BHP CEO eyes JVs for future-facing commodities

The chief executive addressed the company’s shareholders on Thursday to summarise BHP’s plans for the 2021 financial year and beyond, including decisions around divestment of coal assets and taking on potash.

According to Henry, a decision around taking on potash as a new commodity will evolve “in the course of the next year” as BHP aims to take on commodities it believes will be in greater demand.

To do so, BHP is targeting further exploration to find new resources, as recently done with the Oak Dam copper deposit in South Australia, and more early stage joint ventures with other companies.

“Due to the electrification and decarbonisation trend at play due to the rising standards of living, the world is going to need more copper, nickel and potash so the demand is going to be strong,” Henry said.

“We already have business in copper and nickel but would like to secure more options in this space because we believe there is attractive value in returns generated for shareholders.”

BHP also plans to divest part of its coal business, including several mines in Queensland, a New South Wales thermal coal mine and a stake in a thermal coal asset, Cerrejon, in Colombia.

Henry stressed that the company would retain its high-quality coking coal assets across Queensland, as the company believes coking coal has a strong future as steelmakers seek to lower their emissions.

“High quality coking coal is the type of coal we believe is going to have upsize exposure in a decarbonising world,” he explained in his shareholder address.

“Those assets will stay with BHP and realise value by becoming even more productive, lower cost and focussing on improving returns on capital.”

Henry acknowledged the erratic commodity prices brought about by the COVID-19 pandemic as he forecasted high iron ore prices and low prices across other commodities to balance out in the short-term.

“We have a great iron ore business and it is going to be a business that remains strong for a long time, but we aren’t expecting prices to hold up at current levels,” he said.

“We do expect as supply recovers in other jurisdictions we’ll see prices come off a little bit and at the same time we’ll see prices for other BHP commodities increase as the rest of the world recovers from near-term COVID impacts.”

The chief executive outlined that despite trade tensions with China, he had faith in the relationships with its suppliers and customers in China, which remained on “a very solid footing” during the pandemic.

“Our direct relationships with customers and suppliers are on a very solid footing and remain strong,” Henry said.

“Through the COVID period they did a wonderful job and went out of their way, even in the depths of their COVID crisis to meet their commitments to BHP.”

Looking ahead, Henry said that the company would release its scope 1 and 2 climate change targets next month, and despite the current uncertainty in the world he’s confident in the company’s future.

“The future is bright, I can’t downplay the current uncertainty the world is facing and the tragedy that is COVID-19 but we can see what this company has been able to achieve in spite of these unprecedented challenges,” he concluded.

“Couple that with securing more options in the commodities the world is going to need more of is a winning formula that is going to allow us to continue to grow value for a very long time.”