WEBVTT - BHP CEO Mike Henry Talks Global Metal Demands 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Now, soaring demand for copper and the energy transition will

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<v Speaker 2>require some two hundred and fifty billion dollars of investments

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<v Speaker 2>over the next decade, helping to drive further mergers in

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<v Speaker 2>the industry. Now that's a you have PHP TAT executive

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<v Speaker 2>Mike Henry, who says companies will need scale, strong balance sheets,

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<v Speaker 2>and technical capabilities if they're to emerge as winners over

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<v Speaker 2>the coming decades. Well, I'm delighted to be joined by

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<v Speaker 2>Mike Henry himself joining us. Now, Mike, you see, I

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<v Speaker 2>start with your quote because you're kind of like the

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<v Speaker 2>Linch panel of exactly what needs to get the job done.

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<v Speaker 2>How do you see growth in your industry and how

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<v Speaker 2>worried are you about global demand?

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<v Speaker 3>So I'll start by saying BHP's a long term, long

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<v Speaker 3>term company. If you look at the long term trajectory

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<v Speaker 3>from metals and minerals demand, it's very positive. Growing global

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<v Speaker 3>population eight billion today to fifty to ten billion in

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<v Speaker 3>twenty fifty, more urbanizations, so more people living in cities,

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<v Speaker 3>which tends to be more metals and minerals for the

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<v Speaker 3>intensive living standards. The energy transition AI all of these

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<v Speaker 3>things require more metals and minerals, so the long term

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<v Speaker 3>trajectory for metals demand is quite strong, and BHP is

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<v Speaker 3>positioned at the forefront of that to meet the world's

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<v Speaker 3>need for critical minerals.

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<v Speaker 2>Mike, I mean, there's of course a number of some

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<v Speaker 2>of these minerals that most people can't pronounce, lithium and

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<v Speaker 2>then copper. Why have you gone from copper as really

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<v Speaker 2>saying that that actually is needed more than anything else

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<v Speaker 2>for the transition to work.

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<v Speaker 1>So copper demand is ubiquitous if you think about the.

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<v Speaker 3>Number of uses of copper, be it the phones that

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<v Speaker 3>we carry around in our pockets, to televisions, air conditioners,

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<v Speaker 3>wind turbines, electric vehicles. It's pervasive in the economy, and

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<v Speaker 3>so we see that demand growing strongly over time. One

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<v Speaker 3>of the other things we love about copper is that

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<v Speaker 3>it has a steep cost curve, so the cost of

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<v Speaker 3>producing it from one asset can be a lot more

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<v Speaker 3>economic than producing it from another asset. So if you've

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<v Speaker 3>got your hands on the right assets, you can generate

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<v Speaker 3>really healthy margins. BHP is already the world's number one

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<v Speaker 3>or number two copper. We have the world's largest endowment

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<v Speaker 3>of copper resources and we have.

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<v Speaker 1>Big growth prospects now in.

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<v Speaker 3>Australia, the US, Chile and more recently in Argentina. So

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<v Speaker 3>we're positioned quite strongly in this in this quantity that

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<v Speaker 3>the world's going to need so much more of.

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<v Speaker 2>I mean it, do you want more through rem and A?

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<v Speaker 3>So M and A is one lever in our arsenal

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<v Speaker 3>of potential avenues of growth. We're already very well set

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<v Speaker 3>in terms of our existing business, existing resources and the

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<v Speaker 3>growth options that we have.

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<v Speaker 1>And no M and A deal is ever a.

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<v Speaker 3>Must do for us, but where there's an opportunity for

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<v Speaker 3>us to unlock greater shareholder value through it, it's something

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<v Speaker 3>that we've shown.

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<v Speaker 1>Ourselves as willing to consider.

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<v Speaker 3>But again, Plan A for us is develop more of

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<v Speaker 3>the resources that we have and these fantastic growth options

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<v Speaker 3>that we've already developed inside the company.

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<v Speaker 2>So what does M and A depend on? Is it

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<v Speaker 2>price or is it actually a strategic fit or is

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<v Speaker 2>it political blessing.

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<v Speaker 3>It has to be on strategy for BHP, So it's

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<v Speaker 3>in the quantities that we've chosen to be in.

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<v Speaker 1>It has to be of asset quality that is in

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<v Speaker 1>line with the.

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<v Speaker 3>Assets that we want, which are large, long life, low cost,

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<v Speaker 3>and there has to be opportunity to unlock more value

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<v Speaker 3>for shareholders through BHP's ownership, and and and so the

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<v Speaker 3>those opportunities are few and far between.

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<v Speaker 2>I was going to say, there's there's just not much

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<v Speaker 2>around that fits that criteria, yes, which.

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<v Speaker 3>Which is why we focus on making sure that the

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<v Speaker 3>opportunities we have inside the company are so strong. And

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<v Speaker 3>that's really what we rely upon, is this pipeline of

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<v Speaker 3>organic options that we've developed.

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<v Speaker 2>When you look at, of course, the inauguration of Donald

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<v Speaker 2>Trump and we were expecting policies to be pretty much

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<v Speaker 2>in place, what does that mean for China? What does

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<v Speaker 2>that mean for your industry in general?

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<v Speaker 1>So it's still a bit early to tell.

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<v Speaker 3>I think for our industry over the long term, we

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<v Speaker 3>expect growing demand for key commodities to continue unabated. However,

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<v Speaker 3>in the near term or along that path, there is

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<v Speaker 3>going to be uh, you know, a degree of uncertainty

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<v Speaker 3>related to trade flows, tariffs, industrial policy and so on,

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<v Speaker 3>which is something that we keep a very close eye on,

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<v Speaker 3>specifically in respect of the incomingdministration. We know that there's

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<v Speaker 3>strong support for mining, strong understanding of the need for

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<v Speaker 3>security of critical mineral supply chains. Exactly how that plays,

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<v Speaker 3>how we can practice and policy yet to be determined.

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<v Speaker 3>There has been bipartisan support in the US for more

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<v Speaker 3>mining in the US permitting reform, and we expect that

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<v Speaker 3>to continue and to be a strong area of focus

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<v Speaker 3>for the new administration.

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<v Speaker 2>Does that change actually the way you'll run BHP.

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<v Speaker 3>So BHP's strategy is one that is very long term

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<v Speaker 3>focused on the global level. The US isn't currently a

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<v Speaker 3>big market for BHP. It's about three percent four percent

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<v Speaker 3>of our revenues, but of course the US plays a

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<v Speaker 3>key role in determining policies that apply to the industry globally,

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<v Speaker 3>so it's something that we stay very close to. Our

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<v Speaker 3>strategy is one of positioning ourselves in the right commodities,

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<v Speaker 3>large assets that we can expand over time.

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<v Speaker 1>Specific focus on copper, potash.

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<v Speaker 3>We've got a big development underway in Canada iron ore.

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<v Speaker 3>We have the world's lowest cost, best performing iron ore

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<v Speaker 3>business and in a subset of only the best quality

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<v Speaker 3>calls for steelmaking. The other thing I would note is

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<v Speaker 3>that BHP's production is almost exclusively from countries that have

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<v Speaker 3>free trade agreements. In place with the US current, Australia, Chile,

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<v Speaker 3>and Canada.

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<v Speaker 2>What does a Trump presidency mean for the energy transition?

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<v Speaker 2>Does it actually slow it down? And so does it

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<v Speaker 2>mean that everything is a little bit slower, even access

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<v Speaker 2>to these critical minerals, that you have a bit more time.

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<v Speaker 3>So it's a really interesting question, and I don't think

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<v Speaker 3>this applies just to the US. If you look at

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<v Speaker 3>governments around the world these days, they're facing competing pressures.

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<v Speaker 3>I think there's a broad understanding of the need for

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<v Speaker 3>the long term need for the energy transition, but at

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<v Speaker 3>the same time, policy makers are needing to deal with

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<v Speaker 3>cost of living pressures, resurgence of industrial policy, trade protectionism,

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<v Speaker 3>all of these factors coming to bear, and how governments

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<v Speaker 3>then weigh up and balance between those factors and the

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<v Speaker 3>short term, of course, is the key consideration, but I

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<v Speaker 3>don't think it detracts from the long term trajectory of

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<v Speaker 3>the world achieving the energy transition. That energy transition is

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<v Speaker 3>going to be metals and minerals intensive, which is going

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<v Speaker 3>to compound demand for certain commodities often already strong baseline.

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<v Speaker 3>As the world's population grows, urbanization continues to play out,

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<v Speaker 3>and as billions of people around the world chase increase

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<v Speaker 3>living standards akin to those that we enjoy.

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<v Speaker 2>What can shareholders expect in terms of dividends in buyback?

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<v Speaker 3>So BHP has a very clear capital allocation framework. It's

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<v Speaker 3>something that we put in place back in twenty sixteen.

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<v Speaker 3>We've been consistent in execution of it. So one of

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<v Speaker 3>the things that BHP is known for is our very

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<v Speaker 3>simple strategy and are very consistent execution against that strategy.

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<v Speaker 3>We had great progress in recent years. Operationally. The company

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<v Speaker 3>is performing very well. We've returned significant cash dividends to shareholders.

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<v Speaker 3>In fact, we were the largest cash dividend pair in

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<v Speaker 3>the world in any sector for a couple of years running.

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<v Speaker 3>We remain one of the highest. And so this capital

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<v Speaker 3>allocation framework that we have in place, coupled with the

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<v Speaker 3>very clear growth prospects that we have in potash, copper,

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<v Speaker 3>the high performing iron or business that we have, vode

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<v Speaker 3>well for long term shareholder returns.

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<v Speaker 2>I have a couple of things. You know BHP has

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<v Speaker 2>previously say to the same more same pay laws. I

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<v Speaker 2>mean that means that there's like eight hundred million of

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<v Speaker 2>unexpected costs that come from that. What does it mean

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<v Speaker 2>for how you can mitigate that or what's the way forward.

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<v Speaker 3>So we have to continue to drive forward on productivity.

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<v Speaker 3>In the end, productivity is everything, and it's one of

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<v Speaker 3>the key points that we make to policy.

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<v Speaker 1>Makers in Australia and elsewhere is.

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<v Speaker 3>That what countries need to focus on is getting the

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<v Speaker 3>fundamental policy settings in place that support global competitiveness. Down

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<v Speaker 3>respect of that specific policy, we believe that it brings

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<v Speaker 3>with it higher costs for no improvement in productivity. We're

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<v Speaker 3>very big supporters of wage increases that are accompanied by

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<v Speaker 3>productivity increases. In that case that isn't a wage increase,

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<v Speaker 3>wouldn't be a company by productivity improvements, So it would

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<v Speaker 3>pull us backwards on the competitiveness front. We have to

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<v Speaker 3>work very hard to continue to improve productivity through other

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<v Speaker 3>means to upset that increased costs. And the costs are

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<v Speaker 3>still a little bit. We have to see exactly how

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<v Speaker 3>the policy gets implemented, but it will mean more costs

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<v Speaker 3>and we're offsetting that through our application of technology and

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<v Speaker 3>through improving work pack.

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<v Speaker 1>Practices through other means.

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<v Speaker 3>And we have a proprietary system in place called the

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<v Speaker 3>BHP Operating System, which is our way of working inside

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<v Speaker 3>the company and that's what's helped move us from not

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<v Speaker 3>being the best performing in the industry operationally to now

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<v Speaker 3>having the best performing iron ore business in the world,

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<v Speaker 3>lowest costs for five years running now and we'll continue

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<v Speaker 3>our focus on that and how we go about enabling

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<v Speaker 3>the ninety thousand people who work across BHP.

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<v Speaker 2>The productivity puzzle is one of the most important and

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<v Speaker 2>difficult questions that any chief executive can ask themselves. Does

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<v Speaker 2>AI help even at BHP in this regard.

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<v Speaker 3>So we've been using AI now for a few years

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<v Speaker 3>and it is helping with everything from how we go

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<v Speaker 3>about finding resources, how we go about extracting them efficiency

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<v Speaker 3>with which we're able to mine and then process these

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<v Speaker 3>resources and get them to market. And the exciting thing is,

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<v Speaker 3>I don't think we yet know what the full potential

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<v Speaker 3>of AI is.

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<v Speaker 1>It's not the sole focus.

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<v Speaker 3>It's at the end of the day, it's an enabler

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<v Speaker 3>of the underlying business and the way that.

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<v Speaker 1>People people work.

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<v Speaker 3>But yes, it's it's already unlocking value for BHP and

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<v Speaker 3>there's lots more to come.

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<v Speaker 2>Mike, I know there's a UK government's law basically suggests

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<v Speaker 2>that a chair steps down after nine years. What does

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<v Speaker 2>that mean for your chairman?

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<v Speaker 1>Oh so it's probably probably a question better for the

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<v Speaker 1>for the.

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<v Speaker 3>Chair But one of the things that BHP is is

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<v Speaker 3>known for and has done a very good job of

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<v Speaker 3>in the past is our approach to uh to succession.

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<v Speaker 3>But you know, I know that certainly from from my perspective,

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<v Speaker 3>the company is performing well. There's still so much more

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<v Speaker 3>opportunity ahead for BHP, and I can say that both

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<v Speaker 3>the board and the management team are very much focused

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<v Speaker 3>on on on on running the great business that we

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<v Speaker 3>have and unlocking more of that opportunity for shareholders and

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<v Speaker 3>other stakeholders.

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<v Speaker 1>In the coming years.

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<v Speaker 2>Are your biggest challenge for next year?

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<v Speaker 1>Yeah? So just right for next year.

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<v Speaker 3>Of course, safety is always front of front of mind

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<v Speaker 3>in an industry like ours, looking after our people's priority

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<v Speaker 3>number number one.

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<v Speaker 1>UH.

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<v Speaker 3>My management team and I spend a lot of time

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<v Speaker 3>out there in the field talking to people, making sure

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<v Speaker 3>that we understand what their challenges are and how we

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<v Speaker 3>can go about better enabling them. Of course, there's all

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<v Speaker 3>the uncertainty around trade, trade measures and so on in

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<v Speaker 3>the in.

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<v Speaker 1>The year ahead. It creates some some near term uncertainty.

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<v Speaker 3>But the long term outlook for our industry, for BHP

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<v Speaker 3>as a company, and for the commodities that we produce

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<v Speaker 3>is positive, and I'm focused on how we go about

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<v Speaker 3>positioning BHP to best capitalized on those opportunities.

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<v Speaker 1>In the year's ad Mike, thank you so.

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<v Speaker 2>Much for joining us today. That was, of course, Mike Henry,

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<v Speaker 2>the chief executive of VHP