16 October 2020
The FT Commodities Mining Summit
Mike Henry, CEO
**Check against delivery**
Thanks Neil. I’m pleased to have the opportunity to make some opening remarks.
I’ve been in role now for 10 months and it would be fair to say that things haven’t played out quite as any of us had expected or planned for.
We’ve all had to overcome a few challenges this year.
But, we’ve also been able to demonstrate once again what this industry is capable of and what we have to offer.
It has been remarkable to see the way that companies were able to mobilise quickly to safeguard the health of our workforces, to support communities and our business partners and to keep the bulk of our operations running.
Our ability to keep operating and generating employment, taxes, royalties and dividends in a time of crisis has been a positive differentiator relative to some other industries.
Mining is essential. We know this.
I’m not talking here just about the value we create for our direct stakeholders.
The resources we produce enable continued economic development and improvement in living standards around the world.
In the end there is little choice about whether mining happens or not.
There is though choice about how it happens and who does it.
In the face of events of the past year, countless lives have been disrupted and many around the world have been focused on simple survival and then on recovery.
But at the same time there’s also been a growing public focus on the need to secure a different and better future.
This is reflected in the ‘build back better’ concept.
It captures two points: the world must return to growth to help improve living standards and drive prosperity, but this growth needs to be clean, sustainable and of benefit to all.
Our industry, and business more generally, has a role to play in that. In fact, the commodities we produce will be essential to the building of that better world.
Addressing climate change is of course one part of building back better and at BHP we recently announced a new series of climate commitments and actions.
One of the things that I spoke about when we announced these commitments was the fact that decarbonisation is actually going to require a whole lot more of many commodities. That will be the case for some of the other components of building a better world as well.
So, through COVID-19 we’ve demonstrated quite definitively the value we create for our direct stakeholders, and secondly we know that our efforts are essential for the world and the future. Both positives.
But the reality is that with opportunity also comes challenges.
I’ll call out three interrelated trends: shifting expectations, evolving power dynamics and escalating technical complexity.
The expectations of society and our stakeholders continue to evolve and grow.
We all feel the increasing expectations and scrutiny from employees, governments, communities and civil society.
They’re also more vocal and wielding power in unprecedented ways.
They’re demanding better standards, and when those standards aren’t met, the repercussions can be significant and quite immediate.
As we seek to meet the shifting and growing demand for some commodities, we are needing to deal with more complex social dynamics.
We will need to be ever better in how we use water, energy, and resources, in how we manage emissions and how we better meet the rapidly evolving expectations of the societies in which we operate.
For some commodities that will be essential to the future, new ore bodies will be some combination of harder to find, harder to access, lower grade and more costly and challenging to develop.
This mix of increasing stakeholder complexity, greater technical challenges to accessing and developing resources, changing commodity mix and faster pace of change, is likely to mean there will be clear winners and losers in our industry in the decade ahead.
And taken together, I think these factors mean that advantage will increasingly accrue to scale.
Growing risk, both below and above surface, means that winners are likely to be those companies:
- who build and sustain serious technical and social capability and long-term relationships;
- who can learn from the shifting dynamics and increasing challenges in one jurisdiction before they flow on to another jurisdiction,
- who have the financial wherewithal to consistently fund the discovery and development of resources when it will be more costly and more complex to do so;
- who can sustain innovation and can be at the forefront of deploying latest technology for value; and
- who have the balance sheet resilience to manage risk and invest counter-cyclically.
The increasing pace of change in stakeholder expectations, coupled with the consequences of not meeting them, means that more than ever, at minimum, companies need to be in tune with and responsive to what’s happening around them.
Even better placed will be those who can be ahead of the curve and who help in shaping higher standards and better performance.
And who see the opportunity to empower through mining and incorporate this mindset into to the way they operate.
Our industry not only delivers the commodities essential to daily life and economic progress around the world, but in doing so it also has a large, positive impact in terms of the economic and social empowerment of those around us.
This includes through the way we engage First Nations peoples and the Traditional Owners of the lands on which we operate, our business partners, local communities and employees. Creating broad based social value, and empowering others needs to permeate all that we do.
The demands on shareholders are increasing. They are required to be increasingly active in shaping the way companies in the sector operate and discriminating in who they invest in.
They are increasingly demanding of companies in our sector. They insist that we operate to the highest of standards, and that we are in tune with the world around us.
This isn’t just because of the pressures they see from their investors, but because they recognise the importance of this to sustainable value creation.
The onus is on them to make fully informed choices – based on a rigorous assessment of ESG performance, consistently applied on a company-by-company basis.
Our products will be central to any objectives of an ESG-focused portfolio, be it positioning for the energy transition or improving living standards around the world.
It follows then, that for those companies that consistently operate to the highest standards and are in tune with expectations of society – they should be a core holding of any ESG portfolio.
Companies that get this right, who operate and relate to others in the right way, will generate outstanding value and returns for shareholders.
They will be better positioned to sense and manage risk, operate more reliably, access more opportunities and grow more steadily.
And the role that investors can play is to even more strongly reward these companies, the leaders, by prioritizing investment towards them over others. By making them a must-hold part of their portfolio.
So just to wrap up then, the focus of this event is the new narrative for mining.
I really do think that the narrative is there. I’m quite interested in hearing from Mark and Ivan on this shortly.
I think it’s centred on the things we’ve spoken about.
Mining is essential.
Global growth, decarbonisation, renewables, electrification….none of this happens without the commodities we produce.
The only choice for the industry and the world is how we do this. Overall standards must continue to rise.
We need to ensure that we are operating ever more sustainably and that we are creating value for all our stakeholders. We need to support the economic and social empowerment of those around us.
And investors have a role to play in this. They need to reinforce these trends through increasingly differentiating between leaders and laggards in this regard. The best companies in an essential sector are going to do very well for shareholders and for the world.
With that Neil, I’ll hand back to you as I know you’re keen to spend time on Q&A as well.