Gulf of Mexico. And that's given us confidence to accelerate the Wildling appraisal well, which is currently underway, to establish the scale of this new resource.

And in Trinidad and Tobago, we had success at LeClerc, and we're now accessing its commerciality.

Finally, our technology function: energized and focused on the identification and execution of a range of ambitious integrated programs to unlock more resource and lower costs even further.

While we've already achieved much across each of these value drivers, this is just the beginning.

The past several years have presented many challenges for the industry, and for ourselves; however, we've remained steadfast in our plans. And we've used the opportunity to implement and accelerate significant change, change that would have been far more difficult, if not impossible, to make at the top of the cycle.

We have a strong foundation. And while we have substantial work ahead, we are far more agile as a company, and I'm confident that we have everything in place to build significant value well into the future.

We have the right assets, in the right commodities, with the capability and culture to prosper. Our strong balance sheet provides stability. Disciplined investment in our rich pipeline of options will grow value and deliver returns for our shareholders.

We are on track, resolute in our focus, and see enormous potential ahead. Thank you.

Okay, so we'll take questions as they arrive on the phones; and Peter and I will then endeavor to answer them.

Myles Allsop, UBS.

Andrew, Peter, just a quick question around capital allocation. Clearly, that's one of the big concerns in the market, given the track record of this industry.

First of all, how much free cash flow do you think you're generating at spot? And when you look at the three main buckets, growth, returns, and balance sheet, how will your prioritize it? On the growth side, when will you step up CapEx on onshore? Are there any M&A opportunities out there at the moment, or is that fairly limited?

And on the CapEx side, can you -- is the around $6 billion of CapEx this year/next year pretty locked in? So should we start thinking, if prices stay higher, we could see a more meaningful step up in returns in 12 months' time?

Peter, I think you should probably handle the majority of that. I would just start off by saying that we've provided guidance for capital for this year and next year. I don't see it deviating much from that. But maybe Peter can add to that, and answer the first parts of your question.

Yes, Myles, a couple of things I'd just say on that. How much free cash flow at spot, we won't give that. We don't need to, I don't think.

We were trying -- we gave that number last year. We were just trying to illustrate at that time, when prices were low, that this was -- this Company had the ability to generate significant amounts of EBITDA and free cash flow. And I think we've demonstrated that, so that's fine. You have your own models, I'm sure you can have a crack at it yourself.

In terms of the prioritization of the capital allocation, again, we'd just refer you back to that capital allocation framework. It is very strong, and it is very much embedded in everything we do. And nothing has changed there. We will continue to prioritize the integrity of our business, the strong balance sheet, I spoke about it just a moment ago, and those -- and then we will, as I say, continue to invest.

The projects that we have in place are the ones that we have spoken to you a number of times. I doubt there is going to be huge amounts of things that we would add to that for the foreseeable future.

If there are opportunities in M&A that come our way for value, and they were -- fit our portfolio, of course, we'd continue to look at those things. But you know that that's very hard to actually effect. And we don't need to do anything about that.

And then finally, I would say that, as far as the balance sheet is concerned, as I would say, we're bias towards further reductions.

I think the only thing I'd just call out is that shale is very flexible. We're happy with that. And we undertake capital allocation on a quarterly basis, because we have to be very nimble. We'll keep updating the market very regularly, as we have. And that's the only thing that has a little bit of change probably associated with it.

Myles, just to add a bit to that, we are engaged at quite a low level, but I think several thousands of acres have been exchanged in the asset trading and the consolidation that I think really helps to assemble an acreage where you can drill longer laterals across our shale business. And that's happening all the time; in a small way, but not, I think, the bigger transactions you were talking about.

Duncan Simmonds, Bank of America Merrill Lynch.

I've got two questions. Firstly, on Trion, can you broadly outline the next step from here? Has anything really changed post your initial bid win? That's the first one.

And then secondly, just on productivity, in terms of iron ore, just noting, on the cost side, around $15. And I take it you talked about $1 of adverse impact in the half, but there's probably still a little bit of catch up to go versus your other peers in terms of cost. Where do you think that the business can kind of end up getting to an [acadence] of C1 costs versus your peers? Thanks very much, cheers.

Not a lot new in Trion because we -- since winning the bid, we've had to kind of negotiate the detailed documents. I believe that is now complete, because next week I'm on my way to Mexico City to sign everything off and have a little bit of a celebration with Permex and the Mexican Government.

After that, we'll obviously sit down with our partners, and we are the operator. We'll staff up within Mexico. And we'll start to look at ways in which we can, we believe, using our thinking, further improve the economics of that project, and maybe even the timescale. And we'll, obviously, keep you posted on that, in subsequent announcement.

Yes, you're probably about right in terms of the analysis of the C1 costs in the Pilbara. There's about $1 that you could say are one-offs and unique to us because of the way we choose to account it. But there is a little bit of a gap there. We know absolutely how we need to plug that, and we're on it.

But I would say, when you look at the total cost delivered into China, we are the market leader. And so, we catch up considerably from the port all the way through to China and on the premiums that we get for our products and our cost of shipping. So we would intend to hold on to or increase that advantage while closing the gap in the way we've done, in a number of ways, over the coming months, or year or two.

Thanks very much.

Anna Mulholland, Deutsche Bank.

Andrew, thanks for the opportunity to ask questions. I have two. The first is on Escondida, what the process is from here. I think you're back at the negotiating table with the unions, but if you could just confirm that and then give us an update in terms of the options and the potential timeframe there.

And the second question is on the potential for you to sell your gas acreage. Are you still actively pursuing that? What's the status? Thanks.

I'll ask Peter to handle the gas question; I'll handle the Escondida question.

You're right, we are, as of last night, back at the negotiating table. We were successful in being able to have a full shift change of the personnel we need on site to keep things under care and maintenance so that when the strike is over we can restart quickly and safely.

We will now, obviously, sit down with the unions, in good faith, and see whether we can't quickly reach an agreement, and what we think is the appropriate way to maintain the path towards increased productivity and increased flexibility, so that we can make sure that the considerable investment that we've made in Escondida that really sets it up for 10 years with very limited further investment at a relatively constant grade, but with more than adequate supply of water and three concentrators to generate a strong and appropriate return from the amount of capital that we've put in to that operation.

Peter, I don't know if you want to talk about gas divestments.

Thanks, Andrew. Yes, I think, as we outlined previously, very much an integral part of our shale business strategy is, in fact, recycling the capital that we've got there.

We have some large amount of acreage, we have very valuable acreage, but some of it, for us, is long dated and so what we'd like to do is try and monetize some of those, those acres, earlier. So we have, as Andrew mentioned a moment ago, actually done some swaps. We've also sold some acreage for very attractive prices. And, in fact, as we speak, we've got more acreage, as I say, the long-dated acreage, in the market.

I think that's very sensible. We can take that capital; we can recycle it as we look for value, increase the rig counts in due course in our [core] acreage in shale.

Anna, obviously, our preference for the more significant divestments will be for parts of the gas acreage that we think it's going to take us quite a while to get through to development. And in the meantime, we're using things like our hedging program at the Haynesville and the Haynesville to bring forward, we think are our more attractive return on gas assets and realize them for cash.

Menno Sanderse, Morgan Stanley.

Two questions. Andrew, you talked about enormous potential ahead, and Peter mentioned much more to do as well, and those are somewhat generic statements. Can you maybe detail those somewhat? What is the potential? Is it more the cost? Is it the reinvestment in a new project? Or is it Chinese/global demand growth you're most excited about?

Secondly, on Jansen, first, where is the project? And secondly, the consolidation that is taking place in industry away from BSP, has that changed the Company's view on the attractiveness of this industry?

Okay, I'll try and remember all the questions; but if I don't, do prompt me.

I think the first question you had really was about the future potential and the excitement we feel. It's not really about your third point, which is about how we see the economic development. We've been reasonably consistent in our views of China, and, indeed, the potential involvement in India, going forward. We haven't changed.

And we see, particularly in China, the transition that is required to move to more of a services-based industry and some of the restructuring they need to do within there, particularly with the debt that they hold at the local community and SOE level. We feel that's going reasonably well, and that, that gives us a sense of renewed or enduring confidence about that market. And longer term, well, I think there are some quite positive signs about India as well.

So I probably can't answer the second two points entirely to your satisfaction.

Our approach to productivity is very much about putting the structures in place and the culture in place in order to get a bottom-up response to productivity from our very talented people who work for us at BHP Billiton.

We've made a lot of progress as a result of simplifying the portfolio, in having simpler processes. But we've introduced a new structure, almost one year ago now, which we believe is rapidly accelerating the way in which best practice is shared and our ability to pull leading technology into the growth of productivity. And a lot of our effort now is marrying that with a real can-do connected, related culture, where people know everybody and they share, rapidly, ways in which they can improve.

And so, we expect them to set the targets, for them to drive for those improvements. Everything we're seeing coming through is behind our confidence.

But our intention, generally, is really just to point to unit cost guidance, maybe, a year out, some of the productivity targets maybe for the rest of the half year; take stock, see what the bottom-up thing is doing, and give you the best indications we can going forward.

But I think the strength of our approach is that we feel pretty confident that most of the, if not the vast majority of the, savings that we've already secured can be locked in and won't be given back in a period of more stable, or higher price. And we think that it can be added to significantly, both on the operating side and on the capital side.

So that brings me, I think, to your question on Jansen. We, obviously, will have to consider the impact, if it is fully consummated, particularly of the PCS and Agrium linkup, and some of the other alliances that are emerging in that marketplace, and what that does for supply; and as we match that, if you like, with the continuing growth in demand for potash, which is between 2% and 3% per annum.

We are going well in the construction of our shafts. So we're now through the difficult part, the Blairmore aquifer, and so on. And we're very close to coming through into the bottom part of the shaft construction, where we're beyond the free zone, so we're into really hard and consolidated rock. The technology is working well in both the two shafts that we're sinking.

And in line -- parallel with that, we continue to work on what kind of investment we would make, obviously, at the bottom and the top of the shafts, when they're completed, in order to start to develop a mining operation.

We're trying to find ways of breaking up into the smallest possible modules, but also with the most respectable forms of capital productivity. And it's going well. And that's why we are proud to say it's one of our important growth options for the future, along with some of the things we've talked to you about in copper and oil, in particular.

Have I handled all your questions, or is there anything I've missed?

Perfect. Thank you, Andrew.

Glyn Lawcock, UBS.

Thanks for staying up late, or staying in the office later, or whatever.

A quick question. I'm still struggling with US onshore business. October 2016, your petroleum Group talked to us about 1,200 net [undrilled oil] wells, 15%-plus IRRs, [particularly] oil. But I'm looking at all your peers now increasing rig count. You yourself have just approved a big deep-water project, based on your expectation of where oil is going to go.

With everything that's happening, is there a risk that oil caps out? I know you're positive on oil, and that's why you don't want to hedge it, you don't want to -- you're looking at it quarterly. But what if you're wrong? We're walking away from, at the moment, reasonable IRRs, and your peers are pushing everything ahead. Is there a risk you're wrong? And how do you compensate for that? Just trying to understand. It feels like a bit of a rock and a hard place for me.

Well, some of our peers are. But I don't think we're alone in the approach that we're taking. And particularly in liquids, we don't have an awful lot left in the Black Hawk, so we do want to get this right.

And we're not just looking at price, Glyn; we're also looking at the evolution of technology that allows us to develop things at a lower cost than if we rushed things.

But if I would just go through some of the different regions, what I do expect, by the way, that we will start to carefully ramp up the number of rigs.

If I start in the Black Hawk, we've got quite a large inventory there of ducts drilled and uncompleted wells. We're chewing through that now, because we've got five frac spreads in operation. So pretty shortly, when that inventory is complete, if we want to continue to develop and grow production in the Black Hawk we will have to add rigs.

In preparation for that, we're doing a couple of trials, with our partner, Devon, to see ways in which we might drill and complete differently, and, therefore, further reduce the cost and further increase the productivity going forward. And they're looking pretty good, so I expect something there.

If we move now over to the Permian, Permian, at the moment, doesn't really have proper infrastructure for evacuating the oil and a considerable amount of produced water. A lot of that is trucked. And I think we made the mistake before of rushing there before we had fully appraised some of the opportunities.

So we're using the rig there to appraise what might be possible within -- in Permian.

We're also working quite hard, behind the scenes, to think of ways in which we might consolidate acreage with some of the other players so that we can connect things up and drill longer laterals. And, as a result of that, it gives us a chance to wait for a better mid-stream to be available before we ramp up there. I think we will do at these prices, particularly if they firm.

And then, in the gas, we've announced that were going to add a second rig in the Haynesville, and continue with our hedging program to lock in a margin. And we're looking at whether we can extend that further as well. And, at the same time, technology is evolving.

So I wouldn't say we're hot to trot. But we're playing a game, that I think several of our competitors are playing, of making sure we've done our appraisal right. We've got our acreage properly aligned through trades, we've proved technology to get things to a lower cost, and we're looking for hedging opportunities.

I don't want to make a commitment or a promise. But I think the way things look at the moment, we're more than not likely to be adding rigs in all of our three areas as all of these stars start to align.

Thanks very much, Andrew.

Paul Young, Deutsche Bank.

Andrew, looking at slide 15, when you show potential to grow production by 60% in copper equivalent terms, it's pretty impressive potential growth, but most of it is [longer dated]. I'm trying to get a sense of how you think about target returns. And I know, Peter, we've spoken about this in the past, but do you have a hurdle rate for this longer-dated growth? That's the first question.

And then, just turning to CapEx, reviewing you CapEx guidance I see that that deferred stripping will more than double in FY18 to $900 million, so it's a big contributor to the step up in Group CapEx --

Paul, can I stop you there. Unless Peter's doing better than me, we're probably only getting every second word, and Peter's shaking his head as well. So I'd like -- as I understand that -- well, maybe there's -- it's something on your line that we would -- look, I would just be guessing what the question is 'cause I can't hear everything.

Okay, let me talk a little slower. Can you hear me, Andrew?

Just. You're very broken up. So if you take it slow, and we'll concentrate really hard, and then we'll tell you what we think you've asked us. Okay?

Okay. First question, Andrew, was on slide 15, when you show the potential to growth production by 60% in copper equivalent terms. Most of this growth is actually long dated. I'm curious about how you think about target returns. And do you have a hurdle rate for this longer-dated growth? Did that come through?

Yes. So, do we have a hurdle rate for the longer growth, we don't actually have a hurdle rate. Peter might want to add to this. It's very much based on our capital allocation framework and how investment in those projects would compete with cash returns to shareholders in its various forms, including, for example, buybacks, as you'll see on the capital allocation framework.

But you are right that the magnitude is there. We have very strong options, I think, to grow production going forward. We have just talked a little bit about what might be possible in shale with Glyn.

We've got, obviously, the more modest creeping of Olympic Dam production up to 280,000 tonnes; and then, the next decade, going into almost twice that, 450,000 tonnes.

We've got the Spence growth option, which our Board will look at in the second half of this calendar year, which will add another 200,000 tonnes.

We have Jansen, I've just spoken about. We've got Trion, and we've got some other exploration success.

And, of course, we have other options in (inaudible) in preserving production and -- in iron ore and coal. Well, increasing coal in the case of the Caval Ridge Southern Circuit.

I don't know if you want to add anything to that, Peter.

Yes, I'd just say three things. It is tremendous that we have got this range of really, really good projects near, mid, and for the long term. It's a Company that always has been, and hopefully always will be, BHP.

I'd say on the long-dated stuff, you talked about the trade-off between timing and value, of course, we understand that. But, as Andrew mentioned earlier, at times it makes more sense for us to wait: wait for the market to come and wait for the capital costs to go down, productivity to go up. And so, we take all those things into account.

And it's always value over volume, again, another one of these mantras, but it's the reality of how we think about those things.

Final thing I'd say is that there isn't a different hurdle rate because they're somehow long dated. At the end of the day, we don't have a hurdle rate, as Andrew said. But we understand perfectly what a risk-adjusted return over the next-best use of cash to -- which is returning to shareholders. All of those projects will compete for capital, assuming what that -- when we get there, assuming the plan is what we think it is on the spreadsheet today.

So, good strong projects.

Yes. And if I might add, just briefly, we are actually -- we have never really talked to investors about that. But we do work very hard to look at the risks, as well as the NPVs and the returns we might get in the projects, so that we risk-weight our decision making as well.

Maybe, try your second question then?

Yes. Thanks, Andrew. And then, reviewing your CapEx guidance, I see that deferred stripping will more than double in FY18 to around $900 million. It seems that that's the biggest contributor to the uptick in CapEx in FY18. So question, is most of this increase is associated with Escondida? And also, will deferred stripping step up further in FY19 with increasing mill throughput? Thanks.

It's deferred stripping, did you get that, Peter? Did you understand it?

Look, I'd say, Paul, that's quite detailed. We can help you out in the next couple of days.

What I would say is that it does tend to be that Escondida is the biggest contributor to deferred stripping, it's not the only contributor; and it just depends on where you are on the phases, whether you're adding or taking away from that stock, if you like, from an accounting perspective. And, as I say, we'll help you through understanding that better.

Okay. Next question?

Clarke Wilkins, Citi.

Andrew, just a question in regards to the iron ore in WA. I see that the rail maintenance and the renewal program's ahead of schedule. In terms of the steps to that 290 million tonnes in FY19, is there any approval still required to go to that level? I think there's been some noise about dust emissions and that [going on] in Port Hedland and whether that could be a constraint, if the approval or the [licenses are] extended.

Yes, an approval is required. But I wouldn't get too concerned by some of the things that you've read in the press.

We are very confident that the dust levels are falling, and there's nothing in the dust that is in any way a threat to human health. There has been a bit of discussion of, I think, one member who contributes to that debate in the press. But there's a lot of other people and a lot of other process that get involved in achieving that approval, and we're confident that we'll get it.

Jason Fairclough, Bank of America Merrill Lynch.

Andrew, Peter, I just wanted to talk a little bit about the mantra that you mentioned. Everyone seems to be talking about value over volume. And if I think, historically, BHP has been more in the camp of we produce at 100% of nameplate. Now today, Peter, you mentioned about holding back volumes in US onshore for value. On the other hand, if we look at iron ore, you're delivering record volumes.

I guess, could you talk a little bit more, and give us some more color, on how you think about value over volume, and if it differs across the businesses? I'd love to hear the differences in your thinking.

Okay, it has become a bit of a cliche. I don't know if I would completely claim ownership of this, but you heard it first at your own very conference in 2013, from my voice, just after I became CEO. I've seen it picked up in both the oil and gas sector and the mining sector since then by many other people. But, as they say, it's the sincerest form of flattery.

What I would say is that, for us, value over volume means that we will only invest when we believe that we can get an appropriate return when we look at the risks, in line with our capital allocation framework.

And so when we add value, it's about growing returns, it's about growing cash flow; it's not about growing barrels or tonnes. That happens to be, if you like, a consequence of that, and sometimes an indication of our ability at a growing volume. But we will not be driven by volumes, we'll be driven by value.

I don't think it's different anywhere, because the decisions that we make are about when we invest capital and whether we think the market, in some ways, can handle the additional volumes that will come from that capital, and, therefore, support the kind of price that drives the value that we're chasing.

But once we've invested capital, almost certainly, the value-maximizing strategy for us, at the bottom of the cost curve, is to drive the productivity of that capital to the highest point possible. And much of the volumes that we add through productivity come through no additional cost, or very low additional cost, and we always think that is worth doing. And we do believe that, that is a value-adding activity for our shareholder.

And there is no difference between the decisions we make to draw another well in the shale business as to the investment that we might make in Mad Dog 2, or, in the long run, the decisions that we would have around Jansen; same philosophy.

Okay. Thank you, Andrew. Very clear.

Paul McTaggart, Credit Suisse.

Just, Bass Strait, obviously, we've got lots of discussion in Australia about East Coast energy policy. Bass Strait, I guess you're uniquely positioned, in a way, because you can get an improving gas price through time.

The mature asset, which is still a big contributor, how are you thinking about that at the minute? Do we continue to hold it while it moves into a decline phase? Or is there a time approaching, as energy prices improve here, that it becomes time to think about selling it on?

Well, obviously, we are not the operator of Bass Strait so we, by and large, prefer the majority of the statements around that to be diverted towards ExxonMobil.

I am not sure I can add much to your question, at this stage. I don't know if you've got anything you'd like to say, Peter. Obviously, there has been some activity there. But you are right, it's a very strong and powerful cash generator for us, and we like it for that reason, particularly the better assets, or the better parts of it.

Do you have any more insights, Peter?

I think just to reiterate what a wonderful asset it has been for all these years. And, honestly, it still has plenty of guts left in it for -- and with a gas price equalization, it certainly changes in the way that gas pricing is affected on East Coast. Certainly, that remains a very attractive and important part of our portfolio.

We are, as you know, just moving some parts, or seeking to sell some parts, of the liquids which are really very mature at this stage; but apart from that, I think it's still a tremendous part of our portfolio.

Okay. So I was thinking, when does it become more valuable to someone else than it is to you? [And you'll say] that is not necessarily the whole thing.

That's where we have made that decision, because we've looked through the composition of Bass Strait and we have got sale processes underway, but that's not the case for the main bulk of the asset. But, obviously, we look at that for that asset, and for all assets, actually, as [we turn them].

Thanks, guys.

Heath Jansen, Citibank.

Just on Samarco, you said that it was potentially technically possible to start this year. I was just wondering what sort of milestones you are looking at; and also, with the potential debt restructuring, what you need to get through to be in a position to actually restart.

And then, just secondly, in terms of the market for the product, are you comfortable that you can restart that and increase your marketing operations, etc., on the back of it, as well? Thank you.

I'll give you a very high-level answer on the market, but I go around the world, talking to a lot of our investors -- sorry, a lot of our customers, and they certainly miss the product. I think -- and it's a relatively small operation compared to, although it produces pellet, some of its rivals, so I don't think there's any issue in the market for a restarted operation.

But I think the other issue is -- you've sort of said the milestones; I would add one. We have to get an agreement with Vale, because we're going to make use of a couple of their pits to dispose of the tailings. And that, of course, allows us to get a lot of the approvals that would be much longer to achieve if we had to rebuild a tailings dam.

And also, we're working with them on the right technology to put tailings into those dams and the appropriate commercial arrangements that Samarco would have with Vale. And, of course, we are one side of that and Vale are both sides of that. So that has to be worked through.

You're right, we do need to, I think, agree with the banks and the bondholders, Peter may want to say a bit more on this, what we think is an appropriate restructuring of that debt that I think reflects, if you like, the shared pay between the equity holders, ourselves, yourselves, or the people you write for, and the bondholders. And that will be a critical part, I think, of whether or not the restart will be viable.

And then, of course, there is a raft, as you can imagine, of approvals that have to be achieved, even though it's made easier by using Vale's pits.

So, they're important milestones.

And I would say, reaching agreement with some of the key prosecutors on some of the outstanding claims could make a difference, although the more important approval authorities in this area, but not exclusive, are more at state level then at federal level.

All I was trying to hint in my remarks is that with a fair wind and a lot of coming together then you could write down a project chart that says end of this year it can work, and we would love that to be the case. But it's an optimistic case I think we're saying, and given the complexity of what has to be achieved. Is that enough?

Did you want to say anything more, Peter, on the bondholders? No, okay.

No, I think you said it.

James Gurry, Credit Suisse.

Andrew, thanks for taking my questions; I've got three quick ones, just about projects.

With Olympic Dam, it's never been the easiest asset. You're developing the southern project, but, obviously, you're thinking about the 450,000 tonnes per year. How do you think about that project, in light of the power situation in South Australia?

Secondly, with the Spence growth project, would you be comfortable approving that project, in light of the strikes that you're seeing at Escondida?

And just thirdly, just back to Jansen and what Menno was talking about, previously, you spoke of maybe introducing a joint venture partner there, is that option still on the table and being considered? Thanks.

Okay, these are reasonably easy questions. Absolutely, we would not look at a major expansion of Olympic Dam unless we can be confident that we have a reliable and affordable source of power within South Australia.

We sincerely hope that the government of South Australia and some of the reviews that are underway at the moment that we're contributing to, some of which go to the federal level, actually address some of the great difficulties that we've had to face, and which have cost us [$100 million] in this period, because of the very poor provision for power within South Australia. So that's need to be fixed before we would actually push ahead with a project like that.

There's no real link between the Escondida strikes and SGO. We recently reached an agreement with the Spence workforce, amicably, without a strike, and so that is not a factor.

This is something that is specific to Escondida and it would not spill over into Spence, given that we have, I think, a three-year agreement there for a while. And we are pretty confident with our relationships with the workforce at Spence.

And, yes, we will continue to look into the possibility of some form of sell down or joint venture at Jansen, and we continue to leave that on the table.

It's been our experience, to date, that without a clear route to sanction, that we're unwilling, at this stage, to provide until we really understand the economics, understand the market, everything that I talked about earlier, it's difficult to attract a large number of potential buyers. But we will certainly remain open for business.

Okay. And if I may just follow up, can we expect Spence to be approved within the next six months?

Well, I cannot give you the answer, that is a power of my Board, and -- well, not my Board, the Board of BHP Billiton. But I can reassure you that it will be considered and ready for consideration within the next six months by the Board.

Great. Thanks.

Hayden Bairstow, Macquarie.

Just wanted a quick question on met coal. The Chinese policy changes that we've seen last year and coming back, has that changed your thinking around met coal? Obviously, the Caval Ridge project looks pretty good, but would you go beyond that and even look at future longwall developments? Or is met coal still fell off the radar at this point?

I don't think it's off the radar. I don't think it ever has been for us. We've been very strong. It's one of our pillars.

And, yes, Caval Ridge is certainly close to being approved. And we have actually got a lot of the benefits, albeit at a higher cost, within this period by running what we've got at Caval Ridge a bit harder, and also from by trucking some met coal from Peak Downs.

But this is a business that we think has good potential, and we look at it in that light. And it's a particularly attractive business for us because of our position in the market, and the fact that India has no real metallurgical coal, unlike China.

And there's no doubt that the Chinese drive to restructure their mining activities in both coals, and, indeed, in iron ore, through their restructuring of steel, it's probably made the bulks a little bit more investable than they might otherwise have been.

But I don't think we've made a big change to our long-term assumptions.

Peter, would like to say something. Peter?

Yes, I just wanted to add, your question, that's an interesting question on whether we can do further longwalls.

I think one of the less well known facts is the strength of our seams and the fact that we've actually got top coal caving working at Broadmeadow. In fact, that longwall was the most productive longwall in Australia this last period. And that does give us opportunities to deploy that technology in further parts of our resource base, which are not actually replicable, because we're one of the very few that has the height of seams that we've got.

So, yes, that's definitely something we're looking at. But, of course, everything needs to take into account impacts on markets, and the value, etc., etc. But I just thought I'd throw that in, as well.

No, it was a good pickup. I feel ashamed for not raising it, since I was there three weeks ago and saw the longwall in operation and was reassured, in a very bottom-up way, by the people who drive productivity, that even though we're the top operating longwall I think in Australia that they could go a lot better in the future.

So, yes, Peter's right, and particularly with perhaps a little bit more pressure on the remediation of open pits. Having that ability to go a bit deeper and have a little less disturbance and take the majority of as much as a 9 meter seam is quite something.

Sylvain Brunet, Exane BNP Paribas.

Andrew, three quick ones. First, on Escondida, just to help us understand the framework of the talks, what will be your priorities, and what sort of productivity framework you've got in mind?

Second question is on CapEx. If you were to define maintenance as the CapEx number required for volumes to stay flat, I'm interested to know if you would have a number for both oil and copper.

And lastly, on Trinidad and Tobago, just wondering how big the drilling program was. On page 13, you're talking about Phase I. How many more of these phases are there? And how much of this investment has been expensed already? Thank you.

Okay, I didn't quite understand your question on framework. But let me answer the second and the third question, perhaps in reverse order.

We've drilled two wells of the current program in Trinidad and Tobago. One of them, LeClerc, discovered a fairly substantial volume of gas, which we believe could be commercial, and we're working on that right now; and a second one, Burrokeet, it gave all the indications of it being a working oil province.

But because of these two wells, we now have a lot more calibration of the stratigraphy in our seismic. And so we're re-mapping them all, really just to understand a revised prospectivity and where we will drill next.

In the meantime, we've moved the drilling operation back to the Gulf of Mexico to drill the Wildling well; and after that, it will drill another well, another prospect, Scimitar. And probably when that's completed, we'll have a sense as to what pace we want to do.

There is quite a longer-term commitment. I don't know the exact numbers. And I'm sure the people from investor relations can help you with that away from that, because I don't carry that all in my head.

Now I've given you such a long answer, what was your second question again? I've forgotten it, I should have written it down.

Second question was on CapEx. Basically, to get a sense of what number in both oil (multiple speakers).

Yes, we don't actually calculate that. For us, maintenance capital -- and we're getting tighter and tighter in defining that, because we now have this big global drive on maintenance. We have a new center of excellence for maintenance, which reports to Mike Henry. So we're getting much tighter on the definition on that.

We've stripped out some of the things that were just about adding volume. And it's entirely really about maintaining asset integrity, and that's all. And everything else, we call growth CapEx. It doesn't matter whether it's replacing a depleted oil well, or a fall in grade in copper, or whether it's adding coal tonnes.

And they all have to compete, not just with each other, but on a risk and time basis; but also, obviously, with other uses of cash, like the balance sheet or cash returns to shareholders.

So we don't even begin to calculate that number. We don't think it's a valid number, because we would not favor maintaining volume over growing value. And, therefore, everything else is about value beyond the things that we would do for asset integrity, which I think we've spent $600 million on this half year.

Maybe try the framework question again. Was it about the capital allocation framework? It may well be one --

Yes, I was wondering what would be --

It may be one for Peter.

Your productivity priorities, it makes sense for any potential pay rise that you could negotiate?

Did you get that, Peter? Sorry, the line's not great, Sylvan. It was our priorities in exchange for what?

I just wanted to get a sense of what would be your requirements on your side of the negotiation.

What, at Escondida?

Yes, Escondida.

Well, I think I said them earlier. I'm not going to share our details.

Our requirements, broadly speaking, is that we get a deal that supports and rewards productivity and flexibility and sets the Escondida cost structure up in a way that we believe is appropriately competitive for the long term; and make sure that we get an appropriate return for the considerable investment that we have made through the Escondida water project, the Los Colorados extension, and, indeed, the addition of OGP1. And that's what's on the table.

Okay. Thank you.

Lyndon Fagan, JPMorgan.

Andrew, a couple from me. Just back to Escondida, if I look that revaluation or reassessment of the recoverable copper that produced a $369 million credit in FY16; and then, again a $275 million credit just in this half, which is more than $0.25 per pound credit to costs, and, to be honest, a big driver of the whole result versus consensus.

I guess, can you provide us a bit of guidance on how to model or think about that number, at least, going forward into the next result?

Okay, Peter will probably do that.

And then, I guess my second question --

Yes, ask your second question.

Yes, just with the second question on the settings in which you're thinking about project approvals and, broadly, running the business, if we go back to last year, copper and petroleum were ranking as the most preferred commodities, well ahead of met coal and iron ore. But, I guess, in fact, iron ore and coat, at least from a commodity price point of view, have outperformed.

And with iron ore at over $90, I'm just wondering whether completing the rail maintenance program early could see you ramp up production volumes at all, or whether there is some other bottleneck beyond completing that middle of this calendar year that restricts that. Thanks very much.

Okay, let me do the second one, first. Our preference is still, medium to long term, to grow in oil and copper, or add oil and copper production units; and then, possibly potash.

Doesn't mean that we completely neglect some of the things in the bulk. We still have some work to do to debottleneck the port, to match, obviously, the mine capacity, which we now with the full ramp up of Jimblebar, and the real capacity to move towards 290 million tonnes.

Then, on -- and your first question, really, was on how much productivity has come from Escondida in this period. That's true, the productivity doesn't always come in a nice linear fashion, equally distributed between every asset; it comes in lumps and starts, and so on. There have been other periods when more of the productivity has come from other businesses; I'm sure that will be the case in the future.

But I don't know if, Peter, you want to add anything more to the accounting treatment and why we believe, quite strongly, that this is a recognition of more productivity through more recovery. Go ahead.

That's right; that's exactly right. Just the background of that, if you recall, is that we completed the EBPE IV project that allowed us to have confidence that our recoveries were no longer -- not only higher in the near term, but, in fact, we had a longer period in which to recover that copper.

Of course, those are static pads, so that makes a big difference, and they are just -- you know how much material we've got stacked there. So, that technology that we applied through that project has, therefore, translated in an increased recognition -- recognition of an increased store -- stock of recoverable copper.

We accounted for that over a -- obviously, you've got the same amount of costs, because it's already stacked. But you've got a higher amount of recoverable copper. Therefore, of course, that means that the unit costs of those stacked tonnes have come down. And we recognized that over two periods: last period, this period, as you've just mentioned. That should be it.

We'll continue to monitor that. But I think the big material movements, we've seen those.

And I just wanted to say, also, this is true productivity, and those tonnes will come through, in cash form, in due course. In the end of the day, it was $275 million. So I don't think it, in anyway, detracts from the excellent productivity achievements across the whole entire spectrum of the organization in this period, and prior periods.

Thanks.

Hunter Hillcoat, Investec.

Just in terms of your capital allocation framework, clearly, the net debt position you're in now was a beat, albeit for some of the reasons you've already described. Clearly, this year there's a potential for very strong cash generation going ahead.

Where should we think of gearing, now that you're sort of in the mid 20% to 30% area? Where should we think of gearing longer term, in terms of being able to forecast what shareholder returns could look like?

Well, we don't have targets like that. But, Peter, I don't know if you want to elaborate.

Yes, Hunter, just let me reiterate maybe what we've said in the past about how we think about our balance sheet.

A fundamental part of our strategy, of course, having a strong balance sheet. How we assess this is a range of metrics. In fact, we prefer net debt-to-cash flow metrics; we think those are more appropriate than gearing. We do look at gearing. It's a secondary metric. We also think of the tenure, and, of course, liquidity, and so on.

So we put all those things together; and then, we stress test that for various cases that we can see going forward. We, obviously, use our own assumptions. And we also simulate events, if you like. Just make sure that, whatever circumstance arises, the balance sheet of this organization will remain strong.

Now, what we've also said then, a moment ago, as you know, is that we have [biased] to reducing net debt. And we continue to be in that space today.

There is, yes, higher prices today. Those things have changed, happily. On the other hand, our view on what could be low prices hasn't really changed. And so, when we stress test our balance sheet and we think about that we continue to make sure, want to make sure that we have got an even stronger balance sheet than we have today.

And then, the other thing that adds to that, of course, is the general uncertainty in the world, which just further gives us the sense that we should just be on a bias to conservatism at the moment.

Now, there is an endpoint to that. And we will continue to guide on the matters that make up the capital allocation framework, whether that be maintenance capital; whether it's the strong balance sheet, as I'm explaining; whether it's the dividend policy, the CapEx, the growth CapEx. And we think that there is plenty in there for you to make your own assessment as to where we would likely go. And we'll continue to update that as we go, and certainly, obviously, every single period.

We've time for one more question. So, final question. Any more questions?

Peter O'Connor, Shaw And Partners.

Andrew, following on from the question about South Australia Olympic Dam and power, thoughts on sovereign risk in Australia, which should be a safe place to operate with WA and the royalty discussions, and also that power issue, how are you thinking about Australia in that regard?

And then, a question for Peter. On Queensland Coal, the cost trend [seen] half on half, up 10%, or $5, any more color on what exactly drove that, bar the comments you made in the commentary earlier?

You, obviously, want me to answer the first question, and Peter to do the second. Why don't you do the second, Peter? I'll handle the first one, and then I'll close.

Sure. Peter, on the half on half, we haven't got exactly like-for-like portfolio. Chromium has come out. Obviously, those were very low cost tonnes, there was lots of them. And so that [dilutary] affect has, unfortunately, just run out of resource. So, that's the way it is.

And, in addition to that, as Andrew mentioned a moment ago, we've incurred, I think knowingly, and I think correctly, additional trucking costs from Peak Downs up to Caval Ridge to maximize those very attractive margins that we've been seeing for the last few months.

And the final thing I'd say is that we did have a little bit of rain and weather, and you've seen that in our production numbers, as in our operating report that we've issued just a few weeks ago. And so, those things also just took the top off that.

Now, having said all that, I think that the productivity story remains very much intact. We've retained our guidance. The only movement on our guidance is FX related. I think the all the plans are in place [that are being effective], and we continue to see, in fact, very good cost outcomes in Queensland Coal.

Yes. So if I might just add to that, obviously, because we've been trucking some volumes and there's been some additional costs, of course, there's been some additional volumes. Those volumes will continue, and maybe be added to, when we do the Caval Ridge southern circuit. But, of course, the costs will come out.

I think the other thing I would say is that we've made a lot of progress in this half year in increasing the utilization and the availability of a lot of our coal plants and, by and large, remove them as the bottlenecks. But we have lots of opportunities, through further working on things like truck hours and the operations of the mine, to further increase, I think, volumes as well.

So there's a lot still happening in coal, and I think a lot more cost reduction still to come.

I'm not going to be drawn on Australian sovereign risk. We have challenges all around the world. Nothing is absolute. And we are very proud of our opportunities to invest in Australia.

We appreciate the open debate about the right way to, if you like, manage taxation within Australia and to incentivize investment; we have that everywhere in the world. And there is no particular disadvantage that we would see in Australia. I would say, net-net, relative to many countries in the world, it's still a very attractive place to do business.

So, very happy to call Australia home, even though I'm here in London.

That's probably an appropriate place to finish. Thank you for all your questions. I'm sure Peter looks forward to meeting those of you in Australia in the next few days; and likewise, myself, for those of who've phoned in from London and the United States. Thank you.