05 March 2018
Daniel Malchuk, President Operations, Minerals Americas
Prospectors and Developers Association of Canada 2018 Convention Toronto, Canada
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Thank you James, for that kind introduction.
We would like to begin by acknowledging that the land on which we gather is part of the Treaty Lands and Territory of the Mississaugas of the Credit and the Metis people of this area.
It is great to be in Toronto – one of the safest, most multicultural, most liveable cities in the world.
A global city that reflects the world – with more than half its residents born outside of Canada.
A place of possibility that demonstrates the connection between diversity and prosperity.
BHP’s history in Canada goes back to the 1960’s, through interests in copper, lead, zinc, potash and diamonds. And Canadians play an important role in our Company – we have the world’s best undeveloped Potash project, we have almost 300 employees here in Canada, and even our new Chairman is Canadian!
And Canada, like my home country of Chile, is a country where mining is very important to the economy.
The skills and expertise of people in this room will continue to drive that economic contribution. It’s our collective responsibility to keep innovating to unlock that potential.
With that in mind, I want to use this time to talk to you about those opportunities and possibilities. About the future of our mining industry.
To talk about the future though, first we must understand the past. And for me the history of mining and the history of the world are intrinsically linked.
And that history is not always a happy story.
Take the sodium nitrate mines of Chile, for example.
In the 19th Century, Chile was mined extensively for this mineral. It was used for fertilisers and munition. At the time it was called ‘white gold’.
In the middle of that century, white gold mining became a huge part of Chile’s economy. Sodium nitrate mining grew to such an extent that it provided around half of the country´s income.
My country had white gold fever.
Towns were built to support the booming industry. Battles were fought over the ground it lay beneath.
But the industry did not plan for the future or think about its context in broader society.
It did not keep up with technological and societal advances.
It did not cultivate and nurture the towns it created, or think about how to maximise the benefits of the boom. It focused only on the short term.
This approach was not unique to the sodium nitrate mines of Chile. Short term thinking has been endemic throughout our industry at times.
In the early 20th century, the future arrived. Scientists discovered how to make synthetic sodium nitrate through a chemical process. White gold no longer needed to be mined.
By the early ‘60s, the towns that supported sodium nitrate mines of Chile were abandoned.
The ghost towns left behind are now tourist attractions. The wealth created was temporary. The benefits for society of this incredible boom were lost.
What it means to BHP
How are the 19th century ghost towns of Chile relevant to us here in the 21st century metropolis of Toronto?
Let me put it this way: the possibilities of progress must never be taken for granted. Possibilities are either turned into realities that endure and grow – or they are poorly planned and considered and turn into ghosts.
Like the 19th century, and other booms over our cycles, we might be at the heart of another mining boom in the 21st Century.
But this time we won’t be digging for white gold. The minerals we will be seeking will be used to build the batteries and solar panels that will power the digital age. You could call them ‘tech gold’.
The possibilities are immense – but, again, must not be taken for granted.
The example in Chile tells us that sustained success is never guaranteed.
To build truly sustainable success that endures, we must keep pace with technological advances so that our industry fuels them, leads them, and adapts to them.
While we work hard to be more productive to create value for our shareholders, we must balance this approach by working in partnership with local communities and host governments.
Our industry must create and run mines that are recognised for their high performance in a much broader sense. Communities should thrive while we are there and stand tall after we leave.
We don’t want to create ghost towns. We want to be the engine for progress and development.
We all need to take more time and put in more effort to understand the impact of our interactions – and shape our activities to ensure they strengthen the societies, economies and environments of the communities in which we operate, and the global community.
To achieve this, we need to think, plan and act for today and tomorrow. Making workplaces safe and productive today. Making local communities prosperous tomorrow. And ensuring the environment we leave is sustainable for the tomorrows to come.
Certainly, we must continue rewarding our shareholders and lifting our operational performance to benchmark levels, but this financial and operational excellence is informed by the much broader role we play in society.
The days of incredible highs and crushing lows of the sodium nitrate industry are gone. That’s why issues like safety and sustainability must be core business along with our relentless focus on financial and operational discipline.
The good news is that – in recent decades – the industry as a whole has begun to think more holistically.
But we need to do more.
We must work harder to contribute to communities in which we work and the world in which we live.
We must build legacies in local communities and economies, and our society and economy at large that outlast our operations.
Building on our strengths, frankly assessing our failures
Over the years as the world has changed and progressed, mining has changed too. It’s changed even in the time I’ve been in the industry.
I remember when I first stepped onto a mine in the 1990s.
There weren’t many – if any – women. The industry was not strongly connected or attuned to the ecosystem in which it operated. I saw equipment being used that I thought was huge and complex, but that equipment pales in comparison to what we use today.
Now, when I visit our operations around the world I see more diverse workforces, I see a continuous focus on managing our risks, I see concrete actions to protect our environment and I see cutting-edge technology.
Mining today is safer, cleaner, smarter.
Technology and innovation have enabled the industry to scale up to meet the world´s demand for progress, but it has also saved countless lives. Increasingly, our industry has kept people out of harm’s way and deployed our equipment and people more efficiently.
We should be proud of these advancements. But they are not enough.
We must keep improving.
To succeed – and the success to which I refer is measured in generations rather than quarterly results – we need to build on our strengths, frankly assess our failures and perpetually improve.
Sustainability – in water use, in our approach to climate change and in our contributions
Our industry has not always taken the best approach in terms of sustainability.
We need to acknowledge, remember and learn from that history.
And, importantly, we need to set standards for other industries to follow. Not because it’s politically correct or good PR, but because it’s also good for business.
BHP wants to operate in the world for centuries to come. To do so successfully, we need to think and act in generations and work with society to create a sustainable future.
So what does that mean practically?
Firstly, we must spend more time and put more effort into deeply understanding the negative impacts of our activities, and more effectively avoid or mitigate these.
And secondly, we must strengthen the communities, economies and environments of the regions in which we operate, as well as the global community.
Let me focus on one key example – water.
Water management is a critical issue for our industry and our world. It manifests itself differently in different countries.
Now, as a company, BHP cannot say we have always got it right on water. I’m sure many of you here today feel the same about the industry as a whole.
But, what I can say, is that BHP is determined to pay attention to the lessons from the past.
The first step is to acknowledge that water is a shared resource. It’s a human right. It’s essential to all life.
And we need to manage water, collaboratively, for the long-term. In doing so, we’ll deliver productivity, long-term business resilience and enduring environmental and social outcomes.
Why are we doing this? Because it’s good for the environment and society?
Of course. But it also strengthens our business.
Water security frees our operations from increasing constraints.
Increased water scarcity means we need to partner more closely with our communities and consider the needs of everyone, not just ourselves, as we use this shared resource.
We’ve made great steps in this journey. Across the Atacama Desert in Chile – the driest place on Earth – we’ve built a 180km water transport system. Four high pressure pump stations, powered primarily by natural gas, and increasingly renewable energy, move water from the Port of Coloso and up to the reservoir at our Escondida copper mine – more than 3,000 metres above sea level.
It’s an amazing engineering feat and a significant investment that is rapidly reducing our reliance on the precious groundwater of the region.
Why would we do this?
Firstly, it matters to the local community.
Secondly, it makes a positive difference to the environment.
And, lastly, it will help us unlock value in our operations.
Another example - climate change.
We accept climate change is real. That human impact is clear. That it is a reality.
But we also must realise that developing nations need access to affordable, reliable energy.
We’re responding to the challenge of remaining sustainable and providing access to energy in a range of ways, but – for now – let me focus on the International Carbon Capture and Storage Knowledge Centre here in Canada.
We partnered with SaskPower to establish the knowledge centre to help advance carbon capture and storage (CCS) as a means of managing greenhouse gas emissions. The international Carbon Capture Knowledge Centre will help inform governments, universities, industries and research organisations on practical considerations in the development and use of CCS.
It’s just one of the ways we can help make energy sustainable. Not just for us, but for everyone.
Make no mistake: BHP accepts its responsibility to society as a major player in this industry. We are in mining for the long term.
That’s why we invest in local communities and environmental programs.
That’s why we are open and transparent in our interactions with the public.
That’s why we want to realise possibilities and build a closer dialogue with society – rather than create ghost towns.
And I know the vast majority of our peers do too.
Unlocking the potential of our assets, contributing resources to reshape our future
To earn the opportunity to succeed tomorrow, though, we first need to succeed today.
We cannot afford to ignore our backyard.
After all, mining is essential to the global economy – creating jobs, investment and development.
But our industry can only create jobs, investment and development if it remains financially successful.
Collectively and individually, we have a responsibility to be as efficient as we can be – to be smart, sustainable and productive.
Our customers, shareholders and workforce – as well as local and national communities, governments and economies – depend on our ongoing success.
That’s why, at BHP, we are vigilant about everything we do – from our capital allocation framework, to our staged approach to exploration, to a sharp sense of purpose and direction for our technological evolution.
In particular, technology is the key to ensuring we can be the best that we can be, and that we evolve as the world around us also evolves.
Remember what happened to the sodium nitrate mines of Chile?
Wasn’t the industry killed off by a technological advance that created white gold chemically?
The answer is yes and no.
Yes – new technology disrupted Chile’s sodium nitrate mines.
And – no – what really signalled the deterioration of the industry was its failure to innovate and keep up with new technology.
Any new technology worth its salt – so to speak – is disruptive.
What matters most is not the disruption itself but the ways in which we prepare for and respond to disruption.
A key challenge of our industry that has enormous potential to benefit from technology is exploration targeting. As we all know, exploration has always, and will always, be the key to deliver superior long term financial returns. But it is becoming increasingly difficult to find orebodies of the size and quality our high standards demand.
The Earth has ample natural resources. But the issue lies in what I call the depth/maturity curve.
Deposits that are close to the surface are more likely to exist in less mature regions – those that we have not generally operated in and sometimes do not have the level of governance and transparency we require to successfully operate.
On the other hand, mature, well-established and explored, and politically stable regions are less likely to have a big surface discovery. In these areas, new deposits are likely to be deeper and more difficult to identify and mine.
This shows the journey from exploration to operation is more challenging than ever.
But, we do not have to just accept these challenges. We can use technology to innovate and overcome them.
In BHP’s Copper greenfield exploration programs, for example, we are poised to take advantage of machine learning to help our teams make better decisions. We use our extensive exploration database – which dates back over 100 years – to build complex algorithms that will better enable us to identify areas capable of profitably developing a world class deposit.
And, across our company, we’re using other smart technologies in exploration - like zircon analyses and hard rock seismics – to make sure we always stay one step ahead.
We must lead innovation to continuously improve the productivity and prosperity of our industry. Exploration is a key area where this can be achieved.
In conclusion, to reshape the future, we must face the past.
We must frankly assess our failures and open our eyes to the infinite opportunities of the future. And not just see these opportunities, but fully grasp and embrace them.
Mining companies of the past simply mined the land and left, leaving nothing behind. They acted only out of self-interest. They didn’t think about the world they operated in, or prepare or respond to the future.
We, as an industry, have progressed beyond this. I am proud, as a Chilean and as a leader in BHP and in this industry, to say we do not operate in the same world of the sodium nitrate mines.
We do not leave behind ghost towns. We have learned – and must continue to learn – from our mistakes. Mining is no longer only about digging resources out of the ground. We must deliver our value proposition not only to our shareholders, but also to our communities and global society at large.
The opportunity and responsibility before us is to work together – from the big miners, to the junior explorer, to the industry associations, and government – to build a better future for our industry, and our communities – both local and global.
We need to be safe. We need to be productive. We need to be sustainable.
Only then, can we together re-shape the future of mining.