22 September 2021
Thank you for the opportunity to speak today about the outlook for the Peruvian mining industry.
Conventions like PeruMin are important because they allow industry, government, and other stakeholders to come together to share knowledge and strengthen support for an industry that is critical to the people, economy, and development of Peru.
At BHP we understand the need for thinking about the longer term. With a deep history spanning 136 years, our time horizons are not months or years, but decades.
Our decisions are made with a view to sustainable long-term production, and consider not just the resources in the ground, but also the sustainability of our investments, partnerships with our stakeholders, and the competitiveness and stability of policies in the regions where we invest.
Today, I would like to explain our perspective on the long-term outlook for the Peruvian mining industry by addressing three key points:
First, the historic opportunity of the Peruvian mining industry with its strong copper production
and resource position;
Secondly, the ways in which we believe the mining industry and BHP can contribute
positively to, and be a partner with Peru in developing this historic opportunity;
And finally, the importance of competitive and stable fiscal terms, and the collaboration and
partnership between government and industry for developing this opportunity.
In terms of the first of my three points, I would like to start by talking about the historic opportunity facing the Peruvian mining industry.
Peru is currently a big player in copper: it is one of the top countries in the world for copper production, and has a leading resource position.
Copper is a future facing commodity. It is one of the key commodities that is essential in a world seeking to meet the challenges of climate change and a growing population.
As the world seeks to decarbonize, copper will be critical due to its role in electrification and as a key material in renewable energy sources.
In fact, a Wood Mackenzie report this year identified that a commitment to limit global warming to 2 degrees Celsius, would require the development of 23 million tonnes of new copper supply by 2035.
Developing this new supply will require an investment of more than 500 billion US dollars.
For context, this additional new supply is similar to current production levels.
The same report forecasts the increase in demand will last for longer than the increase during the 2005-2015 super cycle, when growth was driven largely by Chinese demand.
The difference today is that copper is essential for the entire planet, and is not dependent on just one country.
So, why is this relevant to Peru and the Peruvian mining industry? Peru’s copper production and copper resource endowment puts Peru potentially right at the centre of the global megatrends of decarbonisation, electrification, renewable energy, and the hunger for
copper that this creates.
Put simply, Peru can choose to be a big player in fuelling the world´s need for copper. And it can also choose to play a crucial role in saving the planet for future generations.
However, this opportunity cannot be taken as certain. It requires competitiveness and stable policies to attract and secure investment, and the right partners to make this investment sustainable in the long-term for all stakeholders, including the people of Peru.
The second theme I would like to touch on today is the role of the mining industry in developing this historic opportunity, and the role of BHP as a sustainable long-term partner in Peru.
Mining is indispensable in providing the resources necessary to enable the changes we know the world will make.
And the sheer size of the industry means it can be a material force for change.
But we also recognise that this change is not just about what we do, but how we do it.
Across BHP, we listen to our stakeholders, and we understand that mining must make a positive contribution to the societies where we operate, that it must be done in a sustainable way, that we must respect the cultural heritage of communities, we must care for the environment and biodiversity, and that we must use our size and leadership as a force for positive change.
At BHP, these concepts are all fundamental to the way we do business. Our purpose is to bring people and resources together to build a better world.
Copper has been a significant part of our history, and will be a fundamental part of our future. We are already one of the largest copper producers globally, and we are looking to grow even further.
BHP is a global company - with a presence in 90 locations worldwide. We were founded in 1885 and the nature of our business means we make long-term commitments to countries and regions.
We’ve been at Escondida in Chile for more than 30 years, and we have recently made a large investment at our Spence asset in Chile to extend the operating life for another 50 years.
We have also just announced our entry into a potash basin in Canada, with the potential to support 100-years of production.
In Peru, we have been involved at Antamina for 20 years now, and alongside our partners, we have developed this operation into one of the world’s leading mining operations.
We are also investing heavily in exploration in Peru, a core element to our long-term growth strategy. We have teams on the ground in Äncash, Guánuco, Guancavélica, Apurímak and Allacucho.
We are putting in tremendous effort in Peru because we believe in the potential of the Peruvian mining industry and we want to be part of contributing to the achievement of that potential.
As I said earlier, the longevity of our assets means we must think and plan in decades. When we invest in a region, we become an intrinsic part of the region: the environment, the economy, the community, and society.
All of this means that sustainability and social value are fundamental to the way we do business.
For BHP, social value is about creating value for all our stakeholders, and a key aspect of this is supporting real and meaningful improvements in the lives of the people, communities, societies, and the environment in which we operate.
Let me illustrate this with some examples from across the company in five key areas.
Firstly, sustainability. We are committed to sustainability and we seek to lead the industry in this area. As I said, BHP produces many of the essential commodities that are critical for continued economic growth and decarbonization, but we are also committed to producing them in a sustainable manner.
In Chile, we have stopped extracting water from high Andean aquifers in Escondida - and Escondida now operates exclusively with desalinated water. This has meant billions of dollars of investment in desalination plants.
And we are in the process of ending coal-based electricity contracts in Chile. In just four years,100% of the energy consumed by Escondida and Spence will come fully from renewable sources.
Secondly, inclusion and diversity. At BHP, we believe inclusive and diverse teams are safer, have a better culture, and are ultimately more productive.
With around 80,000 employees and contractors globally, we know we can have a big impact on diversity. In 2016, we set an aspirational goal to achieve gender balance by 2025. And we are well on our way to delivering on this.
In Chile women make up 26% of our workforce, almost 2.5 times more than the industry average, and an increase of 15% from where we were just 5 years ago.
And at our recently approved Jansen Project in Canada, we have committed to goals for a gender balanced workforce, with 20% representation from local indigenous First Nations employees.
Thirdly, we support and partner with the communities where we operate. A recent example is our support for communities and government throughout the pandemic. In Peru, we developed the Ananda Project in the Chaccaro Community to promote local
employment and support social and productive infrastructure. In Chile, we launched the Vamos Juntos social investment plan, including a vaccination center
for the community at Antofagasta.
Fourthly, local businesses. We actively support local businesses and fuel economies in the
communities where we operate.
Our BHP Local Buying Program is an excellent example of how we are doing that.
At our Iron Ore asset in Western Australia, we have spent more than $100 million Australian dollars with local suppliers since the program began in 2017. That’s nearly 300 local and indigenous businesses who are receiving economic benefits and opportunities from the operation
of our Assets.
As a final and fifth example, we are also committed to the long-term development of capability. One of the ways we do this is through our support for education and training.
In Queensland, Australia, we have partnered with education providers to fund and fast-track the development of automated technology pathways, skill sets and qualifications.
We recognise that the industry is evolving, and we want to ensure we take a leading role and bring our dedicated and loyal employees and partners along on this journey.
This partnership is developing the new skills required to support automation advances in Queensland’s mining industry and for individuals in local communities to acquire these skills. Antamina also provides a very good example of our focus in this area. Through the Efecto Ancash Project, we are investing in capacity building for teachers and local and regional authorities from Huari’s public education system.
By improving education and expanding opportunities for the children of this region, they can shape a better future for themselves and the world around them.
This leads me to my third and final point for today, which is the criticality of competitive and stable business conditions and fiscal settings.
I am pleased to note that the new Peruvian government is thinking strategically in this area. The Government’s concept of “Rentabilidad Social” has the potential to create a positive incentive and build sound long-term partnerships between companies and the State for developing a sustainable mining industry.
The importance of competitive and stable fiscal and policy settings for the long-term success of mining projects cannot be understated.
Mining is a capital-intensive industry. Decisions made today have the potential to significantly impact on the medium and long-term.
Consider exploration. When we invest in exploration today, it is with a view to the long-term development of a resource.
This is truly a long-term prospect, with the average time from discovery of a new resource to its development being in the order of 15 - 20 years.
Similarly, take our recent investment in potash as an example. A more than decade-long exploration and study phase has now culminated in a $7.5 billion Canadian dollar capital investment, with the potential for a century of operations.
Peru’s resource base and pipeline of mining projects, coupled with the rising demand for copper, creates a tremendous opportunity with the potential for enormous benefits for the people, the economy, and the development of Peru.
But history tells us that simply having the resources is not enough. Other nations are also well resourced, and the nature of this industry is that not every opportunity will be realised – investment capital is a finite resource that competes on a global scale.
The best and most attractive investment prospects are those that consider not only the best mineral resources, but also have support from local communities and societies, and are in jurisdictions with stable and competitive business conditions and fiscal settings.
BHP has the experience and expertise to successfully develop the mining projects in Peru and we have, we believe, much to offer to the country - under the right conditions, with the right partnerships in place, and with the support of its Government and its people.
Peru has an opportunity to harness the enormous potential of its resources and ensuring it is a competitive and attractive prospect for investment will play an important part in this.
In conclusion, we see potential for a bright future for the mining industry in Peru.
Peru’s natural resource assets are substantial, and the world will increasingly need its copper.
Developing these resources in a way that is sustainable and creates social value for all stakeholders will be critical.
At BHP, we believe we have much to offer as a partner for Peru to achieve this ambition.
With the right conditions in place: competitive fiscal terms and a stable jurisdiction to support long-term investment, such partnerships can become a reality – and the significant long-term benefits they deliver to all stakeholders can be realised.
Thank you for your time