Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Now, soaring demand for copper and the energy transition will
Speaker 2: require some two hundred and fifty billion dollars of investments
Speaker 2: over the next decade, helping to drive further mergers in
Speaker 2: the industry. Now that's a you have PHP TAT executive
Speaker 2: Mike Henry, who says companies will need scale, strong balance sheets,
Speaker 2: and technical capabilities if they're to emerge as winners over
Speaker 2: the coming decades. Well, I'm delighted to be joined by
Speaker 2: Mike Henry himself joining us. Now, Mike, you see, I
Speaker 2: start with your quote because you're kind of like the
Speaker 2: Linch panel of exactly what needs to get the job done.
Speaker 2: How do you see growth in your industry and how
Speaker 2: worried are you about global demand?
Speaker 3: So I'll start by saying BHP's a long term, long
Speaker 3: term company. If you look at the long term trajectory
Speaker 3: from metals and minerals demand, it's very positive. Growing global
Speaker 3: population eight billion today to fifty to ten billion in
Speaker 3: twenty fifty, more urbanizations, so more people living in cities,
Speaker 3: which tends to be more metals and minerals for the
Speaker 3: intensive living standards. The energy transition AI all of these
Speaker 3: things require more metals and minerals, so the long term
Speaker 3: trajectory for metals demand is quite strong, and BHP is
Speaker 3: positioned at the forefront of that to meet the world's
Speaker 3: need for critical minerals.
Speaker 2: Mike, I mean, there's of course a number of some
Speaker 2: of these minerals that most people can't pronounce, lithium and
Speaker 2: then copper. Why have you gone from copper as really
Speaker 2: saying that that actually is needed more than anything else
Speaker 2: for the transition to work.
Speaker 1: So copper demand is ubiquitous if you think about the.
Speaker 3: Number of uses of copper, be it the phones that
Speaker 3: we carry around in our pockets, to televisions, air conditioners,
Speaker 3: wind turbines, electric vehicles. It's pervasive in the economy, and
Speaker 3: so we see that demand growing strongly over time. One
Speaker 3: of the other things we love about copper is that
Speaker 3: it has a steep cost curve, so the cost of
Speaker 3: producing it from one asset can be a lot more
Speaker 3: economic than producing it from another asset. So if you've
Speaker 3: got your hands on the right assets, you can generate
Speaker 3: really healthy margins. BHP is already the world's number one
Speaker 3: or number two copper. We have the world's largest endowment
Speaker 3: of copper resources and we have.
Speaker 1: Big growth prospects now in.
Speaker 3: Australia, the US, Chile and more recently in Argentina. So
Speaker 3: we're positioned quite strongly in this in this quantity that
Speaker 3: the world's going to need so much more of.
Speaker 2: I mean it, do you want more through rem and A?
Speaker 3: So M and A is one lever in our arsenal
Speaker 3: of potential avenues of growth. We're already very well set
Speaker 3: in terms of our existing business, existing resources and the
Speaker 3: growth options that we have.
Speaker 1: And no M and A deal is ever a.
Speaker 3: Must do for us, but where there's an opportunity for
Speaker 3: us to unlock greater shareholder value through it, it's something
Speaker 3: that we've shown.
Speaker 1: Ourselves as willing to consider.
Speaker 3: But again, Plan A for us is develop more of
Speaker 3: the resources that we have and these fantastic growth options
Speaker 3: that we've already developed inside the company.
Speaker 2: So what does M and A depend on? Is it
Speaker 2: price or is it actually a strategic fit or is
Speaker 2: it political blessing.
Speaker 3: It has to be on strategy for BHP, So it's
Speaker 3: in the quantities that we've chosen to be in.
Speaker 1: It has to be of asset quality that is in
Speaker 1: line with the.
Speaker 3: Assets that we want, which are large, long life, low cost,
Speaker 3: and there has to be opportunity to unlock more value
Speaker 3: for shareholders through BHP's ownership, and and and so the
Speaker 3: those opportunities are few and far between.
Speaker 2: I was going to say, there's there's just not much
Speaker 2: around that fits that criteria, yes, which.
Speaker 3: Which is why we focus on making sure that the
Speaker 3: opportunities we have inside the company are so strong. And
Speaker 3: that's really what we rely upon, is this pipeline of
Speaker 3: organic options that we've developed.
Speaker 2: When you look at, of course, the inauguration of Donald
Speaker 2: Trump and we were expecting policies to be pretty much
Speaker 2: in place, what does that mean for China? What does
Speaker 2: that mean for your industry in general?
Speaker 1: So it's still a bit early to tell.
Speaker 3: I think for our industry over the long term, we
Speaker 3: expect growing demand for key commodities to continue unabated. However,
Speaker 3: in the near term or along that path, there is
Speaker 3: going to be uh, you know, a degree of uncertainty
Speaker 3: related to trade flows, tariffs, industrial policy and so on,
Speaker 3: which is something that we keep a very close eye on,
Speaker 3: specifically in respect of the incomingdministration. We know that there's
Speaker 3: strong support for mining, strong understanding of the need for
Speaker 3: security of critical mineral supply chains. Exactly how that plays,
Speaker 3: how we can practice and policy yet to be determined.
Speaker 3: There has been bipartisan support in the US for more
Speaker 3: mining in the US permitting reform, and we expect that
Speaker 3: to continue and to be a strong area of focus
Speaker 3: for the new administration.
Speaker 2: Does that change actually the way you'll run BHP.
Speaker 3: So BHP's strategy is one that is very long term
Speaker 3: focused on the global level. The US isn't currently a
Speaker 3: big market for BHP. It's about three percent four percent
Speaker 3: of our revenues, but of course the US plays a
Speaker 3: key role in determining policies that apply to the industry globally,
Speaker 3: so it's something that we stay very close to. Our
Speaker 3: strategy is one of positioning ourselves in the right commodities,
Speaker 3: large assets that we can expand over time.
Speaker 1: Specific focus on copper, potash.
Speaker 3: We've got a big development underway in Canada iron ore.
Speaker 3: We have the world's lowest cost, best performing iron ore
Speaker 3: business and in a subset of only the best quality
Speaker 3: calls for steelmaking. The other thing I would note is
Speaker 3: that BHP's production is almost exclusively from countries that have
Speaker 3: free trade agreements. In place with the US current, Australia, Chile,
Speaker 3: and Canada.
Speaker 2: What does a Trump presidency mean for the energy transition?
Speaker 2: Does it actually slow it down? And so does it
Speaker 2: mean that everything is a little bit slower, even access
Speaker 2: to these critical minerals, that you have a bit more time.
Speaker 3: So it's a really interesting question, and I don't think
Speaker 3: this applies just to the US. If you look at
Speaker 3: governments around the world these days, they're facing competing pressures.
Speaker 3: I think there's a broad understanding of the need for
Speaker 3: the long term need for the energy transition, but at
Speaker 3: the same time, policy makers are needing to deal with
Speaker 3: cost of living pressures, resurgence of industrial policy, trade protectionism,
Speaker 3: all of these factors coming to bear, and how governments
Speaker 3: then weigh up and balance between those factors and the
Speaker 3: short term, of course, is the key consideration, but I
Speaker 3: don't think it detracts from the long term trajectory of
Speaker 3: the world achieving the energy transition. That energy transition is
Speaker 3: going to be metals and minerals intensive, which is going
Speaker 3: to compound demand for certain commodities often already strong baseline.
Speaker 3: As the world's population grows, urbanization continues to play out,
Speaker 3: and as billions of people around the world chase increase
Speaker 3: living standards akin to those that we enjoy.
Speaker 2: What can shareholders expect in terms of dividends in buyback?
Speaker 3: So BHP has a very clear capital allocation framework. It's
Speaker 3: something that we put in place back in twenty sixteen.
Speaker 3: We've been consistent in execution of it. So one of
Speaker 3: the things that BHP is known for is our very
Speaker 3: simple strategy and are very consistent execution against that strategy.
Speaker 3: We had great progress in recent years. Operationally. The company
Speaker 3: is performing very well. We've returned significant cash dividends to shareholders.
Speaker 3: In fact, we were the largest cash dividend pair in
Speaker 3: the world in any sector for a couple of years running.
Speaker 3: We remain one of the highest. And so this capital
Speaker 3: allocation framework that we have in place, coupled with the
Speaker 3: very clear growth prospects that we have in potash, copper,
Speaker 3: the high performing iron or business that we have, vode
Speaker 3: well for long term shareholder returns.
Speaker 2: I have a couple of things. You know BHP has
Speaker 2: previously say to the same more same pay laws. I
Speaker 2: mean that means that there's like eight hundred million of
Speaker 2: unexpected costs that come from that. What does it mean
Speaker 2: for how you can mitigate that or what's the way forward.
Speaker 3: So we have to continue to drive forward on productivity.
Speaker 3: In the end, productivity is everything, and it's one of
Speaker 3: the key points that we make to policy.
Speaker 1: Makers in Australia and elsewhere is.
Speaker 3: That what countries need to focus on is getting the
Speaker 3: fundamental policy settings in place that support global competitiveness. Down
Speaker 3: respect of that specific policy, we believe that it brings
Speaker 3: with it higher costs for no improvement in productivity. We're
Speaker 3: very big supporters of wage increases that are accompanied by
Speaker 3: productivity increases. In that case that isn't a wage increase,
Speaker 3: wouldn't be a company by productivity improvements, So it would
Speaker 3: pull us backwards on the competitiveness front. We have to
Speaker 3: work very hard to continue to improve productivity through other
Speaker 3: means to upset that increased costs. And the costs are
Speaker 3: still a little bit. We have to see exactly how
Speaker 3: the policy gets implemented, but it will mean more costs
Speaker 3: and we're offsetting that through our application of technology and
Speaker 3: through improving work pack.
Speaker 1: Practices through other means.
Speaker 3: And we have a proprietary system in place called the
Speaker 3: BHP Operating System, which is our way of working inside
Speaker 3: the company and that's what's helped move us from not
Speaker 3: being the best performing in the industry operationally to now
Speaker 3: having the best performing iron ore business in the world,
Speaker 3: lowest costs for five years running now and we'll continue
Speaker 3: our focus on that and how we go about enabling
Speaker 3: the ninety thousand people who work across BHP.
Speaker 2: The productivity puzzle is one of the most important and
Speaker 2: difficult questions that any chief executive can ask themselves. Does
Speaker 2: AI help even at BHP in this regard.
Speaker 3: So we've been using AI now for a few years
Speaker 3: and it is helping with everything from how we go
Speaker 3: about finding resources, how we go about extracting them efficiency
Speaker 3: with which we're able to mine and then process these
Speaker 3: resources and get them to market. And the exciting thing is,
Speaker 3: I don't think we yet know what the full potential
Speaker 3: of AI is.
Speaker 1: It's not the sole focus.
Speaker 3: It's at the end of the day, it's an enabler
Speaker 3: of the underlying business and the way that.
Speaker 1: People people work.
Speaker 3: But yes, it's it's already unlocking value for BHP and
Speaker 3: there's lots more to come.
Speaker 2: Mike, I know there's a UK government's law basically suggests
Speaker 2: that a chair steps down after nine years. What does
Speaker 2: that mean for your chairman?
Speaker 1: Oh so it's probably probably a question better for the
Speaker 1: for the.
Speaker 3: Chair But one of the things that BHP is is
Speaker 3: known for and has done a very good job of
Speaker 3: in the past is our approach to uh to succession.
Speaker 3: But you know, I know that certainly from from my perspective,
Speaker 3: the company is performing well. There's still so much more
Speaker 3: opportunity ahead for BHP, and I can say that both
Speaker 3: the board and the management team are very much focused
Speaker 3: on on on on running the great business that we
Speaker 3: have and unlocking more of that opportunity for shareholders and
Speaker 3: other stakeholders.
Speaker 1: In the coming years.
Speaker 2: Are your biggest challenge for next year?
Speaker 1: Yeah? So just right for next year.
Speaker 3: Of course, safety is always front of front of mind
Speaker 3: in an industry like ours, looking after our people's priority
Speaker 3: number number one.
Speaker 1: UH.
Speaker 3: My management team and I spend a lot of time
Speaker 3: out there in the field talking to people, making sure
Speaker 3: that we understand what their challenges are and how we
Speaker 3: can go about better enabling them. Of course, there's all
Speaker 3: the uncertainty around trade, trade measures and so on in
Speaker 3: the in.
Speaker 1: The year ahead. It creates some some near term uncertainty.
Speaker 3: But the long term outlook for our industry, for BHP
Speaker 3: as a company, and for the commodities that we produce
Speaker 3: is positive, and I'm focused on how we go about
Speaker 3: positioning BHP to best capitalized on those opportunities.
Speaker 1: In the year's ad Mike, thank you so.
Speaker 2: Much for joining us today. That was, of course, Mike Henry,
Speaker 2: the chief executive of VHP