DBRS Morningstar Confirms Rating on BHP Group Limited & BHP Group plc at “A,” Stable Trend

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating of BHP Group Limited & BHP Group plc (collectively, BHP or the Company) at “A” with a Stable trend. The rating confirmation was a result of the Company’s sound business risk profile and key credit metrics that are solidly in the “A” category following the recent repurchase/redemption of $2.5 billion in debt using existing cash balances. The Stable trend reflects BHP’s attractive portfolio of long-life, low-cost operations that should provide sufficient cash flow over the next few years at forecast commodity prices.

BHP continues to manage the impacts of the Coronavirus Disease (COVID-19) pandemic after introducing additional protocols in line with government and health agency guidelines at its operated assets to protect its workers and the local communities. Initiatives include (1) the AUD 50 million Vital Resources Fund in support of its Australian operations; (2) an $8 million program in Chile with a focus on increasing testing capacity and tracing, medical equipment, and hygiene supplies as well as public-space sanitation; and (3) a $2 million fund in North America to support local and regional health and wellness programs in the communities around its operations.

The Company continues to make progress on its major projects, including the (1) Spence Growth Option in Chile, which will extend the mine life by more than 50 years and could begin production by the end of 2020; (2) South Flank mine in Australia, which will replace the Yandi mine and is on schedule to begin production in mid-2021, (3) Atlantis Phase 3 expansion in the Gulf of Mexico, which achieved initial petroleum production in July 2020; and (4) Mad Dog Phase 2 expansion in the Gulf of Mexico, which is on schedule for initial petroleum production in 2022. That said, BHP has decided against proceeding with its proposed $2.1 billion expansion of its Olympic Dam copper-gold-uranium operations because a better understanding of the orebody has weakened the project economics.

DBRS Morningstar views BHP’s liquidity as strong, with $13.4 billion in cash and $5.5 billion in availability under the Company’s credit facility as at the end of F2020. While BHP funded its more recent debt repurchases/redemption with existing cash balances, DBRS Morningstar believes that the Company remains well positioned to fund any cash flow deficits and, potentially, allow for further debt tenders. DBRS Morningstar does not expect a positive rating action in the medium term based on BHP’s current business risk profile and current financial forecasts; however, DBRS Morningstar estimates that, among other things, either a 30% decline below current consensus forecasts or the purchase of nonaccretive assets could warrant a negative rating action.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are Rating Companies in the Mining Industry (August 17, 2020), DBRS Morningstar Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (November 1, 2019), and DBRS Morningstar Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Relationships (November 25, 2019),
which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

This rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the rating process for this rating action. DBRS Morningstar did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is an unsolicited credit rating.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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