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BHP maps out priorities in quest for ‘future-facing’ commodities

The head of Australian mining giant BHP says new plans to boost exposure to the “future-facing” commodities nickel and copper will focus first on exploring for new deposits and finding ways to extract more from existing assets, rather than looking for acquisitions.

As BHP embarks on a clean-up of its portfolio by seeking to sell several coal mines, quit thermal coal and exit the Bass Strait oil and gas fields, it has also laid out plans to lift exposure to commodities that chief executive Mike Henry believes will be increasingly required to meet the world’s evolving needs, such as the manufacture of clean energy technologies.

Asked whether BHP would seek acquisitions to secure more options in commodities like nickel, copper and potash, Mr Henry said “maybe”, but only if the right opportunities presented.

“It has to be really attractive assets in the places that we like and for an attractive price, and those factors don’t line up that frequently,” he said.

“So we don’t have a strategy that is reliant on acquisitions, rather, our first focus is going to be securing more options through innovation.”

Some of BHP’s existing copper and nickel resources were lower-grade, Mr Henry said, “so in order to be able to extract and process them economically, we are going to need to continue to come up with more innovative ways”.

“We’ll have a targeted effort under way around innovation,” he said. “We’ll also look to exploration … us going out and finding new resources.”

Following an analyst roundtable with Mr Henry earlier this month, mining analysts from UBS said options for copper and nickel within BHP’s existing portfolio appeared to be limited, and suggested merger and acquisitions were likely to “creep back onto the agenda”. Although BHP had stated its preference for exploration over acquisitions, Macquarie analysts noted the company had recently purchased the Honeymoon Well tenements in Western Australia to shore up its nickel division. “We believe it would not shy away from acquisitions in copper should they present,” the Macquarie analysts said.

In a significant reshaping of the business, BHP, the world’s largest miner, this month confirmed it was examining options to divest from its Mt Arthur mine in New South Wales and the Cerrejon project in Colombia, both of which mine thermal coal – the most carbon-intensive energy source. Mr Henry surprised investors by adding that BHP also intended to exit the BHP-Mitsui Coal joint venture, which mines coking coal – coal used in steelmaking – in Queensland, and would also seek to find a buyer for its 50 per cent holding in the Gippsland Basin oil and gas fields off Victoria’s coast.

BHP has come under pressure from climate activists and large investors for its exposure to thermal coal and contribution to global warming, with a growing number of shareholders pledging to divest from thermal coal miners on ethical and financial grounds.
Source: The Sydney Morning Herald

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