DBRS Morningstar Confirms 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 (BHP or the Company) at “A” with a Stable trend. The rating confirmation is a result of (1) the Company’s further progress at reducing adjusted debt, which declined by $6.1 billion or 22% in F2021; (2) the Company’s key credit metrics strengthening in F2021 due to the 82% and 69% increase in adjusted cash flow and EBITDA, respectively, compared with F2020; and (3) modestly weaker business risk profile pending the completion of the announced spin-out of its remaining petroleum assets to Woodside Petroleum Ltd that results in a lessening in both the Company’s size and diversification. The Stable trend reflects BHP’s favourable market position in iron ore, copper, and metallurgical coal that should provide robust cash flow generation over the next few years at forecast commodity prices (Bloomberg consensus as of October 7, 2021).

BHP continues to operate through the Coronavirus Disease (COVID-19) pandemic and has recently moved in conjunction with local health authorities to ensure that all of its Australian workforce is fully vaccinated. However, the operating environment in response to the pandemic in Chile, where coronavirus cases remain high, has been more challenging, and BHP expects reductions in on-site workforces will continue to be an issue through the 2022 financial year.

The Company continues to make progress on major projects, including (1) initial production in December 2020 at its Spence Growth Option project in Chile, which extends the mine life by more than 50 years; (2) initial production in May 2021 from its South Flank mine in Australia, which will replace the Yandi mine and has been on schedule and budget; and (3) the approval in August 2021 of the $5.7 billion Jansen Stage 1 potash development that is expected to commence production in 2027.

DBRS Morningstar views BHP’s liquidity as strong, with $15.2 billion in cash and $5.5 billion in availability under the Company’s credit facility as at the end of F2021. In the absence of an accretive acquisition following the spin-out of its remaining petroleum assets that increases either BHP’s size or diversification, DBRS Morningstar does not expect a positive rating action in the medium term based on BHP’s current business risk profile and financial forecasts. However, DBRS Morningstar estimates that, among other things, either a sustained material 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 can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating Companies in the Mining Industry (August 16, 2021; https://www.dbrsmorningstar.com/research/383106), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021; https://www.dbrsmorningstar.com/research/373262).

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 info@dbrsmorningstar.com.

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 info@dbrsmorningstar.com.

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