BHP is looking to add more oil, copper and nickel resources to its portfolio, while souring on thermal coal because it thinks the fossil fuel will be phased out, “potentially sooner than expected”.
BHP’s chief financial officer, Peter Beaven, told investors and analysts in a strategy briefing on Wednesday that “the world will be a very different place in 10 to 20 years’ time” and the global miner must be thoughtful about the risks and opportunities.
Beaven said the the miner believed that electrification of transport and the decarbonisation of stationary power were two strategic themes going forward.
As such, BHP believes that copper and nickel – used in electric vehicles – are sound investments, a turnaround from its stance of a few years ago when it was trying to sell off its Nickel West project in Western Australia.
But even with the trend towards electric vehicles, BHP forecasts that the decline in existing oil fields ensures that new capacity will be required.
“It is likely that attractive rent will continue to be available for well-placed assets,” Beaven said.
BHP is looking to develop oil projects in the US, the Gulf of Mexico and Canada, Beaven said.
It is also interested in finding another nickel resource in WA and expanding its existing copper projects, in South Australia, Arizona and Ecuador.
But BHP has “no appetite for growth in energy coal regardless of asset attractiveness”, the company said in a briefing slide.
BHP has two high-quality thermal coal mines that generate high margins – the Mt Arthur Coal mine in New South Wales and the Cerrejón mine in Colombia, in which BHP holds a one-third stake – but Beaven suggested they could be sold.
“Our focus will be on maximising value to shareholders, whether we are long-term owners or not,” he said.
BHP forecasts that metallurgical coal, used in steelmaking and mined by BHP in central Queensland, will still offer the company attractive returns, as will its iron ore operations.
But there’s a possibility that gas will be leapfrogged by emerging markets as they opt for renewable energy, Beaven said.
BHP also sees potash, used in fertiliser, as a valuable asset in the long-term as food insecurity drives increased need for potassium.
But Beaven said developing BHP’s substantial potash resource in Saskatchewan, Canada doesn’t yet pass risk-return hurdles, given the large investment required.
In other resources, the abundant supply of lithium means BHP isn’t interested in the asset, and the miner foresees that cobalt will lose share to nickel.