v3.25.2
Leases
 12 Months Ended
Jun. 30, 2025
Text block 1 [Abstract]  
Leases
22 Leases
Movements in the Group’s lease liabilities during the year are as follows:
 
    
2025
      2024  
    
US$M
      US$M  
At the beginning of the financial year
   
 
3,116
 
      3,019  
Additions
   
 
870
 
      593  
Remeasurements of index-linked freight contracts
   
 
(297
)
      230  
Lease payments
   
 
(881
)
      (837 ) 
Foreign exchange movement
   
 
(13
)
      (16 ) 
Amortisation of discounting
   
 
169
 
      181  
Divestment of subsidiaries and operations
1
   
 
–
 
      (60 ) 
Transfers and other movements
   
 
(11
)
      6  
  
 
 
     
 
 
  
At the end of the financial year
   
 
2,953
 
      3,116  
  
 
 
     
 
 
  
Comprising:
      
Current liabilities
   
 
641
 
      686  
Non-current
liabilities
   
 
2,312
 
      2,430  
  
 
 
     
 
 
  
 
1
 
Relates to the divestment of the Blackwater and Daunia mines completed on 2 April 2024.
A significant proportion by value of the Group’s lease contracts relate to plant facilities, office buildings and vessels. Lease terms for plant facilities and office buildings typically run for over 10 years and vessels from
four
to 10 years. Other leases include port facilities, various equipment and vehicles. The lease contracts contain a wide range of different terms and conditions including extension and termination options and variable lease payments.
The Group’s lease obligations are included in the Group’s Interest bearing liabilities and, with the exception of vessel lease contracts that are priced with reference to a freight index, form part of the Group’s net debt.
Refer to note 21 ‘Net debt’ for maturity profile of lease liabilities based on the undiscounted contractual amounts.
At 30 June 2025, commitments for leases not yet commenced based on undiscounted contractual amounts were US$844 million (2024: US$1,170 million).
Movements in the Group’s
right-of-use
assets during the year are as follows:
 
    
2025
      2024  
    
Land and
buildings
     
Plant and
equipment
     
Total
      Land and
buildings		     Plant and
equipment		     Total  
    
US$M
     
US$M
     
US$M
      US$M     US$M     US$M  
Net book value
                
At the beginning of the financial year
   
 
490
 
   
 
2,218
 
   
 
2,708
 
      573       2,236       2,809  
Additions
   
 
26
 
   
 
844
 
   
 
870
 
      26       567       593  
Remeasurements of index-linked freight contracts
   
 
–
 
   
 
(210
)
   
 
(210
)
      –       230       230  
Depreciation expensed during the period
   
 
(75
)
   
 
(642
)
   
 
(717
)
      (79 )      (638 )      (717 ) 
Impairments for the year
   
 
–
 
   
 
–
 
   
 
–
 
      –       (140 )      (140 ) 
Divestment of subsidiaries and operations
1
   
 
–
 
   
 
–
 
   
 
–
 
      (30 )      (40 )      (70 ) 
Transfers and other movements
   
 
(2
)
   
 
4
 
   
 
2
 
      –       3       3  
  
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
At the end of the financial year
   
 
439
 
   
 
2,214
 
   
 
2,653
 
      490       2,218       2,708  
  
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
– Cost
   
 
764
 
   
 
4,690
 
   
 
5,454
 
      742       4,479       5,221  
– Accumulated depreciation and impairments
   
 
(325
)
   
 
(2,476
)
   
 
(2,801
)
      (252 )      (2,261 )      (2,513 ) 
  
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
 
1
 
Relates to the divestment of the Blackwater and Daunia mines completed on 2 April 2024.
Right-of-use
assets are included within the underlying asset classes in Property, plant and equipment. Refer to note 11 ‘Property, plant and equipment’.
Amounts recorded in the income statement and the cash flow statement for the year were:
 
    
2025
      2024      2023     
Included within
    
US$M
      US$M      US$M       
Income statement
            
Depreciation of
right-of-use
assets
   
 
717
 
      717        533      Profit from operations
Short-term,
low-value
and variable lease costs
1
   
 
844
 
      916        795      Profit from operations
Interest on lease liabilities
   
 
169
 
      181        130      Financial expenses
Cash flow statement
            
Principal lease payments
   
 
712
 
      656        576      Cash flows from financing activities
Lease interest payments
   
 
169
 
      181        130      Cash flows from operating activities
 
1
 
Relates to US$777 million of variable lease costs (2024: US$792 million; 2023: US$714 million), US$43 million of short-term lease costs (2024: US$96 million; 2023: US$47 million) and US$24 million of
low-value
lease costs (2024: US$28 million; 2023: US$34 million). Variable lease costs include contracts for hire of mining service equipment, drill rigs and transportation services. These contracts contain variable lease payments based on usage and asset performance.
Recognition and measurement
All leases with the exception of short-term (under 12 months) and
low-value
leases are recognised on the balance sheet, as a
right-of-use
asset and a corresponding interest bearing liability. Lease liabilities are initially measured at the present value of the future lease payments from the lease commencement date and are subsequently adjusted to reflect the interest on lease liabilities, lease payments and any remeasurements due to, for example, lease modifications or a change to future lease payments linked to an index or rate. Lease payments are discounted using the interest rate implicit in the lease or, where the rate is not readily determinable, the interest payments are discounted at the Group’s weighted average incremental borrowing rate, adjusted to reflect factors specific to the lease, including where relevant the currency, tenor and location of the lease.
In addition to containing a lease, the Group’s contractual arrangements may include
non-lease
components. For example, certain mining services arrangements involve the provision of additional services, including maintenance, drilling activities and the supply of personnel. The Group has elected to separate these
non-lease
components from the lease components in measuring lease liabilities.
Non-lease
components are accounted for in accordance with the accounting policies applied to each underlying good or service received.
Low-value
and short-term leases are expensed to the income statement. Variable lease payments not dependent on an index or rate are excluded from lease liabilities, and expensed to the income statement.
Right-of-use
assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost will initially correspond to the lease liability, adjusted for initial direct costs, lease payments made prior to lease commencement, capitalised provisions for closure and rehabilitation and any lease incentives received.
The lease asset and liability associated with all index-linked freight contracts, including continuous voyage charters (CVCs), are measured at each reporting date based on the prevailing freight index (generally the Baltic C5 index).
Where the Group is the operator of an unincorporated joint operation and all investors are parties to a lease, the Group recognises its proportionate share of the lease liability and associated
right-of-use
asset. In the event the Group is the sole signatory to a lease, and therefore has the sole legal obligation to make lease payments, the lease liability is recognised in full. Where the associated
right-of-use
asset is
sub-leased
(under a finance
sub-lease)
to a joint operation, for instance where it is dedicated to a single operation and the joint operation has the right to direct the use of the asset, the Group (as lessor) recognises its proportionate share of the
right-of-use
asset and a net investment in the lease, representing amounts to be recovered from the other parties to the joint operation. If the Group is not party to the head lease contract but
sub-leases
the associated
right-of-use
asset (as lessee), it recognises its proportionate share of the
right-of-use
asset and a lease liability which is payable to the operator.
Key judgements and estimates
Judgements:
Certain contractual arrangements not in the form of a lease require the Group to apply significant judgement in evaluating whether the Group controls the right to direct the use of assets and therefore whether the contract contains a lease. Management considers all facts and circumstances in determining whether the Group or the supplier has the rights to direct how, and for what purpose, the underlying assets are used in certain mining contracts and other arrangements, including outsourcing and shipping arrangements. Judgement is used to assess which decision-making rights mostly affect the benefits of use of the assets for each arrangement.
Where a contract includes the provision of
non-lease
services, judgement is required to identify the lease and
non-lease
components.
Estimates:
Where the Group cannot readily determine the interest rate implicit in the lease, estimation is involved in the determination of the weighted average incremental borrowing rate to measure lease liabilities. The incremental borrowing rate reflects the rates of interest a lessee would have to pay to borrow over a similar term, with similar security, the funds necessary to obtain an asset of similar value to the
right-of-use
asset in a similar economic environment. Under the Group’s portfolio approach to debt management, the Group does not specifically borrow for asset purchases. Therefore, the incremental borrowing rate is estimated referencing the Group’s corporate borrowing portfolio and other similar rated entities, adjusted to reflect the terms and conditions of the lease (including the impact of currency, credit rating of subsidiary entering into the lease and the term of the lease), at the inception of the lease arrangement or the time of lease modification.
The Group estimates stand-alone prices, where such prices are not readily observable, in order to allocate
the
contractual payments between lease and
non-lease
components.