The usage of "this" and "it" in a given example

I came across these sentences in Cambridge, and I do not understand which words "this " and "it" refer to. I have three questions that need your help as answers.

Here are they.
The example: "Put the butter, chocolate and sugar in a saucepan. Heat this over a low flame until it melts."
Question:
(1) "this" here refers to which word?
(2) "it" in that text is a dummy subject or a real subject?
(3) If both "this" and "it" imply a group of words before, why "this" is used first and" it" is used after that?