The Directors present their report together with the consolidated financial statements for the half year ended 31 December 2000 and the auditors' review report thereon.

The profit after tax attributable to BHP shareholders for the half year ended 31 December 2000 was $1 427 million. This was a record result and an increase of $346 million or 32.0% compared with the corresponding half year ended 30 November 1999.

Basic earnings per share were 80.0 cents compared with 61.5 cents for the corresponding period.

The following major factors affected profit after tax attributable to BHP shareholders for the half year ended 31 December 2000 compared with the corresponding period:

Higher prices after commodity hedging for petroleum products and copper increased profit by approximately $355 million compared with the corresponding period.

Foreign currency fluctuations net of hedging had a favourable effect of approximately $315 million compared with the corresponding period.

Profits from the Laminaria/Corallina and Buffalo oil fields (North West Australia) contributed approximately $150 million for the period. These were partly offset by increased losses of approximately $50 million from HBI Venezuela and HBI Western Australia. These losses were mainly due to production ramp-up difficulties at both facilities, the cessation of interest capitalisation following commissioning at HBI Venezuela, and the expensing of capital to resolve process and operational difficulties at HBI Western Australia.

Profits from asset sales were approximately $60 million lower than in the corresponding period.

Costs had an unfavourable effect of approximately $60 million compared with the corresponding period. This was partly due to higher superannuation contributions following the cessation of a superannuation contribution holiday in December 1999, and implementation costs associated with the introduction of Shared Business Services. These were partly offset by lower borrowing costs due mainly to reduced debt levels.

Exploration expenditure charged to profit was approximately $45 million higher than in the corresponding period mainly reflecting activity in the Gulf of Mexico (USA), Latin America and Australia.

Lower petroleum sales volumes at Bass Strait (Victoria) due to natural field decline and pipeline damage between Longford and Long Island Point decreased profits by approximately $60 million compared with the corresponding period. This was partly offset by higher iron ore shipments which increased profits by approximately $20 million compared with the corresponding period.

The corresponding period included a tax benefit of approximately $270 million comprising a benefit of $160 million arising from the restatement of deferred tax balances as a consequence of the Australian company tax rate changes and a benefit of approximately $110 million arising from finalisation of funding arrangements related to the Beenup mineral sands project (Western Australia). The half year ended 31 December 2000 included additional tax benefits of approximately $75 million in respect of certain overseas exploration expenditure for which no deduction has previously been recognised.

Outside equity interests' share of net profit increased by approximately $50 million mainly due to improved results at the Ok Tedi (PNG) copper mine and adjustments in the corresponding period attributable to minority shareholders of the Moura (Queensland) coal mine following its sale in August 1999.

An unfranked dividend of 25 cents per share was declared and paid during the half year, unchanged from dividends declared in the corresponding period.

Following various asset sales and an internal reorganisation, the Services segment ceased to be reported from 1 July 2000.

As a consequence, Transport and Logistics is reported in Steel and remaining Services' activities including Shared Business Services, Insurances and Corporate Services are reported in Group and unallocated items. Comparative data has been adjusted accordingly. 1999 data for Services mainly relates to profits from businesses which have been sold.

Minerals' result for the half year was a profit of $834 million, an increase of $252 million or 43.3% compared with the corresponding period.

Major factors which contributed to the result were:

• favourable effect of the lower A$/US$ exchange rate;
• higher average copper prices, net of hedging; and
• higher iron ore prices and volumes.

These were partly offset by:

• increased equity accounted losses from HBI Venezuela following production ramp-up difficulties and the cessation of interest capitalisation following commissioning;
• the restatement of deferred tax balances in the corresponding period following the Australian company tax rate changes;
• profits in the corresponding period from the sale of assets; and
• increased losses from HBI Western Australia, including the expensing of capital to resolve process and operational difficulties.

Persistent commissioning difficulties at HBI Venezuela, a significant deterioration in the price received for the product, and possible partner funding issues, have led BHP to commence a review of its continued investment in this asset. The review will be conducted during the third quarter.

The average price booked for copper shipments for the period, after hedging and finalisation adjustments, was US$0.84 per pound (1999 - US$0.76). Finalisation adjustments after tax, representing adjustments on shipments settled since 30 June 2000, were $15 million favourable (1999 - $32 million favourable).

Unhedged copper shipments not finalised at 31 December 2000 have been brought to account at the London Metal Exchange (LME) copper spot price on Friday 29 December 2000 of US$0.82 per pound.

Exploration expenditure was $51 million for the half year (1999 - $30 million) and the charge against profit was $45 million (1999 - $25 million).

Significant developments during the half year included:

• BHP and Mitsubishi Development Pty Ltd jointly acquired QCT Resources Limited (QCT). In December 2000, a range of integration activities was announced, including the closure of South Blackwater (Queensland) underground mining by December 2001 and the combining of the South Blackwater open cut operations with the existing CQCA Blackwater mine;
• BHP and its joint venture partners in the Escondida (Chile) copper mine approved the US$1.045 billion Escondida Phase IV expansion project (BHP share US$600 million (A$1.090 billion)). The expansion will be completed within two years and will increase ore processing facilities by 85% resulting in an average increase in copper production of 400,000 tonnes per annum, boosting average total production to 1.2 million tonnes per annum over the first five years of full production;
• approval was granted for the US$148 million development of an underground longwall mine at the San Juan thermal coal operations in New Mexico (USA). The mine will replace the existing San Juan and La Plata surface mines and will be the sole coal source for the adjacent San Juan Generating Station;
• BHP announced it would continue to operate its West Australian HBI plant based on strict technical and financial performance criteria relating to campaign length, productivity, maintenance turnaround and input costs. Continued operation requires an additional $110 million capital investment over the next 18 months to implement additional technical modifications across the plant; and
• BHP reached agreement with Falconbridge Limited on the formation of a joint venture which may lead to the development of the Gag Island nickel laterite project in Indonesia.

Petroleum's result for the half year was a profit of $897 million, an increase of $438 million or 95.4% compared with the corresponding period.

Major factors which contributed to the result were:

• higher average realised oil price net of commodity hedging of A$53.28 per barrel (1999 - A$29.47 per barrel), reflecting higher US dollar prices (2000 - US$29.26 per barrel; 1999 - US$19.16 per barrel). The average realised oil price before commodity hedging was US$31.34 per barrel (1999 - US$21.41 per barrel);
• profits from the Laminaria/Corallina and Buffalo oil fields which commenced operations in November 1999 and December 1999 respectively;
• favourable effect of lower A$/US$ exchange rate;
• higher LPG, LNG and natural gas prices; and
• additional tax benefits in respect of certain overseas exploration expenditure for which no deduction has previously been recognised.

These were partly offset by:

• lower Bass Strait oil sales volumes;
• the restatement of deferred tax balances in the corresponding period following the Australian company tax rate changes; and
• higher exploration charged to profit reflecting activity in the Gulf of Mexico, Latin America and Australia.

Oil and condensate production was 15.7% higher than the corresponding period due to the start-up of the Laminaria/Corallina and Buffalo oil fields and additional oil production from Cossack Pioneer (North West Australia). These were partly offset by lower oil volumes at Bass Strait due to natural field decline and pipeline damage between Longford and Long Island Point.

Natural gas production was 8.1% higher than the corresponding period. This was largely attributable to higher volumes from Bass Strait due to weather conditions, higher nominations at Bruce (UK), and increased facility capacity of the US producing properties, partly offset by lower volumes at Liverpool Bay (UK) due to a planned shutdown in September 2000.

Liquefied natural gas (LNG) production at the North West Shelf (Western Australia) was 5.5% lower than the corresponding period. This was largely attributable to the Train 2 planned shutdown and the unplanned Train 1 shutdown in October 2000.

Exploration expenditure for the half year was $162 million (1999 - $100 million). Exploration expenditure charged to profit was $104 million (1999 - $79 million).

Significant developments during the half year included:

• a Risk Service Contract was signed with the Algerian national oil company, SONATRACH, for the development of four gas/condensate reservoirs in the Ohanet region of Algeria;
• BHP agreed to sell a parcel of interests in its Algerian oil and gas exploration and development activities to Woodside Petroleum Ltd. Woodside will take a 15 per cent interest in the Ohanet Risk Service Contract, a 50 per cent interest in the Boukhechba Production Sharing Contract and a 50 per cent interest in the Ouest Hassi R'Mel Gas Study Agreement. The transaction is subject to Algerian government and SONATRACH approvals;
• BHP agreed to sell its interest in the Buffalo oil field to a subsidiary of InterOil Corporation. However, BHP's joint venture partner Nexen Petroleum Australia Pty Ltd exercised its pre-emptive right to purchase the interest. The sale, on the same terms and conditions, is subject to government approvals and is expected to be completed before April 2001;
• Letters of Intent were signed with Tokyo Gas Co. Ltd and Toho Gas Co. Ltd of Japan for the sale and purchase of LNG from the North West Shelf (NWS). The agreements were signed by the six NWS LNG sellers and cover the supply of LNG for a period of 25 years starting in 2004, building to a volume of one million tonnes per annum (mtpa) by 2006. (BHP share 0.17mtpa);
• approval was granted for the development of the Echo/Yodel gas condensate field on the NWS;
• results from the Atlantis-2 appraisal well and sidetrack confirmed a major oil accumulation with a multi-hundred million barrel resource potential. Atlantis-2, located in the Atwater Foldbelt ultra deepwater area of the Gulf of Mexico, encountered oil bearing sands with net pay in excess of 153 metres (500 feet). Results of the Atlantis-2 sidetrack well confirmed a lateral extension of the known range of the Atlantis hydrocarbon accumulation of up to 1.6 kilometres (one mile) from the original wellbore, and also confirmed the continuity and quality of the Miocene reservoir sands with a net pay in excess of 92 metres (300 feet true vertical thickness); and
• BHP Petroleum acquired a 4.95 per cent interest in the Genesis field in the deep water Gulf of Mexico.

Steel's result for the half year was a profit of $252 million, a decrease of $20 million or 7.4% compared with the corresponding period.

Major factors which contributed to the result were:

• the benefits from lower A$/US$ exchange rates;
• one-off benefits realised on the spin-out of OneSteel Limited;
• higher prices; and
• improved performance from overseas businesses.

These were offset by:

• the restatement of deferred tax balances in the corresponding period following the Australian company tax rate changes; and
• lower sales volumes of coated products to the Australian market.

Steel despatches from continuing flat and coated operations were 2.47 million tonnes for the half year, 3% above the corresponding period:

Steel despatches from discontinuing operations for the half year were 0.69 million tonnes, 58% below the corresponding period. This was primarily due to the spin-out of OneSteel Limited and the sale of the US West Coast businesses in June 2000.

Significant developments during the half year included:

• the spin-out of the Long Products business, OneSteel Limited, in October 2000; and
• the signing of an agreement with e-STEEL Corporation to build and operate a customised steel-based e-commerce network.

Net unallocated interest expense was $220 million for the half year compared with $256 million for the corresponding period. This decrease was mainly due to significantly lower funding levels, partly offset by higher interest rates in the US and Australia, the unfavourable effect of exchange rate movements, and lower capitalised interest.

The result for Group and unallocated items was a loss of $307 million for the half year compared with a profit of $2 million for the corresponding period. The corresponding period included a tax benefit of $112 million arising from finalisation of funding arrangements related to the Beenup mineral sands project.

The result for the half year included losses of $208 million after tax from external foreign currency hedging compared with losses of $80 million after tax in the corresponding period. This predominantly reflects the lower value of the Australian dollar relative to the US dollar for hedging contracts settled in the half year.

The result also included implementation costs associated with the introduction of Shared Business Services.

Significant developments during the half year included:

• on 18 October 2000, following appeal by the Australian Taxation Office (ATO) the Full Bench of the Federal Court ruled in favour of the ATO concerning the deductibility of financing costs paid to General Electric Company in connection with the acquisition of the Utah Group in the early 1980s. BHP is seeking leave to appeal to the High Court of Australia. The Company disclosed a contingent liability of $211 million, as at 30 June 2000, in the 2000 Annual Report. No adjustments will be made to the Group accounts pending finalisation of this matter; and

Outside equity interests' share of net profit increased mainly due to improved results at the Ok Tedi copper mine and adjustments in the corresponding period attributable to minority shareholders of the Moura coal mine following its sale in August 1999.

Sales revenue of $10 506 million increased by $979 million or 10.3% compared with the corresponding period. This mainly reflects the effect of the lower A$/US$ exchange rate and higher prices for petroleum products and copper. Other revenue, including interest income, decreased by $362 million mainly reflecting lower proceeds from asset sales. Total revenue increased by $617 million to $10 754 million.

Depreciation and amortisation charges increased by $95 million to $1 057 million. This mainly reflects depreciation on recently commissioned operations and the unfavourable effect of exchange rate variations, partly offset by depreciation in the corresponding period on businesses now sold.

Borrowing costs decreased by $43 million to $312 million, mainly due to significantly lower funding levels, partly offset by higher interest rates, the unfavourable effect of exchange rate movements and lower capitalised interest.

Tax expense of $621 million was $469 million higher than for the corresponding period. The charge for the half year represented an effective tax rate of 29.9% (1999 - 12.5%). This is lower than the nominal Australian tax rate of 34% primarily due to the recognition of tax benefits in respect of certain prior year overseas exploration expenditure for which no deduction has previously been recognised. This was partly offset by overseas exploration expenditure for which no deduction is presently available, non-deductible interest expense on preference shares, and non-deductible accounting depreciation and amortisation.

At 31 December 2000 BHP's gearing ratio was 38.6% compared to 42.7% at 30 June 2000.

Based on earnings before interest paid and tax (EBIT), interest cover for the half year was 7.6 times compared with 3.3 times for the thirteen months ended June 2000 and 4.2 times for the corresponding period. Based on earnings before interest paid, tax and depreciation (EBITDA), interest cover for the half year was 10.9 times compared with 8.1 times for the thirteen months ended June 2000 and 6.8 times for the corresponding period.

No matter or circumstance has arisen since the end of the half year that has significantly affected or may significantly affect the operations, the results of operations or state of affairs of the Company in subsequent financial periods, other than the following:

• BHP entered into an agreement to acquire a 20 per cent equity interest in Brazilian company Caemi Mineração e Metalurgia S.A. (Caemi) from the current controlling shareholders for a consideration of US$332 million. The 20 per cent equity interest comprises 60 per cent of voting capital in Caemi, which is a diversified company with interests in iron ore, kaolin and transport and logistics. Completion of the acquisition is subject to competition law approval by the European Commission and a waiver, or non-exercise, by Mitsui & Co. Ltd. of its right of first refusal, which exists for 60 days. Following completion of the acquisition, BHP will make a delisting tender offer for preferred shares subject to Caemi shareholder approval; and
• BHP announced that it would implement an on-market buyback program for the purchase of up to 90 million of its shares (approximately five per cent of issued capital). No time period has been set for the share buyback.

The Directors of the Company in office during or since the end of the half year are:

B C ALBERTS - a Director since January 2000;
P M ANDERSON - Managing Director and Chief Executive Officer since December 1998;
D R ARGUS - Chairman since April 1999;
M A CHANEY - a Director since May 1995;
J C CONDE - a Director since March 1995;
D A CRAWFORD - a Director since May 1994;
D A JENKINS - a Director since March 2000;
R J McNEILLY - Executive Director since July 1991;
J T RALPH - a Director since November 1997; and
J M SCHUBERT - a Director since June 2000.

Refer pages 1 - 7.

The Company is a company of a kind referred to in Class Order No. 98/0100 dated 10 July 1998 issued by the Australian Securities and Investments Commission. Amounts in this report, unless otherwise indicated, have been rounded in accordance with that Class Order to the nearest million dollars.

Signed in accordance with a resolution of the Board.

D R Argus
Chairman of Directors

Dated in Melbourne this 13th day of March 2001.

Financial Statements

for the half year ended 31 December 2000

for the half year ended (a)

as at

for the half year ended (a)

These statements are general purpose half year consolidated financial statements that have been prepared in accordance with the requirements of the Corporations Law, Australian Stock Exchange Listing Rules, Australian Accounting Standard AASB 1029: Half Year Accounts and Consolidated Accounts and Urgent Issues Group Consensus Views, and give a true and fair view of the matters disclosed. These half year financial statements and reports should be read in conjunction with the annual financial statements for the 13 month period ended 30 June 2000 and any public announcements made by BHP Limited and its controlled entities during the half year in accordance with continuous disclosure obligations arising under the Corporations Law and Australian Stock Exchange Listing Rules.

Accounting policies have been consistently applied by all entities in the BHP Group and are consistent with those of the previous financial year.

Following the change in financial year for the BHP Group from 31 May to 30 June effective 30 June 2000, the period covered by these financial statements is the six months ended 31 December 2000. All references to the corresponding period in these statements are references to the six months ended 30 November 1999.

3  Depreciation and amortisation