BHP : Decarbonisation Roundtable - Speech, 26 June 2024

Decarbonisation roundtable 26 June 2024

Camille Simeon, Practice Lead ESG, Investor Relations

Welcome everyone and thank you for joining us today. My name is Camille Simeon, and I am ESG Lead for Australia & Asia in Investor Relations.

I would like to start today's session acknowledging that globally BHP operates on or near traditional lands of First Nations peoples. I extend my respect to Elders past and present and to all First Nations people joining us today. I am honoured to be in Melbourne and on the lands of the Wurundjeri Woi-wurrung and Bunurong/Boon Wurrung peoples of the Kulin Nation.

Today we will be covering BHP's progress on decarbonisation in our operations and in our value chain in steelmaking and shipping.

I am joined by Graham Winkelman, Vice President Climate, Dan Heal, Vice President Operational Decarbonisation, Minerals Australia, Nigel Tame our Head of Steel Decarbonisation Partnerships and Ashima Taneja, Head of Maritime Safety, Sustainability and Technical.

So, we're in good hands. After the presentation, which will run for around 35 minutes, you'll have an opportunity to ask questions. To do that you will need to dial in to the teleconference, with the details in the invitation.

I would point out that we are still in Financial Year 2024 and so performance data will be for FY2023 or was provided in our Half Year Results released in February 2024. We are developing our Climate Transition Action Plan 2024 that will be released later this year and so we will be limited in what we can say in response to any questions on the specifics of that topic.

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BHP	Decarbonisation roundtable

But before we get into the detail, please note the disclaimer slide.

I'd like to highlight that some aspects of this presentation involve forward looking statements - and this is an area that is rapidly changing - so it's not a guarantee or prediction of future performance.

I'd also like to flag the importance of the additional information presented in the footnotes on slide 22, which should be considered with each corresponding slide.

With that, I'll hand over to Graham.

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Dr Graham Winkelman, Vice President Climate

Thanks, Camille, and thanks to all of you for your interest in our business and our decarbonisation strategy and progress.

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Let's start with a few key points.

We are on track to deliver our credible FY2030 target of at least a 30% reduction in operational GHG emissions in FY2030 against a FY2020 baseline, and we have an aspirational goal to achieve net zero operational GHG emissions by CY2050. Our medium-term target and long-term goal are both related to Scopes 1 and 2 emissions from our operated assets, or 'operational' GHG emissions.

As we grow to meet increasing demand for our commodities, the pathway to net zero for our operational emissions will not be a straight line. Our pathway reflects the dynamic nature of the assets we operate and the availability and readiness of decarbonisation solutions.

We are also pursuing the long-term goal of net zero Scope 3 emissions by CY2050, despite its uncertainty and the extent of the challenge.

We have made considerable progress on our strategy to partner with others in the value chain, including customers, mining peers and academic institutions, to develop, evaluate and trial the solutions that can make a difference to Scope 3 emissions.

Orderly, methodical, and capital efficient decarbonisation is an important part of our overall company strategy. It helps us build an increasingly sustainable and more resilient business, both of which are key to growing long-term value for our shareholders.

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BHP	Decarbonisation roundtable

In FY2023, our operational GHG emissions were 32% below the adjusted FY2020 baseline, after re- baselining for recent acquisitions and divestments.

This performance has been achieved primarily through introducing renewable electricity via Power Purchase Agreements, or PPAs, at many of our operated assets - notably in Chile.

Our current GHG emissions profile is weighted towards diesel and has been for a couple of years now. And while technology solutions for diesel displacement are emerging, many are not yet mature and available at the scale required.

In addition, our business activity is expected to grow to FY2030 and beyond. Under the current circumstances, this would lead to some organic growth in GHG emissions. Consistent with this, our reported operational GHG emissions for FY2024, which is not yet concluded, will likely reflect a small increase on FY2023 levels - an outcome consistent with the GHG emissions data presented in our half-year results in February 2024.

Our projected GHG emissions increase to FY2030 is shown in the orange column labelled 'Organic growth' in this chart. To counter this increase from our business growth, we plan additional deployment of renewable electricity before FY2030, and further effort to deliver some level of abatement across GHG emissions from the use of diesel and natural gas, and for fugitive methane.

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Our potential future operational GHG emissions reduction pathways to CY2050 are summarised in this chart, including some of the planned and achieved decarbonisation milestones and projects.

Every year we update our plans and our evaluation of the optimised pathway towards our targets and goals, with related impacts upon our decarbonisation project portfolio, range of uncertainty and capital expenditure profile.

Let me explain what is in front of us here. First, we offer visibility of our organic growth with no GHG emissions reduction. This is the grey line and represents the expected emissions pathway associated with our increasing production if we didn't implement any future decarbonisation projects.

Beneath that line is our 'GHG emissions reduction pathway', the blue-grey line tracing the upper boundary of the hatched area. This decarbonisation pathway includes all planned structural abatement projects and planned growth. Progress along this line allows us to reach our FY2030 medium-term target.

You will see that the key milestones on our pathway to FY2030 include commencement of three new Power Purchase Agreements or PPAs that we have signed, and a range of on-site trials to progress future diesel displacement.

To abate emissions beyond a 30% reduction on the adjusted FY2020 levels in FY2030, we will be reliant on technology still under development. On the chart, we have labelled this potential abatement the "Range of uncertainty" - the hatched area in grey in the chart.

If technology develops as we believe it can, we expect the first electric truck fleet adoption by FY2028, and in FY2030, the first of multiple future electric locomotive deployments.

Milestones after FY2030 primarily consist of greater adoption of electrification across materials movement.

And while we do not plan for the use of offsetting to meet our FY2030 target, we do anticipate the need for some carbon credits to deliver on our net zero goal by CY2050. We are likely to source and relinquish carbon credits in coming years to meet compliance obligations under Australia's Safeguard Mechanism. But, to be clear, we would not count those regulatory carbon credits towards achievement of our FY2030 target.

The path ahead of us remains consistent with our operational GHG emissions target and goal and we continue to progress toward them.

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I want to shift our attention from operational GHG emissions strategy to value chain GHG emissions for a moment. BHP's total reported Scope 3 emissions is significantly greater than our reported operational GHG emissions, and our focus areas are set with consideration of materiality, the level of impact we can achieve, and the alignment to our portfolio strategy. We have four primary focus areas:

1. Support the development and adoption of GHG emission abatement technologies in steelmaking.
2. Enhance the quality of the iron ore and steelmaking coal we produce.
3. Support the development and adoption of GHG emission abatement technologies in shipping.
4. Encourage suppliers to pursue net zero GHG emissions.

Steelmaking emissions from the sale and use of both iron ore and metallurgical coal represent approximately 85% of our reported Scope 3 emissions inventory, and BHP is also one of the world's largest dry bulk charterers. Accordingly, today we will focus much of the Scope 3 discussion on our efforts to support the development of new steelmaking technology and shipping.

So, in summary, our approach to decarbonisation across operational and value chain GHG emissions is delivering good outcomes. We will spend the remainder of the presentation providing further details of our progress.

Let's start with operational GHG emissions progress and outcomes.

With that, I'll hand over to you, Dan.

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Dan Heal, Vice President Operational Decarbonisation

Thanks, Graham and hello everyone.

A quick introduction as this is my first decarbonisation briefing. I've recently started in this role as Vice President Operational Decarbonisation in Minerals Australia. Prior to this, I was General Manager at two of our iron ore mines in the Pilbara in Western Australia, and before that I spent time in mine operations manager roles at our copper assets in both Australia and Chile. As a result, I bring a strong operational view to our decarbonisation challenge.

Today I am going to share some of the decarbonisation work we have underway across our global operations.

I will cover some of the biggest technical challenges we are working on, including:

• How we are working with our partners to accelerate the development of diesel displacement technology
• The complex transformation required at our mines as we move to electrification
• How we are thinking about fugitive methane emissions in our production of steelmaking coal

But before I talk about these specifics, let's take a moment to touch on the sources of our operational GHG emissions, and the work we have done already to reduce them.

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On this slide you can see a breakdown of our global operational GHG emissions.

The charts across the top display the source of greenhouse gas emissions in our baseline year for these assets, ordered from left to right by most to least emissions. We haven't included two of our assets here although they are included in our FY2020 baseline - NSW Energy Coal is being managed to proposed closure in CY2030 and Jansen Potash is not yet operational. And we also include our legacy assets in the FY2020 baseline.

It shouldn't be surprising that these charts look different given that our operated assets produce different commodities, using different mining methods and move different volumes of material. And as a result, the way we decarbonise, and what we prioritise, will be different at each asset.

Let's start with purchased electricity, or Scope 2 emissions, which, as you can see, is something common to all these assets.

Across our Australian and Chilean operations, we have made good progress leveraging renewable and other low emission PPAs to reduce Scope 2 emissions in a capital efficient manner. As the charts along the bottom show, these agreements have us on our way to at least a 50 per cent reduction by FY2025 in most grid connected operations based on currently forecast electricity consumption. Escondida and Spence have already transitioned to 100 per cent renewable energy, ahead of schedule, and achieved full use of renewable electricity in CY2023.

We do not have specific renewable energy targets, but our aim is to pursue maximum renewable electricity penetration at all grid-connected operated sites, with an aim of 100 per cent purchased renewable electricity by FY2030, where available and commercially viable.

In Western Australia Iron Ore, our inland Pilbara operations are not connected to an existing grid and so we cannot purchase power through the market. Renewable technologies such as wind and solar are available, but the Pilbara is remote, so we are working through the best way to introduce large volumes of renewable energy, or other sources of low to zero emissions power, while keeping power running 24/7, 365 days a year.

By the end of this decade, we plan to have up to 500MW of wind, solar and battery storage assets available in the Pilbara, backed up by firm power from our highly efficient Yarnima gas fired power station.

We also expect significant demand growth to occur post FY2030, with diesel displacement increasing the amount of electricity required at some of our operated assets by up to four times. This means securing a reliable supply of renewable and other low to zero emission energy into the future remains a significant priority.

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BHP	Decarbonisation roundtable

Each year, our global operations use roughly 1,850 mega litres of diesel in over 1,500 pieces of equipment.

As the chart here shows, almost half of this is used in our truck fleets.

We spoke to the pathways to eliminate diesel at our Operational Decarbonisation briefing last June. We continue to believe that an electrified mining fleet will be more economic than hydrogen. This is primarily driven by the overall efficiency of an electrified pathway, compared to other fuels, as shown on the right side of this slide.

Some of our core mining equipment is already available in an electrical configuration. For example, both BMA and Escondida operate electric shovels, and Escondida has had electric drills for many years.

Electrification can also lead to improved maintenance performance, the elimination of diesel particulate matter, and reduction in noise and vibrations.

We consider alternative fuels such as biofuels as a backup option if electrification is delayed or unsuccessful, and we continue to monitor developments in this area. This is informed by a trial that concluded last year that provided us valuable insights into using hydrotreated vegetable oil in multiple types of mining equipment.

The trial also identified some of the challenging commercial and social concerns associated with these fuels.

Replacing diesel will require us to develop a whole new operational ecosystem to surround the fleet and every part of the mine will be touched by this change.

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