BHP Billiton Results for H/Y Ended 31 Dec 2010

BHP BILLITON RESULTS FOR THE HALF-YEAR Ended 31 DECEMBER 2010

§ Record financial results including Underlying EBITDA(1) up 60% to US$17.3 billion, Underlying EBIT(1)(2) up 74% to US$14.8 billion and Attributable profit (excluding exceptional items) up 88% to US$10.7 billion.

§ Strong margins and returns reflected by the increase in Underlying EBIT margin(3) to 46% and Underlying return on capital to 41%.

§ The consistent deployment of capital towards high quality growth projects delivered half yearly production records across three commodities and five businesses.

§ Operating cash flow(4) of US$12.2 billion and an ungeared balance sheet supports significant investment in organic growth that is expected to exceed US$80 billion over five years.

§ A 10% increase in the interim dividend to 46 US cents per share.

§ An expanded capital management program of US$10 billion.

Refer to page 14 for footnotes, including explanations of the non-GAAP measures used in this announcement. The above financial results are prepared in accordance with IFRS and are unaudited. All references to the prior period are to the half year ended 31 December 2009 unless otherwise stated.

RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2010

Record half year results

BHP Billiton's diversified, tier one business strategy delivered another record half year result with Underlying EBITDA and Attributable profit (excluding exceptional items) increasing by 60 per cent and 88 per cent respectively.

The consistently high margins and returns that characterise BHP Billiton's business strategy were again evident with an Underlying EBIT margin of 46 per cent and Underlying return on capital of 41 per cent. Excluding capital investment associated with projects not yet in production, Underlying return on capital was 48 per cent.

The Group's ongoing commitment to invest through the cycle has ideally positioned BHP Billiton to deliver consistent and high value production growth into generally tight and growing commodity markets. In that context, robust operating performance was reported across the portfolio with three commodities and five businesses achieving production records in the December 2010 half year. Western Australia Iron Ore (Australia) shipments rose to an annualised rate of 148 million tonnes per annum in the December 2010 quarter, while first production was achieved for the Hunter Valley Energy Coal (Australia) MAC20 project.

An improving economic backdrop and broader supply constraints continued to support the fundamentals for the majority of BHP Billiton's core commodities. Stronger realised prices in the December 2010 half year increased Underlying EBIT by US$8,531 million, net of price linked costs. Industry wide operating and capital cost pressures are, however, being experienced across a range of businesses and BHP Billiton is not immune from that trend. The devaluation of the US dollar and inflationary pressures reduced Underlying EBIT by a combined US$1,415 million.

Investing in the future

Operating cash flow of US$12,193 million resulted in the Group ending the December 2010 half year in a net cash position. This balance sheet strength affords BHP Billiton substantial flexibility as it embarks on significant investment in organic growth that is expected to exceed US$80 billion over the five years to the end of the 2015 financial year. Major projects, including those in iron ore and metallurgical coal, are at an advanced stage of the approvals process and should result in a substantial increase in sanctioned project capital expenditure.

Progressive dividend and expanded capital management program

Notwithstanding the significant commitment towards growth, BHP Billiton has declared a ten per cent increase in its interim dividend to 46 US cents per share and has announced an expanded US$10 billion capital management program. BHP Billiton will continue to consider both on and off-market execution for the US$10 billion program and, subject to market conditions, expects to largely complete the initiative by the end of the 2011 calendar year.

Today's announcement continues BHP Billiton's strong track record of returning excess capital to shareholders. On completion of the US$10 billion capital management program, BHP Billiton will have repurchased a cumulative US$22.6 billion of BHP Billiton Limited (Ltd) and BHP Billiton Plc (Plc) shares since 2004, representing 15 per cent of then issued capital (6).

Outlook

Economic Outlook

BHP Billiton is cautiously optimistic on the short term outlook for the global economy given the continuation of robust growth in emerging markets and further positive signs of a sustainable recovery in major developed economies such as the United States.

In the 2010 calendar year, Chinese Gross Domestic Product (GDP) grew by more than ten per cent, with fourth quarter growth accelerating from the third quarter level, while India's GDP growth approximated nine per cent. The strong growth has been accompanied by higher inflation in these and other emerging economies and will inevitably bring further tightening measures. Should monetary policy tools continue to be implemented effectively and proactively, then inflation should be contained. However, inflation does remain a serious challenge as the underlying drivers are structural rather than cyclical in nature. We expect that the Chinese government will continue to control loan growth as it strives to dampen investment from unsustainable levels while restructuring its economy from being investment driven, to consumption led. Calendar year 2011 GDP and capital spending growth in China is expected to remain strong in absolute terms, despite growth rates decelerating from 2010 calendar year levels.

Global industrial production, retail sales and consumer confidence improved throughout the last quarter with the United States and the two largest economies within Europe (Germany and France) increasing capacity utilisation and experiencing broad based growth. An ongoing risk remains the significant level of European sovereign debt. We believe that any solution remains dependent on the stronger members of the European Union (Germany, the Netherlands and France) and their willingness to underwrite the fiscal position of the weaker economies in order to maintain a monetary union.

Despite the short term risks, we remain positive on the longer term outlook for the global economy. We expect markets to be volatile and event driven, however the continuing urbanisation and industrialisation of emerging economies, which is still in its early stages, should provide strong structural support over the long term.

Commodities Outlook

The increase in prices across the majority of BHP Billiton's core commodities during the December 2010 half year has been driven by a combination of robust emerging market demand, stronger than expected developed market growth and ongoing supply constraints. Adverse weather patterns in many producing countries, such as Australia, Brazil, Colombia, South Africa and Indonesia have had a substantial impact on supply, leading to tighter market fundamentals and stronger prices for commodities such as coal, iron ore and copper. There will likely be a lag effect before normal levels of production flow through to the supply chain.

Macroeconomic themes are still a dominant influence on short term price movements and sentiment. While we expect a slowdown in the growth rate of global commodity demand in calendar year 2011, the economic environment still underpins a robust near term outlook for our products.

The publication and implementation of China's twelfth five year plan in March 2011 will have important implications for commodity demand in the medium term. We expect a slower but more sustainable economic growth model to lead to a reduction in resource intensity per unit of GDP, however absolute demand for our commodities is likely to remain strong.

Longer term, we remain confident in the outlook for our core commodities based on emerging markets being the principal drivers of growth. Prices will ultimately be determined by the marginal cost of supply, with the quality of our tier one assets well positioned to sustainably deliver strong margins and investment returns through the cycle.

Development Projects

During the period, we completed one project in energy coal and approved the US$1,050 million (BHP Billiton share) Macedon gas project, located offshore Western Australia. In addition, we emphasised our commitment to maximise capacity in the Port Hedland inner harbour with the approval of a further US$570 million (BHP Billiton share) investment in our Western Australia Iron Ore business.

Industry wide cost pressures are being experienced across a broad range of projects and reflect stronger producer currencies, particularly in Australia, as well as underlying inflation on raw material and labour costs. In that context, BHP Billiton approved revised capital budgets and schedules for the Esso Australia Resources Pty Ltd operated Kipper (US$900 million, BHP Billiton share) and Turrum (US$1,350 million, BHP Billiton share) Petroleum projects, located in Bass Strait (Australia), based upon additional design and fabrication of key structural components, an increased offshore hook up campaign, and the underlying inflation of raw material and labour costs.

Projects completed during the December 2010 half year

(i) All references to capital expenditure are BHP Billiton's share unless noted otherwise. All references to capacity are 100 per cent unless noted otherwise.

(ii) References are based on calendar years.

(iii) Number subject to finalisation.

Projects currently under development (approved in prior years)

(i) All references to capital expenditure are BHP Billiton's share unless noted otherwise. All references to capacity are 100 per cent unless noted otherwise.

(ii) References are based on calendar years.

(iii) As per revised budget and schedule.

(iv) Facilities ready for first production pending resolution of mercury content.

(v) Budget is under review.

(vi) The scope of the iron ore development sequence is under review.

(vii) The Hunter Valley Energy Coal MAC20 project reported first production in the December 2010 half year and was subsequently completed after the close of the December 2010 half year.

Projects approved during the December 2010 half year

(i) All references to capital expenditure are BHP Billiton's share unless noted otherwise. All references to capacity are 100 per cent unless noted otherwise.

(ii) References are based on calendar years.

The Income Statement

To provide clarity into the underlying performance of our operations, we present Underlying EBIT which is a measure used internally and in our Supplementary Information that excludes any exceptional items. The differences between Underlying EBIT and Profit from operations are set out in the following table:

Refer to page 9 for details of the exceptional items.

Underlying EBIT

The following table and commentary describes the approximate impact of the principal factors that affected Underlying EBIT for the December 2010 half year compared with the December 2009 half year:

Volumes

Record iron ore shipments reflected the ongoing ramp up of BHP Billiton's Western Australia Iron Ore growth projects, as exports increased to an annualised 148 million tonnes per annum rate (100% basis) in the December 2010 quarter, despite the ongoing impact of tie-in activities. When combined with record performance at Samarco (Brazil), iron ore volumes increased Underlying EBIT by US$99 million in the December 2010 half year.

Within the Base Metals business, higher grades at Cannington (Australia) and record milling and ore hoisting rates at Olympic Dam (Australia) contributed to the US$138 million volume related increase in Underlying EBIT for the December 2010 half year. Industrial action at Pampa Norte (Chile) and the Clark Shaft incident at Olympic Dam impacted the December 2009 half year.

The deferral of production well drilling in the Gulf of Mexico (USA) was a major constraint on our business as a decline in base volumes in the December 2010 half year reduced Underlying EBIT by US$464 million (excluding Pyrenees, Australia, as a new operation which increased Underlying EBIT by US$587 million). No permits were issued in the Gulf of Mexico for production drilling in the December 2010 half year. BHP Billiton was, however, one of the first operators to return both of its deepwater rigs to (water injection) drilling operations. Our current expectation is that production for the 2011 financial year will be in line with the 2010 financial year.

Prices

An improving economic backdrop and persistent supply side constraint ensured the majority of BHP Billiton's core products achieved (often substantially) higher prices in the December 2010 half year. In total, stronger commodity prices increased Underlying EBIT by US$9,361 million, offset by higher price linked costs (including royalties) of US$830 million.

Costs

Industry wide cost pressures are being experienced, with tight labour and raw material markets presenting a challenge for all operators. BHP Billiton is not immune from that trend. Excluding the significant impact of a weaker US dollar, inflation and an increase in non-cash items, broad and increasing cost pressures were evident across the Group and reduced Underlying EBIT by US$521 million in the December 2010 half year.

Higher fuel and energy prices (of which BHP Billiton is a net beneficiary), together with increased maintenance, labour and contractor costs, accounted for the majority of the impact and reduced Underlying EBIT by US$468 million.

Non-cash items reduced Underlying EBIT by a further US$92 million and reflected the ongoing delivery of our organic growth program.

Exchange rates

A weaker US dollar against producer currencies reduced Underlying EBIT by US$1,132 million which included a US$465 million variance related to the restatement of monetary items in the balance sheet. The Australian operations were the most heavily impacted. The strong Australian dollar reduced Underlying EBIT by US$909 million which included a US$400 million variance related to the restatement of monetary items in the balance sheet. The absolute impact on costs as a result of the restatement of monetary items in the balance sheet was a loss of US$743 million in the December 2010 half year.

The following exchange rates against the US dollar have been applied:

(i) Displayed as US$ to A$1 based on common convention.

Inflation on costs

Inflationary pressure on input costs across all businesses had an unfavourable impact on Underlying EBIT of US$283 million. The effect was most evident in Australia and South Africa.

Asset Sales

The profit on the sale of assets was US$53 million lower than the corresponding period largely due to the dissolution of the Douglas Tavistock Joint Venture (South Africa) which increased Underlying EBIT in the December 2009 half year.

Ceased and sold operations

The currency revaluation of rehabilitation and closure provisions for closed operations was the major driver of the US$46 million reduction in Underlying EBIT.

New and acquired operations

New greenfield assets are reported in new and acquired operations variance until there is a full year comparison. The BHP Billiton operated Pyrenees oil development contributed an additional US$587 million to Underlying EBIT.

Exploration and business development

Exploration expense increased by US$116 million in the December 2010 half year to US$410 million. Within Minerals (US$228 million expense) the focus centred upon copper targets in Chile and Zambia; nickel targets in Australia; manganese targets in Gabon; and diamond targets in Canada. Exploration for iron ore, coal, bauxite, potash and manganese was undertaken in a number of regions including Australia, Canada, South America and Africa.

The Petroleum CSGs exploration expense was US$182 million for the December 2010 half year, including the impairment of exploration previously capitalised which reduced Underlying EBIT by US$47 million. BHP Billiton continues to progress all necessary submissions to allow a return to exploration well drilling in the Gulf of Mexico, although a degree of uncertainty is associated with the new regulatory environment. Outside of the Gulf of Mexico, BHP Billiton will continue to pursue its significant exploration program over the next six months with wells planned for Malaysia, Brunei, Colombia and Australia.

Expenditure on business development was US$107 million higher than the corresponding period with the majority of the increase related to the ongoing assessment of various Petroleum projects.

Other

Other items decreased Underlying EBIT by US$226 million and included a US$111 million provision related to indirect taxes in the Aluminium and Iron Ore businesses.

Net finance costs

Net finance costs increased to US$371 million from US$232 million in the corresponding period. This was primarily driven by exchange variations on net debt and fair value changes on hedging derivatives and hedged loans.

Taxation expense

Excluding the impacts of royalty related taxation, exchange rate movements and tax on exceptional items, the underlying effective tax rate was 30.3 per cent (31 December 2009: 31.6 per cent, 30 June 2010: 30.9 per cent).

Exchange rate movements decreased taxation expense by US$1,127 million (31 December 2009: decrease of US$306 million, 30 June 2010: increase of US$106 million) predominantly due to the increase in the US dollar value of future tax depreciation of US$1,750 million offset by the revaluation of local currency tax liabilities, other monetary items and temporary differences which amounted to US$623 million.

Total taxation expense including royalty related taxation and tax on exceptional items was US$3,458 million, representing an effective rate of 24.4 per cent (31 December 2009: 30.2 per cent, 30 June 2010: 33.5 per cent). Excluding the impacts of exceptional items, the taxation expense was US$3,596 million (31 December 2009: US$2,497 million; 30 June 2010: US$6,504 million).

Royalty related taxation represents an effective rate of 2.4 per cent (31 December 2009: 2.1 per cent, 30 June 2010: 2.3 per cent).

Government imposed royalty arrangements which are calculated by reference to profits (revenue net of allowable deductions) after the adjustment for items comprising temporary differences, are reported as royalty related taxation. Other royalty and excise arrangements which do not have these characteristics are recognised as operating costs (US$1,332 million).

Exceptional Items

The Group withdrew its offer for Potash Corporation of Saskatchewan (PotashCorp) on 15 November 2010 following the Board's conclusion that the condition of the offer relating to receipt of a net benefit as determined by the Minister of Industry under the Investment Canada Act could not be satisfied. The Group incurred fees associated with the US$45 billion debt facility (US$240 million), investment bankers', lawyers' and accountants' fees, printing expenses and other charges (US$74 million) in progressing this matter during the period up to the withdrawal of the offer, which were expensed as operating costs in the half year ended 31 December 2010.

The Australian Taxation Office (ATO) issued amended assessments in prior years denying bad debt deductions arising from the investments in Hartley (Zimbabwe), Beenup and Boodarie Iron (both Australia) and the denial of capital allowance claims made on the Boodarie Iron project. BHP Billiton lodged objections and was successful on all counts in the Federal Court and the Full Federal Court. The Hartley matter was settled with the ATO in September 2009. The ATO sought special leave to appeal to the High Court in relation to the Beenup bad debt disallowance and the denial of the capital allowance claims on the Boodarie Iron project. Special leave was not sought by the ATO for the Boodarie Iron bad debt disallowance. In September 2010 the High Court granted special leave only in relation to the denial of the capital allowance claims on the Boodarie Iron project which resulted in a release of US$138 million from the Group's income tax provisions in the half year ended 31 December 2010.

Cash Flows

Net operating cash flows after interest and tax increased by 123 per cent to US$12,193 million compared with $5,468 million for the corresponding six month period. This was primarily driven by an increase in cash generated from operations (before changes in working capital balances) of US$6,306 million and changes in working capital balances having a positive year on year impact on operating cash flow of US$463 million.

Exploration expenditure incurred which has not been capitalised is now classified within net operating cash flows, which has resulted in the re-classification of US$295 million from net investing cash flows to net operating cash flows for the corresponding six month period and US$1,030 million in the year ended 30 June 2010.

Capital and exploration expenditure totalled US$5,619 million for the period. Expenditure on major growth projects was US$4,274 million, including US$792 million on Petroleum projects and US$3,482 million on Minerals projects. Capital expenditure on sustaining and other items was US$893 million. Exploration expenditure was US$452 million, including US$363 million classified within net operating cash flows.

Financing cash flows include net debt repayments of US$98 million and dividend payments of US$2,506 million.

Net cash, comprising cash less interest bearing liabilities, was US$200 million, an improvement of US$3,508 million, compared to the net debt position at 30 June 2010. The Group had a net cash position at 31 December 2010, compared with net gearing of 6 per cent at 30 June 2010, which is the ratio of net debt to net debt plus net assets.

Dividend

BHP Billiton maintains a progressive dividend policy and our Board today declared an interim dividend of 46 US cents per share.

The dividend to be paid by BHP Billiton Ltd will be fully franked for Australian taxation purposes. Dividends for the BHP Billiton Group are determined and declared in US dollars. However, BHP Billiton Ltd dividends are mainly paid in Australian dollars, and BHP Billiton Plc dividends are mainly paid in pounds sterling and South African rand to shareholders on the UK section and the South African section of the register, respectively. Currency conversions will be based on the foreign currency exchange rates on the Record Date, except for the conversion into South African rand, which will take place on the last day to trade on JSE Limited, being 4 March 2011. Please note that all currency conversion elections must be registered by the Record Date, being 11 March 2011. Any currency conversion elections made after this date will not apply to this dividend.

The timetable in respect of this dividend will be:

Last day to trade cum dividend on JSE Limited and currency conversion into rand 4 March 2011Ex-dividend Australian Securities Exchange (ASX) and JSE Limited (JSE) 7 March 2011Ex-dividend London Stock Exchange (LSE) and New York Stock Exchange (NYSE) 9 March 2011Record date (including currency conversion and currency election dates, except for rand) 11 March 2011Payment date 31 March 2011

American Depositary Shares (ADSs) each represent two fully paid ordinary shares and receive dividends accordingly.

BHP Billiton Plc shareholders registered on the South African section of the register will not be able to dematerialise or rematerialise their shareholdings between the dates of 7 and 11 March 2011, nor will transfers between the UK register and the South African register be permitted between the dates of 4 and 11 March 2011.

Details of the currency exchange rates applicable for the dividend will be announced to the relevant stock exchanges following conversion and will appear on the Group's website.

Capital Management

On 15 November 2010, BHP Billiton reactivated the remaining US$4.2 billion component of the previously suspended US$13 billion buy-back program. During the half year 6,825,007 BHP Billiton Plc shares were repurchased on-market at an average cost of US$37.23 per share (£23.58 per share).

Notwithstanding a significant commitment towards growth, BHP Billiton has announced an expanded US$10 billion capital management program. BHP Billiton will continue to consider both on and off-market execution for the US$10 billion program and, subject to market conditions, expects to largely complete the initiative by the end of the 2011 calendar year.

Today's announcement continues BHP Billiton's strong track record of returning excess capital to shareholders. On completion of the US$10 billion capital management initiative, BHP Billiton will have repurchased a cumulative US$22.6 billion of Ltd and Plc shares since 2004, representing 15 per cent of then issued capital.

Debt Management and Liquidity

No long term debt securities were issued in the debt capital markets during the December 2010 half year. The Group has access to the US commercial paper market and an undrawn US$4 billion Revolving Credit Facility, which expires in December 2015. We have a strong liquidity position with US$16.1 billion of cash on hand, and have maintained our solid A credit rating throughout the year.

Corporate Governance

On 13 December 2010, the Board announced the appointment of Baroness Shriti Vadera as a Non-executive Director with effect from 1 January 2011.

CUSTOMER SECTOR GROUP SUMMARY

The following table provides a summary of the performance of the Customer Sector Groups for the December 2010 half year and the corresponding half year.

(i) Underlying EBIT includes trading activities comprising the sale of third party product. Underlying EBIT is reconciled to Profit from operations on page 6.

(ii) Includes consolidation adjustments, unallocated items and external sales from the Group's freight, transport and logistics operations.

Petroleum

Underlying EBIT was US$2,854 million, an increase of US$528 million or 23 per cent when compared with the corresponding period. The favourable variance was primarily driven by higher prices, which increased Underlying EBIT by US$526 million in the December 2010 half year. The improvement in realised pricing was evident across all of BHP Billiton's Petroleum products and included a 13 per cent increase for oil to US$79.69 per barrel, a six per cent increase for natural gas to US$3.84 per thousand standard cubic feet and a 56 per cent increase for liquefied natural gas to US$10.43 per thousand standard cubic feet.

Total production for the December 2010 half year was in line with the prior period as the successful ramp up of Pyrenees was offset by the deferral of production well drilling in the Gulf of Mexico and severe flooding in Pakistan. Volumes, including new production from greenfield development projects, increased Underlying EBIT by US$123 million for the period.

No permits were issued in the Gulf of Mexico for production drilling in the December 2010 half year. BHP Billiton was, however, one of the first operators to return both of its deepwater rigs to drilling operations with the commencement of water injection wells at the BHP Billiton operated Shenzi (USA) field. Our current expectation is that production for the 2011 financial year will be in line with the 2010 financial year.

Gross exploration expenditure for the December 2010 half year was US$173 million, of which US$135 million was expensed. The impairment of exploration capitalised in the prior period reduced Underlying EBIT by a further US$47 million. BHP Billiton continues to progress all necessary submissions to allow a return to exploration well drilling in the Gulf of Mexico although a degree of uncertainty is associated with the new regulatory environment. Outside of the Gulf of Mexico, BHP Billiton will continue to pursue its significant exploration program over the next six months with wells planned for Malaysia, Brunei, Colombia and Australia.

Aluminium

Underlying EBIT was US$17 million, a decrease of US$137 million or 89 per cent compared to the corresponding period. Higher aluminium and alumina prices increased Underlying EBIT by US$197 million (net of price linked costs) but were more than offset by broader cost pressures which included a combined US$110 million impact from the devaluation of the US dollar and inflation. The average realised aluminium price increased by 16 per cent to US$2,321 per tonne while the average realised alumina price rose 22 per cent to US$318 per tonne. Aluminium Underlying EBIT was unfavourably impacted by a US$76 million provision related to indirect taxes in the December 2010 half year.

Base Metals

Underlying EBIT of US$3,580 million represented an increase of US$1,118 million or 45 per cent over the corresponding period. Higher average realised prices favourably impacted Base Metals Underlying EBIT by US$1,379 million, net of price linked costs, as all key commodities were higher when compared with the corresponding period.

Stronger production at Olympic Dam, Cannington and Pampa Norte increased Underlying EBIT by US$141 million. Record ore hoisting rates at Olympic Dam for the December 2010 half year were reported following the successful repair of the Clark Shaft while record milling rates at Pampa Norte Cerro Colorado (Chile) supported an increase in production for Pampa Norte. Higher ore grades and recoveries had a favourable impact on Cannington silver and lead volumes.

Controllable costs declined in the half year ended December 2010 and were favourably impacted by the return of the Olympic Dam Clark Shaft to full production. Higher energy and raw material costs were the major offsetting factors while labour costs increased for the South American assets and reflected revised terms negotiated in the 2010 financial year. The devaluation of the US dollar and underlying inflation increased costs by US$176 million.

BHP Billiton has refined the basis on which the metal content of its leach pads is estimated at Escondida (Chile) and Pampa Norte, resulting in a non-cash reduction in Underlying EBIT of US$168 million for the December 2010 half year. The change will have no impact on forecast production for the Chilean assets.

At 31 December 2010, the Group had 287,276 tonnes of outstanding copper sales that were revalued at a weighted average price of US$4.30 per pound. The final price of these sales will be determined over the remainder of the 2011 financial year. In addition, 236,584 tonnes of copper sales from the 2010 financial year were subject to a finalisation adjustment in the current period. The finalisation adjustment and provisional pricing impact as at 31 December 2010 increased Underlying EBIT by US$667 million for the period.

Diamonds and Specialty Products

Underlying EBIT was US$221 million, an increase of US$51 million or 30 per cent over the corresponding period. Significantly higher diamond and titanium prices contributed an additional US$160 million to Underlying EBIT. Strong prices were partially offset by lower diamond sales and significantly higher energy prices at Titanium Minerals (South Africa). The weaker US dollar and inflation reduced Underlying EBIT by a further US$39 million.

On 2 February 2011, BHP Billiton announced progression of the Jansen Potash Project (Canada) into the Feasibility study phase, an advanced stage of the Group's project approvals process. Based on the current schedule, Jansen is expected to start producing saleable potash from its 3,370 million tonne in situ Mineral Resource in calendar year 2015. The Project is designed to ultimately produce approximately eight million tonnes per annum of agricultural grade potash over an estimated 70 year life(7).

Stainless Steel Materials

Underlying EBIT was US$357 million, an increase of US$157 million or 79 per cent when compared with the corresponding period. The higher average LME price for nickel of US$10.16 per pound increased Underlying EBIT by US$386 million. Price linked costs associated with the purchase of third party ore and concentrate at Nickel West (Australia) were the major offsetting factors, reducing Underlying EBIT by US$142 million. Costs were also negatively affected by a combined US$92 million impact of a weaker US dollar and inflation.

Iron Ore

Underlying EBIT increased by 178 per cent over the corresponding period to US$5,811 million as Western Australia Iron Ore achieved record production and sales despite ongoing tie-in activities related to its sequence of growth projects. When combined with another strong half year at Samarco, iron ore volumes increased Underlying EBIT by US$99 million.

Persistent tightness in iron ore markets and the associated rise in various iron ore indices was a major feature of the December 2010 half year. When adjusting for the impact of price linked costs, higher average realised prices contributed an additional US$4,276 million to Underlying EBIT.

BHP Billiton remains committed to its long term customer relationships and the move to shorter term pricing has already meant a significant reduction in risk to the parties. During the December 2010 half year, over 97 per cent of BHP Billiton's iron ore exports were sold on the basis of shorter term, landed, market based prices that incorporated index-linked monthly and quarterly average prices.

Tight labour and contractor markets, particularly in Western Australia, continued to place pressure on costs and reduced Underlying EBIT by US$117 million in the period. Similarly, the devaluation of the US dollar and broader inflation had an unfavourable impact on Underlying EBIT of US$366 million. Non-cash depreciation also increased with the ongoing ramp up of expanded Western Australia Iron Ore capacity while a provision at Samarco related to indirect taxes reduced Underlying EBIT by a further US$41 million.

Manganese

Underlying EBIT increased by 126 per cent to US$430 million as new manganese ore production records were set during the December 2010 half year. Average realised prices were the major positive driver of the strong financial result, increasing Underlying EBIT by US$286 million, net of price linked costs. For the period, average realised ore and alloy prices increased by 53 per cent and 23 per cent respectively.

Controllable costs were largely unchanged in the December 2010 half year, although the adverse movement in the US dollar and inflation reduced Underlying EBIT by a combined US$89 million.

Metallurgical Coal

Underlying EBIT was US$1,453 million, an increase of US$681 million or 88 per cent from the corresponding period. The significant improvement in EBIT margin was largely attributable to higher realised prices. Hard coking coal, weak coking coal and thermal coal prices increased by 50 per cent, 57 per cent and 43 per cent respectively. In total, higher prices increased Underlying EBIT by US$1,147 million, after allowing for the royalty related increase in price linked costs.

Queensland Coal (Australia) production was significantly affected by the persistent rain and flooding that impacted the Bowen Basin in the December 2010 half year. The effect on Queensland Coal sales was minimised by the healthy level of inventory that was held across our supply chain at the commencement of the December 2010 half year. However, weather related disruption and higher labour and contractor rates contributed to an increase in costs for the period. Furthermore, the combined impact of a weaker US dollar and inflation reduced Underlying EBIT by US$291 million.

BHP Billiton continues to assess the impact of the extreme weather events and confirms that force majeure has been declared for the majority of our Bowen Basin products, including Goonyella Riverside, Peak Downs, Norwich Park, Gregory Crinum, South Walker, Blackwater and Saraji.

The decision to double pumping capacity following severe wet weather in the March 2008 quarter has minimised in-pit water accumulation, although heavy rainfall that persisted for much of the December 2010 half year has significantly restricted overburden removal. When combined with disruptions to external infrastructure, we expect an ongoing impact on production, sales and unit costs for the remainder of the 2011 financial year.

Energy Coal

Underlying EBIT was US$334 million, an increase of US$2 million from the corresponding period. Record exports from Hunter Valley Energy Coal for the half year reflected first production from the MAC20 project, a greater proportion of high ash sales and the ongoing ramp up of the Newcastle Coal Infrastructure Group (NCIG) port facilities. Higher volumes increased Energy Coal Underlying EBIT by US$45 million for the December 2010 half year.

Higher average realised prices favourably benefited Underlying EBIT by US$318 million, net of price linked costs, and were largely offset by broad cost pressures that were accentuated by an increase in cash and non-cash costs associated with the ramp up of growth projects in Australia and South Africa. The devaluation of the US dollar and inflation reduced Underlying EBIT by US$140 million in the December 2010 half year.

The dissolution of the Douglas Tavistock Joint Venture arrangement increased Underlying EBIT in the corresponding period by US$69 million.

Group and Unallocated items

Underlying EBIT was a loss of US$228 million. A weaker US dollar and inflation reduced Underlying EBIT by US$62 million in the December 2010 half year.

The following notes explain the terms used throughout this profit release:

(1) Underlying EBIT is earnings before net finance costs and taxation and any exceptional items. Underlying EBITDA is Underlying EBIT before depreciation, impairments and amortisation of US$2,475 million for the half year ended 31 December 2010 and US$2,336 million for the half year ended 31 December 2009 (excluding exceptional items of US$605 million). We believe that Underlying EBIT and Underlying EBITDA provide useful information, but should not be considered as an indication of, or alternative to, Attributable profit as an indicator of operating performance or as an alternative to cash flow as a measure of liquidity.

(2) Underlying EBIT is used to reflect the underlying performance of BHP Billiton's operations. Underlying EBIT is reconciled to Profit from operations on page 6.

(3) Underlying EBIT margin excludes the impact of third party product activities.

(4) Net operating cash flows are after net interest and taxation.

(5) Net interest includes interest capitalised and excludes the effect of discounting on provisions and other liabilities, fair value change on hedged loans, fair value change on hedging derivatives, exchange variations on net debt and expected return on pension scheme assets.

(6) For illustrative purposes only as BHP Billiton will continue to consider both on and off-market execution for the US$10 billion capital management program. In this instance, we have assumed that the remainder of the program is completed through an on-market buy-back of BHP Billiton Plc shares. Based upon volume weighted average price during January 2011 of £24.64 per share, and issued capital at 30 June 2004.

(7) Competent Persons - J.McElroy (MAusIMM) BHP Billiton, B.Nemeth (MAusIMM) BHP Billiton, A. D. Mackintosh (APEGS) A.D.M Consulting. The statement of Mineral Resources is presented on a 100 per cent basis and includes Indicated and Inferred categories. The detailed breakdown is shown in the BHP Billiton Annual Report 2010. Resources are based on information compiled by the above named Competent Persons and relates to Mineral Resources estimates as at 30 June 2010. Competent Persons are full time employees of BHP Billiton (unless otherwise stated), have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity they are undertaking to qualify as a Competent Person as defined in the JORC Code. All Competent Persons are members of either the Australasian Institute of Mining & Metallurgy (AusIMM) or a Recognised Overseas Professional Organisation (ROPO). The Competent Persons consent to the inclusion in this report of the matters based on their information in the form and context in which it appears.

(8) Unless otherwise stated, production volumes exclude suspended and sold operations.

Forward-looking statements: Certain statements in this release are forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995, including statements regarding, estimated reserves, trends in commodity prices, demand for commodities, plans, strategies and objectives of management, closure or divestment of certain operations or facilities (including associated costs), anticipated production or construction commencement dates, expected costs or production output, anticipated productive lives of projects, mines and facilities, provisions and contingent liabilities.

These forward looking statements can be identified by the use of terminology such as 'intend', 'aim', 'project', 'anticipate', 'estimate', 'plan', 'believe', 'expect', 'may', 'should', 'will', 'continue' or similar words. These statements discuss future expectations concerning the results of operations or financial condition, or provide other forward looking statements.

These forward looking statements are not guarantees or predictions of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this release. Readers are cautioned not to put undue reliance on forward looking statements.

Factors that could cause actual results or performance to differ materially from those expressed or implied in the forward-looking statements include, but are not limited to, the risk factors discussed in BHP Billiton's filings with the U.S. Securities and Exchange Commission ("SEC") (including in Annual Reports on Form 20-F) which are available at the SEC's website. BHP Billiton undertakes no duty to update any forward-looking statements in this release.

This release is for information purposes only and should not be construed as either an offer to sell or a solicitation of an offer to buy or sell securities in any jurisdiction.

Further information on BHP Billiton can be found on our website: www.bhpbilliton.com

FINANCIAL REPORT

For the half year ended 31 December 2010

Contents

Consolidated Income Statement

for the half year ended 31 December 2010

The accompanying notes form part of these half year financial statements.

Consolidated Statement of Comprehensive Income

for the half year ended 31 December 2010

The accompanying notes form part of these half year financial statements.

Consolidated Balance Sheet

as at 31 December 2010

The accompanying notes form part of these half year financial statements.

Consolidated Cash Flow Statement

for the half year ended 31 December 2010

The accompanying notes form part of these half year financial statements.

Consolidated Statement of Changes in Equity

for the half year ended 31 December 2010

The accompanying notes form part of these half year financial statements.

Consolidated Statement of Changes in Equity

for the half year ended 31 December 2010 (continued)

Consolidated Statement of Changes in Equity

for the half year ended 31 December 2010 (continued)

Notes to the Half Year Financial Statements

1. Accounting policies

This general purpose financial report for the half year ended 31 December 2010 is unaudited and has been prepared in accordance with IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ("IASB"), IAS 34 'Interim Financial Reporting' as adopted by the EU, AASB 134 'Interim Financial Reporting' as issued by the Australian Accounting Standards Board ("AASB") and the Disclosure and Transparency Rules of the Financial Services Authority in the United Kingdom and the Australian Corporations Act 2001 as applicable to interim financial reporting.

The half year financial statements represent a 'condensed set of financial statements' as referred to in the UK Disclosure and Transparency Rules issued by the Financial Services Authority. Accordingly, they do not include all of the information required for a full annual report and are to be read in conjunction with the most recent annual financial report. The comparative figures for the financial year ended 30 June 2010 are not the statutory accounts of BHP Billiton for that financial year. Those accounts, which were prepared under IFRS, have been reported on by the Company's auditors and delivered to the registrar of companies. The auditors have reported on those accounts; their report was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under Section 498(2) or (3) of the UK Companies Act 2006.

The half year financial statements have been prepared on the basis of accounting policies and methods of computation consistent with those applied in the 30 June 2010 annual financial statements contained within the Annual Report of the BHP Billiton Group except for the application of 'Improvements to IFRSs 2009'/AASB 2009-5 'Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project'. This has resulted in exploration cash flows of US$295 million for the half year ended 31 December 2009 (30 June 2010: US$1,030 million), which were not recognised as assets, being reclassified from net investing cash flows to net operating cash flows in the Consolidated Cash Flow Statement.

Rounding of amounts

Amounts in this financial report have, unless otherwise indicated, been rounded to the nearest million dollars.

Comparatives

Where applicable, comparatives have been adjusted to disclose them on the same basis as current period figures.

Exchange rates

The following exchange rates relative to the US dollar have been applied in the financial information:

(a) Displayed as US$ to A$1 based on common convention.

2. Segment reporting

The Group operates nine Customer Sector Groups aligned with the commodities which we extract and market, reflecting the structure used by the Group's management to assess the performance of the Group:

Group and unallocated items represent Group centre functions. Exploration and technology activities are recognised within relevant segments.

It is the Group's policy that inter-segment sales are made on a commercial basis.

2. Segment reporting (continued)

(a) Revenue not attributable to reportable segments reflects sales of freight and fuel to third parties.

(b) Underlying EBIT is earnings before net finance costs and taxation and any exceptional items.

2. Segment reporting (continued)

2. Segment reporting (continued)

3. Exceptional items

Exceptional items are those items where their nature and amount is considered material to the financial report. Such items included within the Group's profit for the period are detailed below.

Withdrawn offer for PotashCorp:

The Group withdrew its offer for PotashCorp on 15 November 2010 following the Board's conclusion that the condition of the offer relating to receipt of a net benefit as determined by the Minister of Industry under the Investment Canada Act could not be satisfied. The Group incurred fees associated with the US$45 billion debt facility (US$240 million), investment bankers', lawyers' and accountants' fees, printing expenses and other charges (US$74 million) in progressing this matter during the period up to the withdrawal of the offer, which were expensed as operating costs in the half year ended 31 December 2010.

Release of income tax provisions:

The Australian Taxation Office (ATO) issued amended assessments in prior years denying bad debt deductions arising from the investments in Hartley (Zimbabwe), Beenup and Boodarie Iron (both Australia) and the denial of capital allowance claims made on the Boodarie Iron project. BHP Billiton lodged objections and was successful on all counts in the Federal Court and the Full Federal Court. The Hartley matter was settled with the ATO in September 2009. The ATO sought special leave to appeal to the High Court in relation to the Beenup bad debt disallowance and the denial of the capital allowance claims on the Boodarie Iron project. Special leave was not sought by the ATO for the Boodarie Iron bad debt disallowance. In September 2010 the High Court granted special leave only in relation to the denial of the capital allowance claims on the Boodarie Iron project which resulted in a release of US$138 million from the Group's income tax provisions in the half year ended 31 December 2010.