https://www.miningweekly.com
Coal|Copper|Energy|Exploration|Gas|Hydrocarbons|Mining|PROJECT|Projects|Renewable Energy|Resources|Steel|Infrastructure
Coal|Copper|Energy|Exploration|Gas|Hydrocarbons|Mining|PROJECT|Projects|Renewable Energy|Resources|Steel|Infrastructure
coal|copper|energy|exploration|gas|hydrocarbons|mining|project|projects|renewable-energy|resources|steel|infrastructure

BHP keen on more copper, nickel sulphide and oil

BHP keen on more copper, nickel sulphide and oil

Photo by Bloomberg

22nd May 2019

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

Font size: - +

PERTH (miningweekly.com) – Mining major BHP on Wednesday laid out its near-term plans for investors, saying that the company would look to add “options” in copper, nickel sulphides and oil.

Speaking to investors, CFO Peter Beaven that BHP analysed a number of scenarios to ensure that the company’s portfolio was resilient and to assess how well placed BHP is to act on opportunities, while also revealing gaps.

“We can, with a degree of conviction, say that adding options in copper and nickel sulphides, as opposed to laterites are likely to be a sound investment. Demand will grow and, at the same time, new supply sources will be hard to discover and permit, and will be more expensive to develop.

“Grade decline is an inherent feature of the existing mines, so that just maintaining existing production capacity is a challenge,” Beaven said.

He noted that while demand for batteries would drive lithium and, to a lesser extent, cobalt, BHP believed that abundant supply of the former, and substitution of the latter, reduced the attractiveness of these commodities.

“Steel production growth is expected to remain marginal, and increased recycling and long term slower growth in infrastructure will challenge even these low possible growth rates.

“Our iron-ore and metallurgical coal assets, being low cost, will likely continue to offer attractive margins and returns. But cost curves are also likely to flatten compared to today, and the end markets will remain concentrated on China, although less so for metallurgical coal.”

Energy demand will rise as populations grow and living standards increase, while hydrocarbons demand would likely be tempered by increased renewables in the energy mix, Beaven said.

He added that thermal coal should remain a large market; however, BHP expected demand to plateau and then decline, as headwinds strengthened.

Field decline in oil would ensure that new capacity would be required, notwithstanding demand destruction owing to electric vehicles (EVs). In addition, new discovery trends were not strong, and Beaven said that it was likely that attractive rent would continue to be available for well-placed assets.

He added that while there was a growing market for gas in the medium term, there were abundant new supply options and a possibility that gas would be bypassed as a transitional fuel to renewable energy in emerging markets in the longer term.

On potash, the company expects demand to continue to grow, as the world consumed more food and demands for a higher quality increased.

“Demand for potash should continue to grow in line with established historic trends. However, there is today material existing latent potash capacity. We expect this existing latent capacity will be utilised by the middle of next decade given this demand growth. This is likely to cap prices in the near term. Thereafter, new greenfields projects will be required,” Beaven said.

He reiterated statements from CEO Andrew Mackenzie, saying that the Jansen potash project, in Canada, made “sense on a strategic level”, and created a high-margin, long-life asset, with multiple, basin-wide, expansion opportunities.

However, he noted that as existing excess supply capacity would only be used by the middle of next decade, first production from Jansen could only arrive in that time frame.

“But this is a large investment and the first stage has to pass the risk-return hurdles in the capital allocation framework. And that has not yet happened.

“As always, we will be guided by our capital allocation framework. It demands that investments in these projects will always be compared with cash returns to shareholders. We will not invest in markets that do not require additional capacity. But we must be prepared to invest counter-cyclically.”

BALANCED PORTFOLIO

Beaven told investors that it was vital for BHP to maintain options in different quadrants, noting that an unbalanced portfolio overweight with long-term options would penalise near- to medium-term returns to shareholders. While a portfolio with only near-term, low-risk options, would jeopardise long-term value and dividend growth.

He noted that while BHP currently had options in both copper and oil, the company needed more. BHP is also interested in adding more nickel sulphide resources to its portfolio, with the miner expected to add exploration options in these areas.

“We do not need to do merger and acquisitions. But we never discount it as a way to acquire great resource bases, especially early in the life of a project when the optionality is not necessarily fully understood or valued.

“We are unlikely to add significant new capacity in iron-ore or metallurgical coal beyond productivity tonnes. We should squeeze the maximum value out of the existing invested capital. Our energy coal exposure is just 3% of our asset base, but it is made up of two very high-quality mines, which generate high margins.

“Our focus will be on maximising value to shareholders, whether we are long-term owners or not,” Beaven said.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

Comments

Showroom

Flameblock
Flameblock

FlameBlock is a proudly South African company that engineers, manufactures and supplies fire intumescent and retardant products to the fire...

VISIT SHOWROOM 
John Thompson
John Thompson

John Thompson, the leader in energy and environmental solutions through value engineering and innovation, provides the following: design, engineer,...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Photo of Martin Creamer
On-The-Air (15/03/2024)
15th March 2024 By: Martin Creamer
Gold, hydrogen, mining boost make headlines
Gold, hydrogen, mining boost make headlines
15th March 2024
Magazine round up | 15 March 2024
Magazine round up | 15 March 2024
15th March 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.13 0.163s - 92pq - 2rq
Subscribe Now