BHP Group Aktie

Just ask you to take about 15 seconds and get seated, and then we'll keep going with BHP, please. So let's take some seats. Okay. Good morning, everybody. For those of you I haven't met, I'm Jason Fairclough. I run Metals and Mining Research for Bank of America in EMEA. On behalf of myself and my new colleague in Australia, Kate McCutcheon, very pleased to welcome our next speaker, BHP CEO-elect Brandon Craig.

Brandon has chosen a hybrid format, so he'll do a few slides, and then we'll have a fireside chat. Brandon, welcome to Miami, and over to you now for your presentation.

Good morning, everybody. Thank you for the warm welcome, Jason. I know most of you are probably more familiar with seeing Mike Henry at this conference. Mike has led BHP with clarity and discipline. And I'm quite deeply honored to be succeeding him as the Chief Executive on the 1st of July. With that date very fast approaching, I thought it would be appropriate that it would be better that I turn up at this conference today and speak to you all.

Mike and I have spent a lot of time on the road together since our announcement, speaking with our workforce, meeting with our key stakeholders and shareholders. The message we have heard is pretty consistent, which is BHP is performing really strongly. There is also very massive opportunity ahead of us.

If I can just draw your attention to the disclaimer slide. BHP has evolved generation by generation to meet the changing needs of the world. Under Andrew Mackenzie, BHP simplified its portfolio, and under Mike, we have pivoted to future-facing commodities. We have built a truly world-class portfolio of growth options and embedded the BHP Operating System, which we affectionately just call BOS, to build a culture of high performance.

BHP has a clear and compelling strategy, and that is to invest in highly attractive and durable commodities, to operate world-class tier one, and I stress tier one, world-class tier one assets with excellence, and offer a distinctive approach to social value, and of course, to allocate capital with discipline. This strategy has been very successful.

Since 2020, we have delivered total shareholder returns of more than 300%. That is around 25 percentage points higher than the average of our closest peers and significantly above the MSCI World Materials Index. So today, I want to talk about the strength of the position we are in right now and the potential I see for BHP to operate at even higher velocity with increased ambition to lift safety, productivity, and growth to the next level.

So let's start with where we are today. Our half-year results demonstrate the underlying quality of our business. We have margins averaging over 50% for 25 years. We have a strong balance sheet strengthened by actions to unlock undervalued and underutilized capital.

We have a track record of more than $110 billion returned to shareholders over the past decade and a strong pipeline of organic growth. That gives us a truly strong platform to deal with the world that I think we can all see is changing at pace. Geopolitical complexity is increasing, trade flows are changing, and energy and resource security is front and center.

These dynamics bring significant challenges but also opportunity. In this environment, asset quality, operating discipline, and the ability to adapt matter more than ever. A key pillar of our strategy and reason for BHP's ongoing success is operating tier one assets with excellence. Low-cost, high-quality assets operated well with discipline generate higher margins and cash flows through the cycle, and this is even more relevant in periods of high inflation. That is where BHP is truly advantaged.

And in times like this, the cost gap between efficient and less efficient companies grows, steepening cost curves. The result is the ability to capture higher relative margins through the cycle, and in short, we are built to be more resilient and to create value. Of course, strong foundations start with safety. This is non-negotiable and my first priority.

We have an improving track record, but we are not yet at zero, which is where we intend to be and need to be. We will keep strengthening our foundations through a safety-first culture, faster and more rigorous intervention alongside the improvements enabled by our Operating System. And we will use more technology to keep people out of harm's way and detect and control risks earlier.

One of the reasons I'm so passionate about this sector is that no matter how well you are performing, there is always another level we can reach when we stay focused on what matters most. A new horizon of performance lies ahead of us, and I'm determined to lead BHP there. We will accelerate performance by pairing the BHP Operating System with the faster adoption of technology to unlock even greater safety and productivity.

As these two systems reinforce each other, the rate of improvement can be even greater. We'll continue disciplined and consistent growth, developing the pipeline already in front of us and staying ready to act when value-accretive opportunities emerge. The point is not growth for growth's sake. It is value-accretive growth that ultimately matters.

We will also be stronger and more resilient, building and investing in strategic relationships supported by the creation of social value to navigate and grasp opportunities in what is an increasingly complex world. And we'll do all of that while maintaining a strong focus on capital discipline and attractive shareholder returns, which is exactly what our investors expect from us.

I've been fortunate enough to work across the majority of BHP's assets. What I've seen is that operational excellence comes from disciplined systems, world-class teams, and a culture of disciplined daily improvement, and an operating system that makes all of that repeatable. That discipline creates stability, and that stability unlocks performance. The quality of this system and the consistency with which we apply it is a competitive advantage. We have seen the power of BOS in our iron ore business in Copper South Australia, and more recently at Escondida.

We assess BOS maturity through an Operational Excellence Index. As you can see on this slide, Escondida's OEI continues to trend upwards and is already world-leading against external benchmarks, and the results follow. As we reported last month, Escondida delivered record material movement and concentrator throughput for the nine months through to March.

The exciting point is how much opportunity still remains. We continue to progress BOS across the company, and the opportunity now is to lift our rate of improvement even further by pairing BOS with emerging technology. Together, they can create a compounding effect, stronger safety, accelerating productivity with greater consistency.

Great operating performance and a diversified portfolio drive strong cash flows that underpin shareholder returns and reinvestment. We are focused on growth and generating it in a very disciplined way. Over the past two months, we have achieved two very important milestones. We have submitted the environmental permit application for Escondida's new concentrator, and Resolution Copper completed its land exchange, which enables the important work to better understand the ore body now being able to progress.

Our high-quality, capital-efficient organic growth options are expected to deliver compound annual copper equivalent production growth of 3% to 4% through to 2035. And this includes growth of around 5% per year on average in our copper business that will further increase our exposure to forecast copper prices.

In copper, we are the world's largest producer and we plan to increase production on an attributable basis to about 2 million tons per annum by 2035. We have a strong pipeline of growth options today. We are not stopping there. One of my priorities will be ensuring we have options to grow well beyond 2035.

That means increasing exploration, seeking opportunities to partner with peers to unlock value in adjacent operations, and by executing smaller bolt-on acquisitions, and when the value case supports them.

In this way, we will deliver more programmatic growth and while we will remain extremely disciplined, our diversified model and strong balance sheet gives us the ability to move at pace if the right opportunities present themselves. Credibility with investors is built over time, and it is built through delivery. Our focus is straightforward. Set clear commitments, allocate capital against them, and then execute.

More simply put, we do what we say we will do, and in turn, we create value for shareholders. And copper is a very good example. We have increased our copper production guidance for the next two years at a time when supply across the sector remains constrained and peers have revised their production expectations downwards.

This gives us more exposure to a constructive copper market in a way that is underpinned by assets, operational performance, and disciplined execution, not simply aspiration. That is the kind of growth we want to be known for, growth that is visible, growth that is executable, and growth that is value accretive.

In closing, BHP thinks and plans in decades. We have done very well over the last decade, and we set up to win the next. We have a simple and clear strategy. My focus is to accelerate performance, more velocity, more ambition, and stronger discipline. That means higher productivity and improved capability. It means consistent, disciplined growth, and it means an even stronger, more resilient BHP.

We have an extremely bright future ahead, and I'm excited to lead this next phase for BHP. And I look forward to connecting with all of you as I get around the place in the coming months. Thank you.

Thanks, Brandon. Why don't you join us for a little fireside here?

Thanks.

Thank you. I can see some killer charts in the making there, so.

I'm going to be borrowing some of those.

So let's get into it. Let's start with a simple one. And you touched on it in your presentation, Brandon. What is your vision for BHP under your leadership?

Thank you. I think the simplest way I can describe it would be to say it's accelerating performance to the limit. Maybe I'll just talk about that very briefly, through the lens of safety and productivity. So on safety, I have a view that if you don't have safe and stable operations, you don't have the right to do any further growth or any further investment in your business.

Investing heavily and making sure we can eliminate fatalities from our business is a key priority. So we will be doing a significant amount of work of pursuing absolute zero in terms of fatalities in our business, and supporting that thinking across the industry. On productivity, I think we have seen in BHP that implementing our Operating System has been a formula for accelerated productivity, but we can also see a lot of emerging technology coming towards us.

And I have a view that if you can couple the Operating System together with some of the latest advances in technology, we have the ability to compound and accelerate how fast we can go after that improvement. Technology also changes the structural limit of productivity. So, technology allows you to unlock a level of performance that with more traditional approaches you cannot achieve.

So that combination of an Operating System and technology is very powerful. And then on growth, there's two components. The first, organic growth and delivering that with discipline and confidence so that people can actually bank that growth in terms of how they look at our business is really important.

And we'll be strengthening our organization to bring that delivery reliability to our capital projects. But I also want the organization to be a lot more creative in terms of how it thinks about unlocking additional growth. Now, I described in my presentation a concept of programmatic growth. I think it's critical that a business like ours has an underlying growth rate banked into it, which then gives you the degrees of freedom to be able to pursue more interesting and more creative options in the future. If we can put all of that together, we can drive BHP's value to the next level, and that's what I'm gonna be focusing on.

Let's just back up a little bit. Something we're asking most of the CEOs today. Obviously, we have a situation in the Middle East. How is that impacting your business, so far on the supply side, on the demand side? And there's a particular focus on diesel, and particularly with some big miners that are moving a lot of dirt, like you. So, how do we think about that?

Listen, I think like most other mining companies, we're watching what happens in the Middle East very, very carefully. Most of our businesses do run on critical input supplies like diesel, explosives, and similar. So those inbound supply chains are really important. If I answer the question through the lens of, I think, looking at BHP as a business, what's important is the underlying demand for our products is very resilient. So that's important because when you have conflict, the risk is you can get GDP impacts, and you can get demand destruction that happens.

And BHP, we're not seeing any of that at this stage. Iron ore continues to be strong. Copper continues to be strong. We're obviously very pleased about that. But on the inbound side, you know, we did have a concern, could there be a disruption to critical supplies like diesel? Fortunately, we have very strong supply arrangements in place. We have very strong supply relationships in place and because of that, what we've seen is the Middle East disruption translates more to a pricing impact to a supply chain risk impact, particularly when you're a business as strong as BHP.

I think what we see in the market is for the supply and demand to balance out through energy products, it's the more marginal producers that are ultimately impacted by disruptions in supply chains. So for BHP, it's fundamentally a pricing effect that we have to manage. And it's still not immaterial though.

I mean, when if you want to put that into numbers, $1 per barrel of diesel translates if you assume you have to carry $1 a barrel over 12 months, that translates to about $10 million of EBITDA impact for a company like BHP. So, it's not insignificant, but I think the quality of the portfolio, the tier one nature of our assets, the quality of our supplier relationships, is translating to the business being incredibly resilient during this period.

Okay. Thank you.

So BHP seems to have rebranded themselves as the world's largest copper producer, which is technically true. Tell us a bit about that, Brandon.

Yeah. I'm not quite sure if it's necessarily a rebranding per se, but I think we've been working really, really hard in our copper business to try and lift our productivity, to try and lift our performance. In recent years, we've managed to unlock sort of 30% underlying growth in the copper produced from the business. And we've done that really through productivity and focus on business performance.

So it's something we are particularly proud of to have accomplished. But it's not meant to be a signal to anyone that we're trying to necessarily become a pure play copper business. I think similar to what Simon was describing earlier, we do fundamentally believe in the diversified model. We think that gives us a unique set of advantages to be very successful in the market.

But copper clearly is a focus. If you have a look at the slides, you'll see some of the organic growth options we set out earlier. Those are highly attractive options. Copper is an incredibly resilient commodity in the sense that it's not easily substitutable. It's quite ubiquitous in the development of countries. A very strong demand profile over the next decade. So we're very bullish copper, but we still fully intend to remain a diversified company.

And so given that you're bullish on copper, what does that mean for the other parts of your business in terms of attracting capital when copper's possibly the standout?

Well, we certainly apply capital across the portfolio still. The single exception is probably Queensland. We obviously have a set of royalty arrangements in Queensland we're not very comfortable with. And because of that, we're not investing significantly into Queensland. But across the balance of the portfolio, potash, copper, iron ore, I think if you refer to the chart I had up earlier, there's still investment going into all of those businesses.

Now the level of investment in each one is different. I think you can see there is a bias to copper. We have the view that it holds probably one of the longest, one of the strongest long-term demand profiles of all the commodities in the portfolio. So we think it's right that it attracts a disproportionate share of capital.

But we're certainly not starving the capital that goes to the balance of the business, and we will continue to put capital into iron ore and potash as well.

And so if we come back to the copper growth in the portfolio, there's probably a couple of things to unpack. How do you think about the capability of the business to execute or manage projects? And then does that hit differently for the greenfield optionality you have versus the brownfield optionality?

I think if you, if you have a look at BHP's track record on major projects, our underlying track record is actually very strong. If you look at the last $35 billion of investment over recent years, we've delivered that capital to within 3% of the cost estimates we set out to the market. I think the single exception is Jansen, where we got some productivity assumptions incorrect, and where we didn't estimate inflation and escalation appropriately.

I think going through 2021, when we had COVID, and we ended up with inflation levels higher than what we expected. But if you have a look at the underlying capability in BHP to deliver major projects, we've got very strong project systems. We have very strong project talent, and because of that, we're very confident we have the internal capability to be able to deliver major projects.

And it's important to understand when you have a look at the portfolio, how we think about the projects, because we're not carrying every growth option alone. If you have a look at Escondida, for example, that's probably one of the projects we're carrying as BHP. But if you go into Vicuna, we're doing that jointly with Lundin.

If you have a look at what we're planning for resolution, that's going to be done together with Rio Tinto. So the fact that we've partnered, that partnership helps us distribute risk. You put all of that together with our projects being in different jurisdictions. Our projects are not competing with each other.

We've set risk frameworks up through who we partner with, and we've got very good embedded capability for delivering. So you package all of that together, and we're very confident we can deliver the set of projects we've currently set out.

Let's dig into Vicuna a little bit, right? I think it's interesting because you mentioned it's a JV. It's a JV where you aren't in the sole driving seat. How are things going with Lundin so far?

Yeah, great. Great, actually.

Good answer. Good.

Yes. No, it is genuinely good. I think as BHP, historically, we shied away from joint ventures and partnerships. We had a sense of discomfort if we didn't have direct control over the work that we were undertaking.

That's post Samarco particularly?

No, not necessarily post Samarco. I think our sort of strategic philosophy was always own and operate. And that was the dominant thinking in the business. But I think we've seen that we can be a little bit more nuanced and a little bit sophisticated about how we think about managing risks, particularly in more complex jurisdictions.

And putting together a way of working that allows us to address the specific issues we need to manage. If you look at a project like Vicuna, I think there's no disputing the quality of the resource base. There's 47 million tons of copper in the Vicuna resource, which is phenomenal. But we needed to make sure we could create an investment approach that would give us confidence we could deliver. In Lundin, they have a track record of delivering projects in more complex countries.

They'd been in Argentina for a very long time. So because of that, we can partner with a team that actually has demonstrated capability of successfully working in these jurisdictions. So that's valuable for us. But in addition, the way to think about this is the complementarity. You can bring the best of both organizations together in terms of how you structure these arrangements. so when you look at the joint venture structure we've established with Lundin Mining, we can both vend in talent into that structure.

We can take the best of standards, policies, and systems for both organizations to put them into that vehicle. And that combination actually is really, really interesting because it allows you to take the best of Lundin, which is speed, agility, a level of entrepreneurship, incredible focus on cost.

And you can couple that with BHP, which has probably got more rigorous systems, more rigorous governance. That combination together is proving to be really successful. So, we actually find the more we operate in this manner, the more we find that it's beneficial. And at the same time, in a country like Argentina, a structure of this nature, because it's a joint venture and the scale of the investment being by the time we get to Filo, $18 billion, being able to risk share that through more parties is a very sensible thing to do.

Okay. I'm aware of time. Let's see if we've got any questions from the floor. Anybody got a burning question? There's one right behind you there, Jack.

Going forward, how do you see the production of iron ore in Australia? It mean, to maintain because of the resource replacement and or option of growth.

I'll speak to BHP's component of that. So we currently have a number of investments underway in our iron ore business. We have what we call the Western Ridge project, which is an extension of our Newman mine. We have Ministers North, which you could see as an extension of the old Yandi mine. We have infrastructure investment both in rail and car dumping and port infrastructure.

That combination will allow our iron ore business to grow to about 305 million tons. And then the opportunity for BHP is to capacity creep that volume through productivity. Cause the way to think about our business is you don't want to over-invest in infrastructure. You want to make sure you're harnessing the maximum productivity potential, so you get the best capital efficiency out of your business.

So for BHP, the ultimate constraint in our iron ore business is the volume we can put through the port at Port Hedland. That's about 330 million tons. So if you invest in infrastructure and mining capacity to get to 305, that delta is just a huge opportunity to do through pure productivity and capacity creep, where you can get all that volume at zero capital.

So that's gonna be the focus for us. We'll deliver the projects we have in train, and then we're gonna push really hard on how we can deploy the operating system, the technology I described earlier, to be able to then unlock future volumes, but at very, very low capital.

Could probably squeeze one more in. We've got one right here we can go to.

Hi, Ben Shrewsbury from Aberdeen Investments. Could you maybe talk a little bit around the infrastructure portfolio and what is non-core, what is core, and just sort of, the value unlock opportunity for BHP with, I suppose, that non-core segment, please?

Sure. Sure. It's interesting to think through that question through a lens of history. When you develop major mining infrastructure, what tends to happen is there's very little state, province, or country-level infrastructure. You have to carry a lot of infrastructure directly as the business. If I use Escondida as an example, you have to put in the power infrastructure, you have to put in the water infrastructure, you have to put all of that in place.

When you do that, you end up in a situation where you've had to put the infrastructure in place. But if the infrastructure existed, or you were later in your development, you wouldn't need to put that infrastructure there. So in many respects, it becomes somewhat unnecessary, and it becomes low returning capital within the portfolio.

And it would fit the descriptor of being better owned by, a sort of, larger major company or state sort of state energy corporation, for example. Those opportunities, I think, are where we have opportunity to try and monetize that infrastructure in some way.

Having said that, I think we've shared with the market that we believe there's about $10 billion of opportunity for BHP. I know we've delivered about $6.3 billion of that so far. So there's $4 billion to go. We know what those opportunities are, so it's not an undefined quantum of sort of capital improvement. We're busy actively working through those residual opportunities.

But I'm not expecting any opportunities beyond that $10 billion number. Now there would be capital that, in theory, you could recycle in that manner. But you start to approach a point where you either lose operating control or create operating risk by doing that, and that's a level we don't want to go past.

Okay. Could you join with me, please, in thanking Brandon for his presentation?

Thank you.