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Now, soaring demand for copper and the energy transition will require some two hundred and fifty billion dollars of investments over the next decade, helping to drive further mergers in the industry. Now that's a you have PHP TAT executive Mike Henry, who says companies will need scale, strong balance sheets, and technical capabilities if they're to emerge as winners over the coming decades. Well, I'm delighted to be joined by
Mike Henry himself joining us. Now, Mike, you see, I start with your quote because you're kind of like the Linch panel of exactly what needs to get the job done. How do you see growth in your industry and how worried are you about global demand?
So I'll start by saying BHP's a long term, long term company. If you look at the long term trajectory from metals and minerals demand, it's very positive. Growing global population eight billion today to fifty to ten billion in twenty fifty, more urbanizations, so more people living in cities, which tends to be more metals and minerals for the
intensive living standards. The energy transition AI all of these things require more metals and minerals, so the long term trajectory for metals demand is quite strong, and BHP is positioned at the forefront of that to meet the world's need for critical minerals.
Mike, I mean, there's of course a number of some of these minerals that most people can't pronounce, lithium and then copper. Why have you gone from copper as really saying that that actually is needed more than anything else for the transition to work.
So copper demand is ubiquitous if you think about the.
Number of uses of copper, be it the phones that we carry around in our pockets, to televisions, air conditioners, wind turbines, electric vehicles. It's pervasive in the economy, and so we see that demand growing strongly over time. One of the other things we love about copper is that it has a steep cost curve, so the cost of producing it from one asset can be a lot more economic than producing it from another asset. So if you've got your hands on the right assets, you can generate
really healthy margins. BHP is already the world's number one or number two copper. We have the world's largest endowment of copper resources and we have.
Big growth prospects now in.
Australia, the US, Chile and more recently in Argentina. So we're positioned quite strongly in this in this quantity that the world's going to need so much more of.
I mean it, do you want more through rem and A?
So M and A is one lever in our arsenal of potential avenues of growth. We're already very well set in terms of our existing business, existing resources and the growth options that we have.
And no M and A deal is ever a.
Must do for us, but where there's an opportunity for us to unlock greater shareholder value through it, it's something that we've shown.
Ourselves as willing to consider.
But again, Plan A for us is develop more of the resources that we have and these fantastic growth options that we've already developed inside the company.
So what does M and A depend on? Is it price or is it actually a strategic fit or is it political blessing.
It has to be on strategy for BHP, So it's in the quantities that we've chosen to be in.
It has to be of asset quality that is in line with the.
Assets that we want, which are large, long life, low cost, and there has to be opportunity to unlock more value for shareholders through BHP's ownership, and and and so the those opportunities are few and far between.
I was going to say, there's there's just not much around that fits that criteria, yes, which.
Which is why we focus on making sure that the opportunities we have inside the company are so strong. And that's really what we rely upon, is this pipeline of organic options that we've developed.
When you look at, of course, the inauguration of Donald Trump and we were expecting policies to be pretty much in place, what does that mean for China? What does that mean for your industry in general?
So it's still a bit early to tell.
I think for our industry over the long term, we expect growing demand for key commodities to continue unabated. However, in the near term or along that path, there is going to be uh, you know, a degree of uncertainty related to trade flows, tariffs, industrial policy and so on, which is something that we keep a very close eye on, specifically in respect of the incomingdministration. We know that there's strong support for mining, strong understanding of the need for
security of critical mineral supply chains. Exactly how that plays, how we can practice and policy yet to be determined. There has been bipartisan support in the US for more mining in the US permitting reform, and we expect that to continue and to be a strong area of focus for the new administration.
Does that change actually the way you'll run BHP.
So BHP's strategy is one that is very long term focused on the global level. The US isn't currently a big market for BHP. It's about three percent four percent of our revenues, but of course the US plays a key role in determining policies that apply to the industry globally, so it's something that we stay very close to. Our strategy is one of positioning ourselves in the right commodities, large assets that we can expand over time.
Specific focus on copper, potash.
We've got a big development underway in Canada iron ore. We have the world's lowest cost, best performing iron ore business and in a subset of only the best quality calls for steelmaking. The other thing I would note is that BHP's production is almost exclusively from countries that have free trade agreements. In place with the US current, Australia, Chile, and Canada.
What does a Trump presidency mean for the energy transition? Does it actually slow it down? And so does it mean that everything is a little bit slower, even access to these critical minerals, that you have a bit more time.
So it's a really interesting question, and I don't think this applies just to the US. If you look at governments around the world these days, they're facing competing pressures.
I think there's a broad understanding of the need for the long term need for the energy transition, but at the same time, policy makers are needing to deal with cost of living pressures, resurgence of industrial policy, trade protectionism, all of these factors coming to bear, and how governments then weigh up and balance between those factors and the short term, of course, is the key consideration, but I don't think it detracts from the long term trajectory of
the world achieving the energy transition. That energy transition is going to be metals and minerals intensive, which is going to compound demand for certain commodities often already strong baseline. As the world's population grows, urbanization continues to play out, and as billions of people around the world chase increase living standards akin to those that we enjoy.
What can shareholders expect in terms of dividends in buyback?
So BHP has a very clear capital allocation framework. It's something that we put in place back in twenty sixteen. We've been consistent in execution of it. So one of the things that BHP is known for is our very simple strategy and are very consistent execution against that strategy. We had great progress in recent years. Operationally. The company is performing very well. We've returned significant cash dividends to shareholders.
In fact, we were the largest cash dividend pair in the world in any sector for a couple of years running. We remain one of the highest. And so this capital allocation framework that we have in place, coupled with the very clear growth prospects that we have in potash, copper, the high performing iron or business that we have, vode well for long term shareholder returns.
I have a couple of things. You know BHP has previously say to the same more same pay laws. I mean that means that there's like eight hundred million of unexpected costs that come from that. What does it mean for how you can mitigate that or what's the way forward.
So we have to continue to drive forward on productivity. In the end, productivity is everything, and it's one of the key points that we make to policy.
Makers in Australia and elsewhere is.
That what countries need to focus on is getting the fundamental policy settings in place that support global competitiveness. Down respect of that specific policy, we believe that it brings with it higher costs for no improvement in productivity. We're very big supporters of wage increases that are accompanied by productivity increases. In that case that isn't a wage increase, wouldn't be a company by productivity improvements, So it would
pull us backwards on the competitiveness front. We have to work very hard to continue to improve productivity through other means to upset that increased costs. And the costs are still a little bit. We have to see exactly how the policy gets implemented, but it will mean more costs and we're offsetting that through our application of technology and through improving work pack.
Practices through other means.
And we have a proprietary system in place called the BHP Operating System, which is our way of working inside the company and that's what's helped move us from not being the best performing in the industry operationally to now having the best performing iron ore business in the world, lowest costs for five years running now and we'll continue our focus on that and how we go about enabling the ninety thousand people who work across BHP.
The productivity puzzle is one of the most important and difficult questions that any chief executive can ask themselves. Does AI help even at BHP in this regard.
So we've been using AI now for a few years and it is helping with everything from how we go about finding resources, how we go about extracting them efficiency with which we're able to mine and then process these resources and get them to market. And the exciting thing is, I don't think we yet know what the full potential of AI is.
It's not the sole focus.
It's at the end of the day, it's an enabler of the underlying business and the way that.
People people work.
But yes, it's it's already unlocking value for BHP and there's lots more to come.
Mike, I know there's a UK government's law basically suggests that a chair steps down after nine years. What does that mean for your chairman?
Oh so it's probably probably a question better for the for the.
Chair But one of the things that BHP is is known for and has done a very good job of in the past is our approach to uh to succession. But you know, I know that certainly from from my perspective, the company is performing well. There's still so much more opportunity ahead for BHP, and I can say that both the board and the management team are very much focused on on on on running the great business that we have and unlocking more of that opportunity for shareholders and other stakeholders.
In the coming years.
Are your biggest challenge for next year?
Yeah? So just right for next year.
Of course, safety is always front of front of mind in an industry like ours, looking after our people's priority number number one.
UH.
My management team and I spend a lot of time out there in the field talking to people, making sure that we understand what their challenges are and how we can go about better enabling them. Of course, there's all the uncertainty around trade, trade measures and so on in the in.
The year ahead. It creates some some near term uncertainty.
But the long term outlook for our industry, for BHP as a company, and for the commodities that we produce is positive, and I'm focused on how we go about positioning BHP to best capitalized on those opportunities.
In the year's ad Mike, thank you so.
Much for joining us today. That was, of course, Mike Henry, the chief executive of VHP