必和必拓 (BHP) 2022 Q2 法說會逐字稿

Hello, and thank you for joining us to hear about BHP's results for December 2021 half year. I am joined today by David Lamont. I am pleased to be able to announce today another strong set of results. We safely delivered record first-half earnings and shareholder returns, and we continue to execute on our strategy.

We had solid underlying operational performance in the majority of our assets. We maintain cost discipline amid escalating inflationary pressures. We made good progress on our portfolio-related actions in Coal, Petroleum and Potash, and we unified our corporate structure, further simplifying the business and creating a stronger platform for growth.

We're doing what we said we would do. We're creating significant long-term value for shareholders, and we're benefiting society through sustainably meeting the world's growing need for resources. This half year has produced a number of highlights. Most importantly, we achieved our third consecutive year without a fatality.

Our high-potential injury frequency, one of our key safety indicators, decreased by a further 10% during the half. This measure has improved by over 1/3 over the past 3 years.

Continuing with safety, I deeply regret that in spite of all of our efforts of recent years, people continue to experience instances of sexual harassment and assault in our workplaces and accommodation villages. This conduct is completely unacceptable. I am absolutely committed to eliminating it from BHP, and we continue to take strong action.

On the production front, our Western Australian iron ore business ran at very close to record levels, and Escondida saw record material mine during the half.

We faced a number of continuing external challenges across the business, and these include ongoing COVID measures, constraints on labor mobility and availability, supply chain issues, twice as much rainfall at our Queensland coal operations as last year, and, of course, inflation in the cost of key inputs. However, we retained a sharp focus and solid control over costs, right across the business.

We're also making good progress on reshaping our portfolio in line with our stated intent. We took the decision to proceed with the Jansen Stage 1 potash project. We announced the merger of our Petroleum business with Woodside, and we further consolidated our coal portfolio into the highest quality coals for steelmaking.

We continue to develop more internal options for growth in copper and nickel and secured a number of further options through exploration and early-stage entry. Having completed the Spence Growth project on time and on budget, production ramped up during the half, albeit recoveries are trending lower than expected, and some plant modifications are being planned, in order to achieve full intended production levels.

This operational performance, combined with high prices for a number of our products, is reflected in our strong financial results. Underlying earnings per share were up 77%, and return on capital employed increased to 43%. Strong cash flow generation means our balance sheet remains in excellent shape. And today, we announced an interim dividend of USD 1.50 per share, representing a strong flow-through of our underlying financial performance for the benefit of shareholders.

Our success is measured not only by how well we create value and returns for shareholders, but also by the way in which we benefit society and our other stakeholders. Shareholder value creation is not sustainable without a focus on social value creation.

We're delivering on our climate commitments. During the half, our Climate Transition Action Plan, via our Say on Climate vote, received strong support from our shareholders. We're on track to meet our operational emissions reduction target.

In fact, compared with the same period last year, we've reduced absolute emissions by 16%, as renewable power contracts at a number of our operations commenced. And we're continuing to build on our partnerships along our value chain to support pursuit of our net zero by 2050 Scope 3 goal.

We're also building a more capable workforce that better reflects the communities in which we operate and where people feel safe and are able to contribute to their full capacity. More inclusive and diverse teams deliver safer, better business performance, as we've demonstrated over recent years. We're making good progress towards our aspirational goal of a gender-balanced workforce by 2025.

Just shy of half of our external hires over the past 6 months, were female. And women now comprise 30.6% of the workforce. The executive leadership team at BHP is already fully gender balanced.

We've also raised the proportion of our employees, including those in leadership positions from First Nations backgrounds in Australia, Chile and at our Jansen Potash Project in Canada. We look forward to updating you on our approach to social value in more detail in the coming months. I'd like to now hand over to David to take you through our results in more detail. David, over to you.

Thanks, Mike. Despite the challenging conditions, the quality of our assets and people, together with the robust demand for our commodities, enabled us to deliver a solid set of financial results in the first half. .

Our resilient operational performance and strong cost control, combined with higher prices, drove underlying EBITDA to $18.5 billion, up 33%, at a very healthy margin of 64%. This excludes Petroleum, which is treated as a discontinued operation, as we progress the merger with Woodside.

The adjusted effective tax rate was just over 30%, slightly below our guidance range due to the reclassification of Petroleum. This increases to just over 37% with the inclusion of royalties. Underlying attributable profit of $9.7 billion increased 57%. Including petroleum, this increases to $10.7 billion. .

We recorded a net exceptional charge of $1.2 billion after tax, comprising, $800 million for the Samarco dam failure, largely due to updated cost estimates for the Renova's programs, and a $400 million impairment of U.S. deferred tax assets no longer expected to be recovered.

EBITDA waterfall shows the significant benefit of the higher prices for our core commodities, with metallurgical and thermal coal prices, both close to triple that of the December 2020 half. Copper and nickel, each up 30% and iron ore 9% higher.

The favorable impacts of the weakening Australian dollar and Chilean peso against the U.S. dollar were offset by inflationary and commodity input cost pressures, in particular, for diesel and acid. However, we maintained a tight lid on controllable cash costs.

Contributing to the increase was the South Flank ramp-up and higher demurrage costs due to quarantine requirements in Western Australia, as well as around $150 million in COVID-related costs, which were treated as exceptional in the prior years. This was partially offset by lower operational activity at Olympic Dam due to the major smelter rebuild.

Our strong operating performance at Western Australian Iron Ore and higher concentrate sales at Spence were more than offset by lower volumes at Escondida due to a lower fee grade, at Olympic Dam due to the maintenance program and the impacts of significant wet weather and labor constraints at Queensland Coal.

Across the portfolio, our underlying operations performed well, despite these headwinds. We continue to apply BHP's Operating System, [BOSS], principles to unlock even greater performance. And for the first time since FY '17, all of our major assets delivered EBITDA margins in excess of 50% in the half.

Western Australian Iron Ore delivered record lump sales, driven by the ramp-up of South Flank, contributing to strong price realization above the benchmark. Full-year unit costs are trending towards the lower end of the $17.50 to $18.50 per tonne guidance range, at a $0.78 guidance FX rate. Of course, if the current Australian dollar rate continues, we'll do better. In copper, EBITDA increased 14% to $4.3 billion, driven by the higher realized prices.

Escondida's unit costs are tracking in line with full-year guidance, and concentrator feed grade is expected to improve in the second half, as we mine higher grade areas. Despite Queensland Coal experiencing double the amount of rainfall versus last year, it achieved a $2.2 billion increase in EBITDA, with average realized prices almost 3x the prior period. The increase in unit cost guidance reflects the lower production guidance.

Nickel West sulphate plant delivered first crystals, an essential ingredient for batteries used in electric vehicles. Ramp-up will continue throughout the remainder of the year. We now sell more than 90% of our nickel metal to the battery market, up from no sales only 6 years ago. And this comes at a time of increasing demand, with average realized prices for nickel metal just under $20,000 per tonne in the first half.

And for potash, our projects continue to track well. The shafts are now 98% complete, and the Jansen Stage 1 project is underway with approximately $1.2 billion in contracts, out of the $5.7 billion investment already awarded.

While treated as a discontinued operation, the Petroleum business also continues to perform well. During the half, production increased by 5%, and cost control remained strong, and we expect production and unit costs to be consistent with original guidance until merger completion.

Our major projects proceeded on time and on budget. So we continue to perform well, capitalizing on the strong demand for the commodities we produce, with guidance largely unchanged. while we are well positioned, we're acutely aware that the lag effects of inflation, weather and labor availability are challenges we will continue to contend with in the second half and into FY '23.

Turning now to capital. Our commitment to our Capital Allocation Framework, or CAF, is stronger than ever. It has served us well, since it was put in place back in 2016. Our first priority remains to invest in maintenance capital to sustain and improve asset integrity, in order to deliver stable and reliable performance. Over the past 6 months, this amounts to $1.1 billion.

Our balance sheet is in good shape, with $6 billion of net debt, compared to $26 billion at the end of FY '16. And we have consistently exceeded our minimum 50% dividend payout ratio we implemented with the policy. Beyond this, we continue to reinvest back into our business, spending $1.8 billion this half, excluding maintenance and petroleum.

This ongoing discipline has supported an increase in return on capital employed from continuing operations to approximately 43%. In FY '22, we expect to spend a total of $6.5 billion on capital and exploration expenditure, excluding petroleum, marginally below prior guidance due to favorable FX movements.

While spend may be higher in future years, both due to Jansen and as attractive opportunities to reinvest in our business present themselves, we remain disciplined. Today, we announced a dividend of $7.6 billion, taking our total returns to shareholders to over $22 billion over the past 18 months.

In light of our strategic announcements in August last year, we have revised our net debt target range from $12 billion to $17 billion, to between $5 billion and $15 billion.

This revised target range will enable BHP to maintain a strong balance sheet throughout the cycle, including during periods of portfolio change, liabilities associated with the Samarco dam failure and external uncertainties. It also provides flexibility to allocate capital towards shareholder returns and future investment opportunities, be they internal or external.

Before I wrap up, I wanted to take this opportunity to run through how we apply the Capital Allocation Framework to investment decisions. While the CAF was a major step forward, as we do around the business, we continue to learn from the past and refine our processes.

We have a broad range of investment opportunities in front of us. and under the framework, all options, small and large, internal and external, compete for capital, all go through the same process. We consider a range of metrics, including net present value, internal rates of return and payback periods, and incorporate risk, both upside and downside, to come to a decision.

There is no single hurdle rate we apply to investment decisions. And we factor in how individual opportunities impact both the portfolio, our decarbonization metrics, social value commitments and ultimately, shareholder value and returns.

Importantly, we consider all metrics in ranges rather than point estimates or mid cases. As a demonstration of both the power of the cap and our discipline in applying it, during the half, we made the decision not to increase or extend our offer to acquire Noront.

While a promising nickel resource, we ultimately did not see adequate long-term value for shareholders at the final offer price and believe this capital can be better utilized elsewhere.

On that note, I will close by saying that we have reported a strong set of financial results for the half. We are maintaining tight cost control over cash costs, despite headwinds. The portfolio is performing well in a high-price environment, and we remain committed to our Capital Allocation Framework to ensure we continue to deliver long-term shareholder value.

Thank you. Back to you, Mike.

Thanks, David. I'd like to talk now about what lies ahead. We've been clear about our commitment to social value and to delivering shareholder value through operational excellence and growth in future-facing commodities. And we've made great progress, in spite of a near-term operating environment that remains complex and challenging with the pandemic inflation, disrupted trade patterns and dynamic stakeholder expectations.

Our strategy, high-quality assets, strong balance sheet and capabilities position BHP exceptionally well for circumstances like these. And this is reflected in our continued strong results and the progress on our portfolio over the past 6 months.

In terms of the near-term outlook for commodity demand, while growth slowed in China more than we anticipated in the second half of calendar year 2021, we see the headwinds easing over the course of 2022. Real estate policies are easing, including in the critical area of developer financing. The beginning of China's new 5-year plan will bring greater infrastructure spending.

Exports are likely to remain a support for growth, and direct constraints on heavy industry are expected to ease. For the fourth year in a row, our mid-case is for Chinese steelmaking to exceed 1 billion tonnes in 2022, supporting demand and pricing for our iron ore.

While we're seeing stark inflationary pressures globally, with major value chains in food, construction, materials, autos, energy and logistics, all moving higher, it's important to differentiate between the drivers of this.

Supply chain bottlenecks, which, as David indicated, we expect to contend with for another year or 2 versus inflation that is demand-led, which we expect to be more enduring. This latter driver is positive for commodities demand and pricing.

The longer-term fundamentals for the commodities BHP producers, remain very positive. The resource sector is essential to the meaning of global aspirations for sustainable long-term growth. Demand for energy, metals and fertilizers will be underpinned by population growth, urbanization, decarbonization and rising living standards for decades to come.

BHP's portfolio, capabilities and distinctive approach to operational excellence and the creation of social value place us in an advantaged position, when it comes to being able to meet this demand. Our strategy is aligned to these global aspirations. It provides clarity on the commodities and assets we want and the capabilities we need to excel at, in order to maximize value and returns from these assets.

We've made significant progress already by increasing our exposure to future-facing commodities through sanctioning the Jansen Potash Project and adding exploration and early-stage options by progressing our divestments of BMC and Cerrejon as well as the merger of our Petroleum business with Woodside and by simplifying our corporate structure to make us more efficient and agile. Of course, plenty remains to be done.

We'll continue to reposition our portfolio for greater leverage towards the key megatrends playing out around us, and we'll continue to improve operational performance to deliver our products even more reliably and sustainably.

BHP's fierce commitment to sustainability and social value is evident in our approach to areas such as health and safety, community engagement, climate, water and cultural heritage. We also scored our best-ever results in our most recent global customer satisfaction surveys. And these were particularly strong in China and India. Our customer relationships have never been better. This includes deeper collaboration on sustainability initiatives.

For example, we recently partnered with both Southwire and Tesla on blockchain pilots to trace greenhouse gas emissions associated with our copper and nickel products, contributing to collaborative efforts to reduce emissions across value chains.

We've also progressed our partnerships with steelmakers, representing around 12% of reported global production to help advance the green transition of the steel industry. This includes a new collaboration with China Baowu and 3 top Chinese universities on the development of low-carbon steelmaking technologies and their future application at plant scale.

BHP is also a proud contributor to the regions where we operate. We've continued to support COVID-19 efforts, including vaccine awareness and accessibility for local and indigenous communities. And we're supporting small, local and indigenous businesses through reduced payment terms and the USD 1.2 billion spent, with over 4,000 local suppliers across the globe over the past 6 months.

We have sector-leading assets, and we aim to operate them exceptionally well. These assets generate strong margins through the cycle and create a baseline of stable cash flows that our shareholders consistently benefit from. In fact, in all, bar one, of the last 15 years, we've delivered net operating cash flows of more than USD 15 billion.

In Iron Ore, our assets constitute the best combination of scale, quality and cost competitiveness in the Pilbara, and we have room to grow, should market conditions warrant. Our reliable delivery is valued by customers and our higher-quality iron ores will remain attractive, as steelmakers strive to reduce emissions through improved productivity.

The need to reduce steelmaking emissions will also drive a growing market preference for higher-quality metallurgical coals. We produce some of the world's best quality calls for steelmaking. And over the past 12 months, we've seen increasing premiums for these.

In copper, we have some of the most sustainable operations within one of the largest resource bases, globally. This provides significant optionality. We are well positioned to take advantage of growing demand for copper required for urbanization and electrification.

At Nickel West, we're studying ways to unlock growth from what is the world's second largest nickel sulfide resource. And of course, with the approval of Jansen Stage 1, we've entered into another commodity with attractive fundamentals in the world's best potash basin. This opens a new future growth front for the company with significant expansion potential, which is expected to support up to a century of production.

As David mentioned, our Petroleum business continues to perform well, operationally, and we've enjoyed healthy oil and gas markets and strong prices during the half, all to the benefit of our shareholders. The merger with Woodside remains on track to be completed in the June 2022 quarter. It will combine two great businesses that will be even better together, will unlock synergies and will create a global top 10 independent energy company.

The combined business will have a high-margin oil portfolio, long-life LNG assets, significant growth optionality and the financial resilience to help supply the energy needed for global growth and development over the energy transition. Importantly, it will offer value and choice for BHP shareholders.

As I've flagged on previous occasions, we are creating and capturing more opportunities to deliver value growth. Our first priority, of course, is protecting and growing value through delivering safe, reliable operational performance, with a strong focus on continuous improvement, every day.

In terms of high returning production growth, our current portfolio of large, long-life resources offers plenty of opportunity for organic growth through further debottlenecking and by larger Brownfields Expansions, including bringing innovation to bear in ways that enable us to unlock more of our resources more quickly and at attractive returns.

At Escondida, where we expect production to average 1.2 million tonnes per year over the next 5 years, we are assessing Brownfield options to unlock more of this world-class resource. This will enable us to mitigate the effects of future grade decline.

At Spence, we are currently betting down the Spence Growth project, but we'll look to future optionality here as well. Over the next 5 years, across all our copper assets, we expect production of around 300,000 tonnes per annum more than 2021 levels.

At Nickel West as well as looking at opportunities to grow production, we're increasing the value of our product. We've now produced first crystals from our nickel sulphate plant, and we'll ramp up to around 20,000 nickel-equivalent tonnes per year, supplying the electric vehicle battery market.

And at Western Australian Iron Ore, we've increased our export license to 330 million tonnes per year out of Port Hedland, providing headroom to pursue low-cost initiatives across our mines, railways and port facilities.

We're being more agile and commercial and building our capability to add to our options through exploration, innovation, early-stage entry or mergers and acquisitions. Technology and innovation are areas of particular focus as well as working internally, we're collaborating externally to solve big challenges.

We're looking at how to improve productivity and deliver better value from installed capacity at our assets, including with autonomous haulage and primary sulphide leaching. We're also investing in emerging technologies to give us more competitive edge and to drive sustainable growth across our current operations, our resource base and our value chain. We've cast the net wide.

For example, working with start-ups and academia to investigate a number of innovative iron ore beneficiation concepts. With [Jetty] resources, who are developing a novel catalyst to more economically recover copper from low-grade chalcopyrite, and with [coal bold] metals, who are looking to apply machine learning to revolutionize the way we discover new deposits.

We're also adding to our suite of early-stage entry options. Last year, we invested in Kabanga Nickel in Tanzania, gaining access to what might be the world's largest development-ready nickel sulphide deposit. This adds to our existing suite of early-stage entry options in Ecuador, Australia, Canada and Mexico.

As always, one of the most important pathways to volume and value growth, is investing in our people. Year-on-year, we continue to embed the BHP operating system, which we put in place in 2017. [BOSS] is our way of leading and working that is delivering results. By increasing the capability of our workforce in this way, we are improving our decision-making, our efficiency and our productivity.

BHP is well positioned to create and grow value. We've demonstrated our ability to execute well through all of the challenges the world and industry have faced over the past 6 months and continue to face.

In addition to maintaining safe, reliable operations, we've progressed a number of strategic decisions and actions in parallel. We're improving our growth outlook and our leverage to commodities that stand to be positively impacted by the big trends underway, not least of which is action on climate and decarbonization.

After the divestments we currently have underway, we'll be left with a portfolio that is all or almost all comprised of commodities with decarbonization upside, copper, nickel, potash, and higher-quality iron ore and coals for steelmaking.

We're delivering more reliable operational outcomes, enabled by our efforts on workforce, the BHP operating system and technology. This powerful combination of operational excellence, a stronger portfolio and social value will underpin continued attractive returns on long-term value growth. Thank you.

Thank you for watching our presentation, and welcome to the BHP Half-Year Financial Results Investor and Analyst Q&A session. I advise you that this conference is being recorded today. (Operator Instructions).

I would now like to hand the conference over to Tristan Lovegrove, BHP's Group Investor Relations Officer.

Thanks, operator. Hello, everyone, and thank you for joining us today. I'm joined today by Mike and David to answer your questions. So with that, we are ready for the first question, operator. Operator, we're ready for the first question.

Operator, are you there?

Yes. Tristan, it's Paul Young. Am I open? .

Yes, we can hear you loud and clear, Paul, off you go.

Okay, great. I didn't get a prompt. Hi Mike, David, first question is for David on the net debt range. David, that $10 billion range. It's much wider. I presume that's due to the increased earnings volatility without Petroleum. The question is, are you prepared to go above the top end of the range, in the event if a good opportunity comes along?

The second question is to Mike around the portfolio and -- it's actually on met coal, Mike, a fantastic half of met coal. It's going to get even better this half, where met coal prices are. You dropped your medium-term target on volumes a while back. How do you create value from met coal, from here, Mike? Is it around creeping volumes with demand? Or is it more around decarbonizing the truck fleet? .

David, do you want net debt?

Yes. So thanks, Paul, for the question in relation to the net debt range. You're right, we've widened the range. Effectively, the basis behind that was obviously looking at Petroleum impact and the fact that Petroleum came out. And that's why we've now got the range of 5 to 15.

And importantly, as you did flag, we have significantly delevered the balance sheet. And when we're paying out the sorts of dividends that we've just announced, the $7.6 million coming on the back of our over the $10 billion at the full year. And that just meant that we'll get it below the bottom end of that range. So yes, we widened the range to 5 to 15, which recognizes the significant deleveraging that we've actually had.

Specifically, your question though is, would we be prepared to move above the top end of the range? There has been no change to that as a result of the change in guidance from the 12 to 17 to the 5 to 15. We always said, for the right acquisition, we would be prepared to move outside that range.

But obviously, that is dependent upon finding the [right] acquisition as part of that process, and we'll be very diligent, as we have been in the past, around the application of the Capital Allocation Framework to any opportunities on growth.

So Paul, let me pick up on your question around met coal. And so your question was around how do we go about creating value in met coal. And really, it's a strategy that's similar to what we have in iron ore, which is the value -- the way that we create value that is most enduring, is through a sharp focus on productivity and improving the overall quality suite or the average quality of the product suite.

Now, the way that we're going about that in met coal is through optimizing the portfolio. So you've seen the successful divestment of the BMC assets, which leaves us with a portfolio that's more skewed towards the highest-quality hard coking coals that we believe are going to be in greatest demand and have the greatest price premium.

In tandem with that, we need to be driving productivity further. Now, some of that will come through things like decarbonization of the truck fleet over time, but there's a lot more that we need to do there as well, in terms of driving operational performance, which is, we've had some external drags on operational performance like the doubling of rain over the course of the past year, COVID and so on.

But once we're through that and hopefully into a more stable period, in terms of weather, then we'll see the true operational performance of that business.

So that focus on reliable operations, driving productivity is the value lever that is most in our control. In addition to that, depending on how markets play out, there is upside there on volume, but it's all very uncertain at this point in time because we've been locked out or Australian coal has been locked out of a market that made up about 25% to 30% of our sales before the ban was put in place.

If that were to change a few years down the road, then the effective market we could access would grow, and there may be more by way of volume upside, but not for now. Right now, the focus is all on that kind of portfolio optimization and driving productivity.

Your next question comes from Hayden Bairstow of Macquarie.

Morning Mike and David. Just two questions for me. Firstly, just on -- is there any sort of guidance you can provide on capital management? Obviously, with debt range being nice and wide. Now, there's plenty of flex there. Is there any likely plans to look at anything post the Woodside transaction?

Or are we just going to be waiting for the full-year result in August before you'd potentially look at off-market buybacks or whatever, some shifting in the capital management plans?

And then the second one, Mike, just on the Iron Ore business. Obviously, the government's finally rebased Port Hedland at a more sensible capacity level, cleared the path for you guys, if you wanted to push beyond 300 towards 330 [accord]. Is there anything, sort of, in the works that may become part of the base case that you'd look at a more train loadout capacity to get that ultimate system capacity to that sort of level?

Okay. Well, thanks, and I'll take the one, David, on Port Hedland and Iron Ore, and then I'll pass to you for capital management. So Hayden, the strategy in Iron Ore remains exactly as it was, which is to continue to focus on reliable operations, eking out a little bit more production, keeping a lid on costs and improving the overall product suite, in terms of quality.

And you've seen us do that with South Flank, which is increase the proportion of lump in the mix, increase the average Fe content. All of that's playing towards that strong focus on decarbonization of the steel industry and the draw that's going to exist for higher-quality products. And we're seeing the benefit of that now.

As you can see coming through the cost performance and the production performance, things are going pretty well there, operationally, as well.

Now, what the increase at Port Hedland does do for us, is two things. One is, it ensures that we don't get into this weird situation, where we run up against -- because of the strong underlying operational performance, we hit up against the 290 million tonne per annum wall and then have to curtail things. So this gives us a little bit of flex deal on that.

And we may -- all things going well and current trends on performance continuing, we'll creep beyond that. but there's no -- there are no plans in the works right now to go to the 330 million tonne allocation that's been given. But of course, we have the ability, if market circumstances [toward] to warrant to grow further, but we don't have anything currently in train for that. David? .

So Hayden, on the capital management side of things, the first thing that I would say is that the Board looks at the quantum of cash to be returned back to shareholders on a half-yearly basis. As we have done, obviously, through this period, as we continue to look at how do we ensure that we return an appropriate amount back to shareholders.

I would just flag that, obviously, with this announced dividend, it's some $22 billion that we've returned to shareholders over the last 18 months. So a significant amount of return in that context. Specifically, your question around would we look at doing anything on the capital management post the merger with Woodside? The short answer is no.

We obviously, though, continue to monitor things throughout the period within that debt range that we've come out with between the 5 and the 15. And as I said, the Board looks at that on a 6-monthly basis.

Your next question comes from James Redfern of Bank of America.

Mike and David. Look, I just -- question relates to the potash and nickel aspirations for BHP. So BHP becoming a more simple company, posted a merger of Petroleum. So effectively 3 key commodities, iron ore, copper, met coal, which are a top 3 global producer in all 3 commodities.

I'm wondering, is BHP happy to wait until 2027 before generating any earnings from potash. And then for nickel, BHP is kind of the ninth largest nickel producer, globally. Does BHP also have aspirations to be a top 3 global nickel producer as well? So I guess, just wondering around the aspirations in potash and nickel into medium term .

So in the case of potash, that is a long-term, quite significant growth opportunity for BHP. First focus is on executing the Jansen project [while] you've seen the track record we're building around good, solid project execution with both South Flank and SGO coming in on time and on budget. .

And then we'll look to the Jansen Stage 2, 3 and 4, beyond that. So we do see that becoming a pretty significant part of the BHP business, over time. We'll look to whether there is opportunity to accelerate the build of Jansen Stage 1. But it's still going to be around that time frame, James. And we're not feeling any need to do things materially quicker than that.

But as David said in response to an earlier question, we'll always be opportunistic and look at things as they're right. Now, in terms of nickel, I think not all nickel -- so nickel is nickel. We're very focused on [Class 1] nickel. And in particular, you've seen us wait about 90% from (inaudible), David, of our sales now, 85%, 90% of our sales to the battery market. And so that's really going to be the focus for us there.

We do want to grow volumes. We have some opportunities to do so at Nickel West. You've seen the investment we've made, small investments that we've made into a project in Tanzania. And we're also looking at how we can go about enhancing value for the nickel units that we're already selling, and that's come through the development of this nickel sulphate plant in -- at (inaudible). And we realized first crystal coming out of that in the past period. We'll add more to our margins in the period (inaudible).

(Operator Instructions)

Your next question comes from Robert Stein of CLSA.

Mike and team, firstly, congrats on the great results, especially cost control in the Pilbara in this environment. I've got 2 questions, both on capital allocation and an inorganic growth. So the first question is on net debt at $6 billion currently represents 3% of the current EV. Are we -- is that overly conservative given the cash generation potential of the business, both in the last half, but then also potentially for this half given where spot pricing is? And then the second question is around M&A and considering that in the capital allocation framework. Now that we've collapsed DLC, does offering scrip as a way to acquire assets offer a different risk return framework to how you consider M&A given crystallizing prices after cash at cyclical highs may not be the most prudent way forward?

Okay. So David, I'm going to talk just very briefly to M&A and then net debt, and then I'll pass to Dave because I know you'll have further to add on net debt. So Robert, just on your question around having collapsed the DLC, does it change the equation then in terms of risk returns and give us more ability to do scrip-based acquisitions, I should be clear. We've always had the ability to do scrip-based acquisitions if we so wish. They were just hard in the past. So we'd be slower, there would be more complication associated with them. So this will free us up to be more commercial and agile. But -- and this is a big caveat, we're only going to pursue the right opportunities at the right time and at the right price because we have a strategy where the growth -- we do have a strategy where we intend to grow value, but our means to growing value come through driving better performance out of the business that we already have, looking at how we can go about liberating more of these huge resources that we have in copper and nickel already. So how we can go about unlocking more of them more quickly at good returns. .

We then upped our effort in exploration and early-stage entry and then comes M&A. So if we do identify the right opportunity or the right opportunity comes along, then of course, we'd be looking at cash versus a scrip and so on. But I really do want to emphasize that the way that we think about growth in this company is multifaceted, and it starts with driving better performance out of the current business and looking at unlocking more current resources, but we have upped our effort on a number of those other dimensions as well.

Now on net debt, your question was are we being overly conservative on kind of net debt, and I assume that the flip side of that is returns to shareholders. Look, if we were, we don't believe we are, but if we were at a 6-month issue because we reconsider this every 6 months, so if cash generation continues to be as strong as it's been in the period ahead, well in 6 months' time, that will play into the thinking around returns to shareholders at that time. But David, anything you'd like to add?

Other than just to say that we obviously want to maintain a resilient balance sheet, and we're mindful of uncertainties. Some of those play out in the context of Samarco and where are our liabilities in that regard. But equally, what I would say to you is you referenced the $6 billion 3% of EV. I mean obviously, that's towards the bottom end of that $5 billion to $15 billion range. When we actually then pay out the $7.6 billion of dividend this time around, we'll move up towards the top end of that current $5 billion to $15 billion range.

So as Mike said, it's a 6-monthly exercise that we look at and determine what's appropriate given the outlook that we see and the uncertainties at that point in time.

And perhaps just a quick follow-up. So the $5 billion to $15 billion, is it an inter-period range rather than an end-of-period range? How should we think about that in terms of cash outflows and dividends?

Yes. So it's a range that we're looking to manage the balance sheet to within the periods that we're talking about. So it's something that we reflect on half yearly when we would look at the return to investors as part of that. But certainly, we're looking to maintain throughout all periods $5 billion to $15 billion.

Your next question comes from Paul McTaggart of Citigroup.

So it seems like all the roads lead to Rome in the sense that many of the questions are getting at the same thing. So in the past, petroleum was going to be one of your growth areas, that's obviously going to go. And if you think about Escondida, I mean, in the long run, we have grade decline, so we know we need to expand concentrator output just to offset grade decline. So it's not clear to me that in the current portfolio, you've really got growth opportunities that are meaningful in the scale of the current profit line. And so that sort of gets to the question about how you think about M&A, et cetera.

So how should we think about what your vision is, Mike, for the future? Are you looking for a fourth strong arm for the company? Or are you happy if you can't find the right deal that you'll just return cash to investors either via dividends or buybacks? I mean I'm trying to get a sense of your vision for what needs to happen to BHP on a 5-year view.

Okay. So let me address the back end of your question first around are we happy to return cash to shareholders. If we don't find the right opportunity, absolutely, yes. So we will not pursue things here just for the sake of creating a new business or just for the sake of growth. We've got a multiyear track record now being very, very disciplined when it comes to capital location framework. That's not going to change. So anything we do, be it internal growth -- capital projects internal, I'll come to that in a second, or M&A has to stack up under the capital allocation framework, and 1 alternative under the capital allocation framework is to return further cash to shareholders.

Now having said that, we do have an aspiration to grow for good value and returns. The levers available to us to do so are: one, continuing to drive more out of the business that we currently have. And that's a combination of high productivity but also looking at for the debottlenecking and brownfield expansions within the current resources. We have some early thoughts and concepts around further opportunities to do. And there is a slide in the pack that outlines some of those. But there's further work to be done, and the teams have increased the amount of spend on project studies internally, including at Escondida, to look at how we can go about unlocking more of this these great resources that we have in copper and nickel.

I saw one -- I was looking at the numbers earlier today, and 45 billion tonnes of inferred resource. So it's at one end, but sitting at just under 0.6% copper from memory. And we've got the world's second largest nickel sulfide resource as well. So I'm confident that we'll be able to secure more options within the resources that we already have in time. But we -- I also recognize that we would like to be able to secure more options over and above that through things like exploration and early-stage entry. And we've had some great wins on that front in the course of the past 6 months with more partnerships in place. You've seen the small investment we've made in this -- the world's best undeveloped but close to being developed nickel sulfide deposit in Tanzania.

And then comes M&A. And for the right opportunity, in the right construct at the right price, we have a foundation now that allows us to pursue that sort of opportunity, but at all times with discipline and with it being put through the wringer of the capital allocation framework.

Your next question comes from Glyn Lawcock of Barrenjoey.

Two quick questions for me. Firstly, in your opening remarks, you made some comment that said inflation that is demand-led is positive for pricing. I would have put lithium in that bucket. Just wondering if you could maybe comment on how your views about the market not being big enough, the cost curve not being steep enough in lithium may be changing, if at all? And then the second question is, just on the decarbonization spend. I mean I think the company has talked about $2 billion to $4 billion by end of the decade. Some of your peers have already talked about building their own solar and wind in the Pilbara with some pretty ritzy capital numbers. Just what's BHP's intent? How are you thinking about in-house versus perhaps outsourcing through power purchase agreements, et cetera?

Okay. So thanks for the questions, Glyn. On lithium, so the statement around demand-led inflation, all other things being equal, leading being positive for commodity prices, that's a broad statement and applies to most commodities. But of course, it's not just the demand side question. We also have to look at the supply side and our views around lithium have been less about market size because I think all factors point to the market size growing over time and becoming a sufficient materiality to be of interest. But we do view the cost curve as being flat and therefore, haven't been able to see our way through to it being an industry with good, strong long-term margins of the like that we would see in other commodities. And that view hasn't changed, but we review these things regularly. .

On decarbonization spend, we've said we'll be at the upper end of that $2 billion to $4 billion range. So let's say, $4 billion or close to that. Importantly, we look at all of the spend on a returns basis. So current numbers indicate that we'd be about minus $500 million NPV on that $4 billion spend. But the challenge that we've set ourselves is to get back to NPV neutral or better because all of these projects compete for capital under the capital allocation framework as well.

Now the point that you raised around what are we going to do in-house versus contract out. One key area where we do have the ability to go to third parties for -- to help us decarbonize is stationary power. And that comprises about 40% of our kind of decarbonization target. And we've done that to great effect through our Chilean operations, which has underpinned the 16% period-on-period decrease in Scope 1 and Scope 2 emissions. And we'll certainly look at those alternatives as well for the Pilbara.

Your next question comes from Peter O'Connor of Shaw and Partners.

First on portfolio optimization. And Mike, I wanted to pick up on a thread that we talked about a little while ago. 2 assets in your portfolio account for about 33% of your net operating assets, that's met coal in Queensland and Olympic Dam. You've talked a lot about portfolio optimization and productivity, which I admire and I think that's a tremendous way forward. How can you unlock those 2 businesses to get a reasonable or an acceptable return on capital? Is that achievable? Do you need more asset terms? Or do you need lower cost or do you need both? And will you actually be able to do that given the track record of the past decade? And I've got a second follow-up.

Okay. So look, let's take that one first. And Peter, the -- look, 2 very different businesses, obviously. In the case of Queensland, it is just kind of day-to-day, continuous improvement. Again, it's -- we have had the noise of things like weather and COVID. But even if I adjust for those, there's more that we can do in that business in terms of driving productivity, without a doubt. And it will be things like improved truck cycle time, improved kind of discipline when it comes to mine planning and compliance to plan. But we've built the capability to be able to do that. And with the advent of autonomous haulage in Queensland, that's going to help us drive that truck-shovel productivity as well, which is the bottleneck in that business. .

Olympic Dam, different kettle of fish. So Olympic Dam, we've been on a multiyear journey now around rectifying kind of a legacy of underinvestment in asset integrity. We're at the very back end of that now with SCM21. The smelter has come back online, performing well. And the combination of the improved productivity that we're seeing on the surface and the underground is already leading to improved operational performance. And you saw that last year with the record production under BHP's stewardship. But because the capital base at Olympic Dam is so high, even with that very solid performance, return on capital employed was still low.

So the long-term way of increasing returns at Olympic Dam is through further growing production. And there's some things that we can do around minor debottlenecking to allow us to increase production a bit further, but for there to be a significant change in returns there, it does require a long-term way of further unlocking that resource. And that may come through Olympic Dam, it may come through Oak Dam or a combination of the 2. So we haven't -- we've continued to look at that in the background, but none of that's going to happen if the base business isn't running well, and that's what we've been focused on and are starting to see the success shine through on. Peter, you had a second question as well?

Yes. If I shift gears to dividends and dividend payout policy. And your capital allocation framework, it's very clear, it has been for the last 6 years and the base payout ratio of 50%, well you all work from and looking at your average over the last 5 or 6 years, I think it's running about 74%. Just thinking about how that drops out of the policy a bit more looking ahead with growth in the company, additional capital calls, maybe M&A, inorganic stuff, payout ratio staying well above that 50%, how do we think about that beyond just the short-term large cash flow you're generating?

David, do you want to take that one?

Yes. So Peter, as we have said, we look at this on a 6-monthly basis. And we're committed to that 50% minimum. And then over and above that, it's an assessment of how much do we wish to reinvest back into the business to maintain that resilient operations, which we've seen, which clearly we look to do, but also look to grow the company. And so it's a balance every 6 months that we review that.

What I think you're flagging is, to date, what we are saying is we're not going to sit on the cash. So we have that net debt range, and we will return money to shareholders, as we have done, going back to what the $22 billion just paid out over the last 18 months declared and about to be paid out over the last 18 months, which is a demonstration of returning money to maintain the discipline. I think the key through the capital allocation framework is to ensure that we maintain that discipline that exists. It's a matter of assessing both internal and external opportunities, is about managing the risks that we see through that versus returning money to shareholders. And that's what we can continue to actually look at.

But I think -- if I just add one thing, Peter, we've shown that we have shareholder interest strongly at heart. So the combination of disciplined application of capital allocation framework, keen eye on shareholder interest. I'd ask that people take some confidence in the decisions that we'll make along the way.

Mike, can I just push back? And the policy has been in place for 6 years, 7 years, and that's basically a 50% average, call it, 75%. Is that the right number, 75%, not 50%? So should you rebase the policy? Are you being too cute? And if not, should investors have not capitalized current levels of dividends and capitalize the future dividend stream from BHP at 50%?

Look, so the -- do we think -- so we continue to believe that the 50% is appropriate. And this is a long-term industry. We go through cycles, both cycles of growth and reinvestment in the business as well as market cycles. So we still believe 50% is the right level. Now we're as transparent as we can be with the market about how we see forward production levels, growth projects and so on. And conversely, if we were reinvesting more back into the business, that's likely going to be to lift long-term production levels.

And so I would say that either way as long as we're applying the CAF in a disciplined fashion, shareholders should see or be able to capitalize one of higher cash returns or reinvestment in the business and higher growth, which leads to longer-term higher cash returns. But you'll have to rely upon our constant reporting and transparency around our plans and where the cash is falling to.

(Operator Instructions). Next question comes from Rahul Anand of Morgan Stanley.

Mike, David and Tristan plus team, two questions from me. First one, David, if I can label the point on net debt range a bit more, if I may. Look, I just wanted to understand in terms of the bounds, once you start going outside these bounds. So on the bottom end, firstly, if you are sitting below that bottom end comfortably, can we assume that, that capital comes back to shareholders? And then once you do decide to go above that top end of the range, what would dictate how much over you go in a transformational transaction? Is it fair to think that, that would be driven by that investment-grade credit rating? That's the first question. Second one is on copper. I'll come back with that, if that's okay.

So let me deal with the range and specifically your question around the credit rating side of things. I mean, clearly, what we're looking to do is maintain a resilient balance sheet. And credit metrics are 1 way for you to assess how that's playing out. But from our side of things, we also need to look at what we see around the future and how the businesses are performing, the uncertainties that exists there, as I flagged earlier, also in relation to the Samarco liabilities, et cetera.

So there's a number of factors that we actually look at when we're looking at the overall range, and where we feel comfortable at any 6-month period, when we assess the dividend as to where we want to land within that range. Your question around if we're at the bottom end, below the $5 billion, is it appropriate to think that, that would be returned to shareholders? Yes, because we would look to see how looking into that range. I would, again, come back to -- and it's a bit back to Peter's question, the capital allocation framework has been in place since 2016 and has allowed the company to delever hugely to the position that we're actually in at the moment. So the balance sheet is in a very healthy position, and that gives us the opportunity to think about how much do we reinvest back into the business versus looking at organic growth opportunities or any external growth opportunities as well. And they are all of the factors that we will look at on a 6 monthly basis to determine where do we want to actually sit in relation to that $5 billion to $15 billion range. But the range is there to give you an indication of where we would be from a capital return side of things.

In relation to how we would assess going above the top end of that, that really comes down to the opportunity. And we don't have a generic view around that. That would be based on the specifics of anything that we were looking at from an M&A perspective and how would that play out? And we would look at how quickly could we necessarily return back into that net debt range, but also obviously, with a core focus to how does it add to overall shareholder value and over what time period. So we don't have a generic response to that. It would be specific based on any opportunity as we assess at that time.

You had a second question on copper?

Yes, Mike. That one is for you. Look, I wanted to talk about the copper production in the South Americas in the near term and the medium term. So near term, obviously, the average at Pampa Norte, the average 300,000 tonnes per annum guidance. You've had some issues with recoveries at SGO. I just wanted to understand if the critical items, the orders are in place for you to be able to get to that number? And then I guess the longer-term question in terms of copper is around Escondida. I just wanted to understand, post the grade decline, what's the plan? Is it to allow that production to taper off in line? Or do you expect to spend more CapEx and increase concentrator capacity there to be able to keep that production at a level which is higher than what grades would dictate?

Sure. Okay. Look, both good questions. So in the case of SGO, you asked very specifically are orders in place yet. And the short answer is no because it's -- project has only recently been commissioned obviously, had a period now of running it. We have achieved full throughput levels in terms of volume over the month of December. So we're confident that the throughput is there. The issue is recoveries. We have a pretty good understanding of what's going to be required, the plant modifications, which are all manageable, that are going to be required to get to the full production rates. But we're still early on in that project planning phase. So exactly when we'll get to full production rates is subject a little bit to where we ultimately land in terms of the project and execution schedule and so on. But we can say with confidence that we will ultimately get to the original intended levels of production. And keep in mind, this is the long-term resource, it's a 50-year project. So it's not something that just impacts the next -- or the opportunity isn't just in the next couple of years. We're confident that the long-term payoff is there.

Now in terms of Escondida, what's the plan? Rag and the team have been working -- or they've been very focused on looking at developing more options for how we go about addressing the long-term grade decline that kicks in post the kind of the 5-year window at Escondida. Big resource, of course. We do know that there's going to be a number of options available to us, but they all have to be attractive from a returns perspective as well. And that's really where the focus is at currently is on proving that up. I know we'll have more to say about that in due course. But suffice to say at this point that the team's beavering away at a number of project concepts in and around Escondida and at Spence and so on.

Your next question comes from Lachlan Shaw of UBS.

Mike and David, congratulations on the results. So just a couple of questions from me. So just firstly, in terms of the work around decarbonizing Scope 1, 2 in West Australia iron ore. Just interested if there have been any updates on studies around beneficiation of lines. And I guess, more generally, updates on your expectations of CapEx required sort of looking out into the medium term. I'll come back with the second question well.

Okay. So just can I confirm on the CapEx. You mean the CapEx associated with decarbonization?

Yes, but also the potential studies cited around possible beneficiation at Jimblebar.

Sure. Okay. So no update on beneficiation other than the Jimblebar. The study at Jimblebar continues. I don't think, David, we've given any numbers around CapEx. I will just say that Jimblebar is an ore that lends itself well to beneficiation of being able to generate returns off the back of that. But still too early in the process to give specifics around schedule and cost and so on.

In terms of overall CapEx for decarbonization, we have said that we expect now to be at the upper end of the $2 billion to $4 billion range. For returns, kind of on paper currently of about minus $500 million NPV. So $4 billion CapEx, minus $500 million NPV, but a lot of work underway to get that back to being NPV neutral or better keeping in mind that all of these projects have to compete for capital under the capital allocation framework.

Your next question comes from Kaan Peker of Royal Bank of Canada.

Mike and David, 2 questions from me. The first one is just on future-facing commodities, especially nickel. I think In December, you decided not to increase or extend your offer for Noront. I understand the argument about not paying too much. Just wanted to sort of understand the specific appeal in Noront as the geology, the basin, the possible size. And with the Noront acquisition not being progressed, is there any read through from Nickel West. I mean will you bring forward any projects such as Honeymoon Well or the smelter upgrade? And I'll circle back with a second question.

Sure. Okay. So look, we were clear at the time that we saw Noront as being attractive in its own right, but also because it's part of a basin. It was a very early stage play with all the risks that come with that, but we could see our way through to there being a potentially attractive opportunity there. But we have to be disciplined. We've spent 5 or 6 years now building up trust and a track record of being very disciplined when it comes to application of the CAF, and you saw that in its full glory in and around Noront.

Now one of the implications for Nickel West. I wouldn't -- there's no direct implications. We were looking at opportunities to further improve value from Nickel West before we looked at Noront. We've continued to look at opportunities since where do those opportunities lie. Number one, let's increase the margin that we secure on existing production. We've done that through pivoting into the battery raw materials market, 85%, 90% of sales now going there. We've upgraded products through the first nickel sulfate plant, which will give us more margin for the nickel units that we're selling. We are looking at things like what we do with the smelter longer term and whether there's an opportunity in there to deconstrain the operation in terms of ore quality and so on.

So quite a few things that the team is looking at there, the HPOX leaching project as well, which I'm confident that over time, are going to allow us to grow value off of Nickel West. But we're also -- we've got further efforts underway on the exploration front, both in WA and elsewhere. And you saw our small investment into a nickel sulfide project in Tanzania recently. You had a second question as well?

Yes. It's on the iron ore business and circling back to Hayden's question, I think on Slide 30 medium-term target is 290. I understand the focus is on sustainably achieving 290 in costs. But I think, Mike, you've mentioned that you can possibly get to 300 and 310 in the medium term. Just wanted to get clarity on this in terms of time frame, what does medium term mean. Is it 2024 when South Flank ramps up? And I think you talked about the debottlenecking program underway. What are the key components that we should be focusing on?

So I've been clear that the plans at this point are to sustainably get to 290. But I've also recognized that the team is doing such a wonderful job there. That all things going well, continuing reliable operations, a bit of improvement on productivity and some debottlenecking things that I'll come to in a second, there's every potential that we would end up creeping beyond 290, let's say, to the kind of that 300, 310 level, but no plans in place for a major capital program to get us to the 330. We have the flexibility to be able to do that with the new allocation, but there's no plans in place to do that, and we'll always be guided by the way the markets are unfolding.

Now what are the key components of debottlenecking? First and foremost, it's rail. So we are looking at how we go about increasing capacity on the rail and safety through the implementation of a new signaling system. And then there's a bit at the port itself, where we've been looking to improve car dumper reliability and so on at the port to give us more port capacity. If we were ever going to lift production and throughput at Vale more significantly, that will require further work at the port potentially another car dumper and some work on the yards and so on. But again, that's not the current plan.

Your next question comes from Lyndon Fagan of JPMorgan.

The first one is just on BHP view around flat steel production in China this year. Just wondering if you could maybe provide a bit more granularity there given the slowdown in the property sector and what gives you confidence around a flat outcome for the year. And then the next one was -- just to sort of dive into Chile, a bit more, there's been proposals to nationalize assets over there, and I think we'll end up with a royalty increase of some sort. I'm wondering if you could maybe give us a bit of an overview of how you see the situation playing out?

Okay. David, do you want to comment on steel and I'll take Chile.

Yes, certainly. So Lynn, just specifically in relation to China and the property side of things, we are seeing some recovery coming through there. Again, I'd point you towards credit side of things within China, et cetera. So what we would have said in the 6 months just gone. China came off probably quicker than what we had anticipated, but we certainly see some recovery coming through there. And for the fourth consecutive year, we do see over 1 billion of steel coming through from China. So that's sort of how we're seeing things play out in China at this point, a little bit of recovery, if you like, in the short term.

Now on your question about Chile and royalties, clearly, a big process underway around the constitution, but also looking at royalty increases there. We expect that, that will come through -- that those discussions will be landed post March with the new government, the new Congress. The -- now at the start of this process, there were some more extreme calls around what a royalty increase might look like. But I think more balanced voices have come into the debate. There's a broad understanding or a building understanding around the criticality of the copper industry to the nation and the national economy and knowledge that at the end of the day, Chile needs to compete for capital. And there's been earlier questions on this call about grade decline and so on. The only way that the nation will be able to address that grade decline is through attracting more investment. It can only attract more investment if it has the right fiscal settings.

So I think that's -- there has been a growing recognition around that, such that the more recent proposals and thinking around royalty increases are more measured. Let's put it that way. So not yet finalized, but signs are emerging that there's a more balanced perspective being brought to bear on this. Now the only other thing I would add is we have in place, of course, tax stability agreements that give us certainty or delay the changes for BHP's operations for a period of time, shorter for Escondida than for Spence. But David, I think it's out to 2023 from memory for Escondida. We have a taxability agreement in place and then it's further out for Spence.

The Spence is 2032.

2032. Okay.

And just a quick follow-up related. Can you maybe provide some broad indication of the cost of rectified dispense design issue?

All I want to say on that one at this point is that it's manageable. So we're still looking at things, but it's not -- it's going to be possibly 1 extra flotation circuit, but certainly manageable both in time frame and in cost, but not yet fully nutted out.

Your next question comes from James Redfern of Bank of America.

I just want to ask a question on New South Wales Energy Coal. Obviously, we had a big improvement in profitability. EBITDA of $435 million compared to a loss of $180 million in the previous half. And obviously, the sale process or review still ongoing, has until August to complete. So is there any chance you could please give us an update on how it's progressing? I mean, is this asset being held a little bit longer to extract more cash flow -- or is the sale process, I guess, struggling, if you like?

So James, we -- at the time that we embarked on this process, we recognize that these processes, particularly for coal assets, can be a little bit more complicated. We've got 3 of them away, 1 more to go, but still within the 2-year window that we gave ourselves. There's been no proactive decision here to hang on to things a bit longer given where market prices are at, of course, happy that the asset is generating a lot more value now, but that's not what's driving the time line. As to the where to from here, I'd say just we'll -- you can be certain that we'll come back with further in -- once the 2-year process is up. But until then, not much more to add.

Your next question comes from Glyn Lawcock of Barrenjoey.

Mike, just a quick one. Just on -- we spent a lot of time today talking about capital returns, but there's obviously multiple ways and you've chosen just to continue to pay higher than your minimum 50%. How do you think about it then when you sat down this last couple of weeks versus, say, a buyback, given now the DLCs collapse, we don't have to go offshore to buy back their stock to keep it equal? How did you approach your thoughts around the off-market versus the increased payout?

Great. Thanks, Glyn. So it's clearly something we consider every 6 months. We have had pretty healthy returns, and that's continued in this period. But David, maybe you just want to talk about the framework that we kind of bring to bear on thinking about this and how we landed and where we landed?

Yes. So thanks, Glyn, for the question. Clearly, it starts with how much. And so we firstly look at what is the return that we think is appropriate given the capital allocation framework and given the net debt range, et cetera. And then what we do is we look at what's the most efficient way to get that back to shareholders. Clearly, a buyback is one of the things that we look at, whether that's on market or off market. We consider those -- at this point in time, we felt the best way to return and keep things for all shareholders was actually the cash dividend. And so that's where we landed from an overall perspective. And that's where we resituate ourselves alongside balancing out the various different demands of shareholders as part of that overall process. I would just say as part of that, again, come back to $22 billion returned in the last 18 months, it's been a great return to shareholders, and we think that's consistent with the application of the capital allocation framework.

I understand that. Can I just challenge you a little bit more then, I mean, a 14% discount for an off-market, do you mind interpreting therefore that that's not attractive entry point into the shares versus just returning cash?

So again, that goes into that framework that we assess things on from our point of view. As I said, we felt that it was appropriate to return our cash dividend to all shareholders in the form that we did and felt that was the best way to return money to shareholders this time around. But it is something that we assess on a 6 monthly basis, and we'll continue to do so.

I think the important point there, Glyn, is that there's a number of parameters that we consider kind of where shareholders are at overall in terms of sentiment and the broad base of shareholders and so on. So it's about 1 factor. And as David said, taking all of that into account, the Board decided this time around to go with all cash, but we consider it in 6 months' time.

Your next question comes from Lachlan Shaw of UBS.

So just a follow-up question from me. Just around your commentary around the outlook for many commodities, quite strong demand, low supply, low inventories in respect of copper, particularly -- and just thinking about the improvement we've seen in the uranium market recently, you talked about Olympic Dam, Oak Dam optionality there, the importance of getting the asset producing reliably. But is there any sort of update there on timing and potential scope of how those sort of projects in that province may come together in the short to medium term?

Short answer is no. I don't want to -- to be totally transparent, I don't want to get ahead of ourselves in terms of painting a growth outlook for Olympic Dam at this point, given some of the scars of the past. All I can say is that none of -- so any growth ambitions that we have around Olympic Dam won't happen unless the base business is running well. So that has been 90% of the focus of recent times, and you see it shining through. But of course, we continue to look at what more we can do with this large resource at Olympic Dam. And now we bought the added plus of Oak Dam. In the case of Oak Dam, there is further drilling underway to tell us exactly what we have. And then in the coming period, the coming few years, we'll look at whether we can turn all of that into a high-returning growth opportunity for us in copper. Of course, it will be aided if we have the tailwinds of higher uranium prices. But that's probably it for now. I don't -- once we have greater confidence around things, I'm sure we'll come back and talk about exactly what that might look like and when but not for now.

Your next question comes from Peter O'Connor of Shaw and Partners.

Mike, can I just go back to the answer about the buyback versus dividend question from Glyn? Just to clarify, is it part of the decision tree in deciding on a buyback as part of that process? Does it involve a hurdle, which is share price versus your assessment of NPV of share? And I have a follow-up.

Peter, yes, so I understand the question. I mean, again, there's several factors that would contribute to the decision as to whether it's a cash dividend or whether it's a buyback as part of the process. As I said, we evaluate that on a 6-month basis, and there's a -- through the capital allocation framework, but that's the mechanism that we use. And we obviously, as part of that, are conscious of where the share price is at, yes. You'd expect us to factor that into the equation. But having said that, this time around, we felt that it was more appropriate to return a cash dividend with all things balanced out, as we look at where we were also with the revised range and where we asked also in relation to the ongoing organic growth options that we have.

I think if I cut to the chase, Peter's question, Glyn's question really at the heart of it is, do you think your share price -- your shares are overvalued? Short answer, no. Very happy that they've rallied since their lows -- Tristan when was that -- back in November thereabout, so shares have rallied. This really is a decision. It's not a spreadsheet-driven decision. There's a value component to it, but there's a whole host of other factors that come into the decision about what the best option is at any given 6-month period.

Just final question, Mike, in terms of nickel, and you mentioned several times about nickel being the second largest resource of nickel sulfide in the world. Thinking about the future and adding in Kabanga and the IP that you may pick up there in terms of a move towards hydrometallurgy, and you mentioned HPOX as well. How does WA, Nickel West unfold? Is pyrometallurgy part of that process and if so, for how long? Or is hydrometallurgy the way to go and is that the way you unlock the resource?

Way, way too early for us to know, Peter, the -- all I can say is that the -- more so than -- I think of all the BHP businesses that -- where we're at the advent of bringing innovation to bear on how we unlock more value Nickel West is right up there. And that includes a nickel sulfate plant that we've developed, some of the things like a HPOX that we're looking at. So I think innovation does hold within it quite a bit of potential around Nickel West, but too early at this point to be calling for what are going to be the winning technologies and the approaches.

With that, operator, I just wanted to thank everyone for joining the call earlier today. If anyone's got any questions, feel free to ask us in the Investor Relations team. But with that, we'll call it a day.

Thanks, all.

Thank you, everyone.

This concludes today's event. Thank you for your participation. You may now disconnect.