HBI Western Australia

Broken Hill Proprietary Co Ld
4 May 2000


HBI WESTERN AUSTRALIA

May 2000

Overview

*  BHP's financial results for the March 2000 quarter include an abnormal item
   of A$1 138 million (before tax), A$794 million (after tax) representing a 
   write-off of the Port Hedland HBI plant.

*  The Port Hedland HBI facility is one of the key portfolio performance issues
   facing BHP.

*  Process and operational performance and subsidiary equipment reliability 
   issues remain as significant challenges to the outlook for the financial
   performance of the plant.

*  An improvement plan has been implemented which will seek to address the 
   process and equipment reliability issues.

*  The BHP Board has approved A$46m of capital expenditure to determine if the
   facility is technically viable.  This amount is in addition to current 
   ongoing operating losses incurred by the plant.  Any further capital costs
   will be expensed.

*  Additional capital is expected to be required to determine the economic      
  viability of the plant.

*  A final decision on the asset's retention within the BHP portfolio will be   
  made by the end of the calendar year.

*  For the ten months to 31 March 2000, HBI Port Hedland had produced 343 000   
  tonnes and incurred an operating loss after tax of A$(116)million and         
 negative cashflow of A$(94)million.

Write Off of Carrying Value

BHP's financial results for the March 2000 quarter include a A$1 138 million
(before tax) write-off of the Port Hedland HBI plant, excluding working capital
and land. The write-off was a result of a review of the carrying value of the
asset in accordance with Australian Accounting Standards and BHP Policy.

Australian Accounting Standard AASB 1010, Accounting for the Revaluation of
Non-Current Assets, requires a regular review of asset carrying values to ensure
they do not exceed the asset's recoverable amount.

The plant was commissioned in February 1999. The total capital cost of the
project was A$2.6 billion. The plant has previously been written down on two 
occasions as a result of the carrying value review process. An amount of A$590
million (before tax) was written off in the year ended May 1998 and a further
A$829 million (before tax) was written off in the year ended May 1999.

These write-downs were due to significant capital cost overruns and unfavourable
changes in key assumptions used to estimate the operation's future cashflows.

At November 1999 the asset passed the carrying value test. Since November the
asset's recoverable amount has been significantly reduced. This is due to
continuing operational issues and a revised operating plan.

Key changes impacting on the calculation of recoverable amount included: lower
production and sales volumes, lower sales prices, increased average cost of
production and higher capital expenditure to support modifications. This
analysis led to the recommendation for a complete write-off of the asset.

Background

In February 1999 BHP completed construction of the HBI plant at Port Hedland in
Western Australia. The facility is integrated with BHP's Western Australian iron
ore operations.

The plant processes iron ore fines into partially metallized iron granules that
are compressed into small briquettes for use in electric arc furnace and blast
furnace operations.

The plant is the first FINMET plant in the world. This technology has been
developed jointly by Voest Alpine Industries and FIOR de Venezuela based on the
existing FIOR technology.

Process Description

*  Iron ore fines are concentrated at the benefication plant.

*  Concentrate is dried and charged to the feed bins.

*  From the feed bins the ore is lifted to the top of the reactor structure     
and charged to the reactor train via a pressurized lock hopper system.

*  A gas plant converts natural gas to hydrogen and carbon monoxide (reducing   
  gases used in the plant's reactors).

*  As the concentrate travels down the reactor train the gas flows upwards,     
  extracting oxygen and reducing the iron to partially metallized iron          
 granules.

*  The briquetting plant compresses the metallized iron granules into small     
  briquettes.

The HBI plant includes:

* An overland conveyor carrying ore to the plant and HBI back to the Finucane   
 Island shiploader for export.

* An iron ore stockpile area with stackers and reclaimers.

* A benefication plant to upgrade the ore.

* Two production modules each with two FINMET reactor trains.

* Two gas reforming plants and a briquetting plant.


The first shipment of HBI was despatched in May 1999.

BHP has experienced persistent commissioning difficulties, major cost overruns
and significant operational issues with the plant. This has led to an inability
to achieve commissioning production targets and product specifications.

Current Status

Operating performance has continued to be well below expectations in recent
months. November 1999 was the best month in terms of production (70 000 tonnes).
This level has not been equalled since.

An electrical storm and subsequent power failure were responsible for the
commencement of a seven week shutdown from early February. During this period
maintenance and modifications were undertaken on the plant. Operations
re-started in late March without significant improvement in production
reliability.

Key operating issues relate to solids transfer problems with the production of a
sticky material that causes blockages and interrupts production. Subsidiary
difficulties include mechanical reliability of equipment, as well as long
shutdown and maintenance periods for trains. A number of safety issues have also
been raised as a consequence of safety reviews by Du Pont and the Western
Australian Department of Minerals and Energy.

A review of the asset in February-March 2000, conducted by a team including
external consultants, concluded that a process change and associated plant
modifications to the existing facilities were required.

A detailed project plan has been developed to trial these modifications. the BHP
board has approved A$46 million of capital to determine if the facility is
technically viable. If sufficient progress is shown, and the Board elects to
continue, further capital expenditure will be required to complete
implementation of the project plan.

A decision relating to the economic viability of the Port Hedland facility, and
hence BHP's continued operation of the facility, will be made by the end of the
calendar year.

The performance of the asset, given its significant impact on BHP's financial
performance, represents one of the major portfolio management issues for the
Policy committee. If a decision is taken to cease operations and shut down the
plant, it would be necessary to make provision for take or pay and other
liabilities amounting to approximately A$1.1 billion before tax and mitigation
of exposure.

HBI Venezuela

BHP has a 50 per cent interest in Orinoco Iron, a company formed to construct a
new FINMET HBI plant in Puerto Ordaz, Venezuela.

This project is approximately 90 per cent complete with production of first
briquette expected in June 2000.

The Venezuela HBI plant has a number of technical and operational factors that
differ from the experience at the Port Hedland HBI plant. These include:

* Engineering
    * The plant design is simpler.
   
    * Plant design at Orinoco has incorporated many of the process learnings    
     gained from Port Hedland over the last 18 months.

* Experienced Operational Personnel

    * Key Orinoco Iron personnel have gained experience with FIOR in Venezuela  
     and FINMET at Port Hedland.

BHP's investment in HBI Venezuela has been reviewed under the carrying value
process and satisfies the accounting test. Apart from the above technical and
operational differences, the Venezuelan HBI plant also has significantly lower
capital costs, as well as lower ongoing operating costs, in terms of inputs such
as ore, gas, power, labour and water.

Contact details

For clarification contact:

Investor Relations

Dr Robert Porter (Melbourne)
Vice President Investor Relations
Ph: (613) 9609 3540 Fax: [phone]
Email: [e-mail]

Mr Andrew Nairn (Melbourne)
Senior Business Analyst
Ph: (613) 9609 3952 Fax: [phone]
Email: [e-mail]

Mr Pierre Hirsch (San Francisco)
Manager, Investor Relations
Ph: (1 415) 774 2030  Fax: [phone]
Email: [e-mail]