06 December 2021
Ecuador “Open for Business” Invest Summit 2021
Key global market trends in the mining sector and how Ecuador can harness them
Keenan Jennings, Vice president Metals Explorations, BHP
- Thank you for the opportunity to speak to you today.
- Summits like this are important because they allow industry, government, and other stakeholders to come together to share knowledge and strengthen support for an industry that is crucial to Ecuador's people and future development.
- This theme is consistent with BHPs overarching aim of bringing people and resources together to build a better world.
- Today I would like to share some thoughts global trends, and about what role Ecuador might play in this. I will do this by addressing three key topics:
- BHP’s role in shaping the world agenda today
- BHP as a partner, and why Ecuador
- The importance of building a powerful, transparent, clear and regulated mining industry in the country.
Our Role in the World Today
- We were born in 1885, and the nature of our business means that our time horizons are not measured in months or years, but in decades. At BHP we think long term.
- The resources life cycle of exploration and production requires us to operate our assets over many decades.
- We closed fiscal year 2021 (July 2020 - June 2021), with a contribution to the world economy of $ 40.9 billion that includes payments to suppliers, dividends, taxes, royalties, salaries, as well as $ 11.1 billion of contributions in taxes, royalties and other payments to governments
- When we invest in a region, we become an intrinsic part of the region: its environment, economy, community and society: social value is a pillar of our overall strategy.
- Because of our long-term perspective, sustainability sits at the heart of everything we do.
- In Chile, we have great examples in this area.
- At Escondida, we stated that by 2029 we would stop withdrawing water from underground aquifers for operational use and transition to desalinated water. This involved a financial commitment of almost 4 billion US dollars. We met this goal 2 years ago. As a result, we now operate the biggest copper asset in the world with 100% desalinated water.
- In that same year, 2019, BHP entered into new power agreements based on renewable energy sources for our Escondida and Spence copper operations. These contracts aim to displace over 3 million tonnes of CO2e per year, compared with the fossil fuel-based contracts they are replacing. We are on track to have 100% renewable energy supply by the mid-2020s.
- We see a world where this environmental custodianship continues with global trends of decarbonization, transition to renewable energies, and feeding a growing population will deepen and extend the demand for the commodities we produce. Copper will drive electricity distribution. Nickel will power batteries. Potash will nourish crops.
- We have an optimistic vision for the future and Ecuador has a huge role to play. We want to be partners in shaping and developing together this common future.
BHP as a sustainable long-term partner
- So lets talk about BHP as a partner.
- BHP operates internationally, including across 5 countries in South America. We believe we have much to offer to Ecuador. With the right conditions, the right partnerships, the right projects, an aligned vision between the people of Ecuador, their elected officials, and BHP can become a tremendous force for good.
- BHP is a benchmark on responsible mining, technical excellence, innovation, and best practices from a social and environmental perspective.
- We arrived to Ecuador in 2017, when we first opened an exploration office in Quito as Cerro Quebrado.
- Exploration activities are not always successful, but it is a clear sign and vote of confidence that we believe there are new opportunities for the future in Ecuador.
- Exploration teams are always the first step in establishing relationships with the communities in which we operate, and we are already proud of our track record.
- By way of example, we are in a partnership with Luminex Resources on a project called Tarqui, located in the Gualaquiza canton, in the southern Amazon region.
- During the last two years, this exploration project has generated positive change in the Shuar indigenous community, promoting well-being and social value in the midst of vulnerable conditions.
- Before the project started, 80% of the community did not have access to toilets or drinking water. Today the community has access to Basic Sanitation Units implemented by BHP, which has drastically improved its general health indicators.
- And today, even though we are at an early stage of exploration, 7 out of 10 households have at least one person directly employed in the Tarqui Project, which has led to the progressive abandonment of risky artinasal mining activities.
- In addition, BHP has been able to support the local community, through donations of food, biosecurity kits and together with BHP employees, they lined up to receive their COVID-19 vaccinations in June this year.
- Through the Ecuadorian Chamber of Mining and the Ecuadorian Business Committee, BHP contributed to the donation of 4 million syringes for the Ecuadorian Government vaccination plan.
- A 2021 study from Wood Mackenzie, identified that efforts to limit global warming to 2 degrees Celsius would require the development of 23 million tons of new supply of copper by 2035. To put it in context, this new additional supply is similar to current global production levels.
- This study also predicts that the increase in Cu demand will last longer than the increase during the super cycle of 2005-2015, when the growth was largely due to Chinese demand. The difference is that today copper is essential for the entire planet and does not depend on a single country.
- The development of this new supply of copper will require an investment of more than 500 billion dollars investment.
- Ecuador represent a world-class search space globally for copper. There are a number of projects that demonstrate the prospectivity, even though Ecuador has seen limited mineral exploration and project development to date
- We want to help match this geological potential with modern exploration techniques and qualified professionals.
The Role of Ecuador and its People
- This leads me to my third and final point for today, which is the criticality of competitive and stable business conditions and fiscal settings.
- This geological 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 Ecuador.
- As a very positive step, we are pleased to see that the presidential decree 151 signed in August this year, includes a clear action plan to reopen the Ecuadorian mining cadastre in coming months. This is exactly the kind of stability required. Reopening the cadaster with clear rules and transparency is crucial to bring investment to Ecuador and keep a healthy projects pipeline in the industry.
- Mining is a capital-intensive industry. Decisions made today have the potential to significantly impact on the medium and long-term. 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 investment process, with the average time from discovery of a new resource to its development being in the order of 15 - 20 years.
- As said before Ecuador copper resource potential, 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 this country.
- 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.
- Ecuador 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.
- We describe copper as a future facing commodity. It is an essential resource in a world that seeks to address the challenges of climate change, decarbonisation, electrification and renewable energy sources.
- Ecuador can be a big player in producing the world´s need for copper. And it can also choose to play a crucial role in saving the planet for future generations. This country has the potential to be right at the centre of the global megatrends of decarbonisation, electrification, renewable energy, and the production of copper that these activities needs.
- At BHP we have worked all across the world in different countries, jurisdictions and cultures. And we are certain that an industry that is able to create positive impact needs structural clarity and stability.
- We want to collaborate and we want to think strategically on how explorations can take the Ecuadorian mining industry to the future.
- We are already one of the largest copper producers in the world, and we look forward to growing even further and continuing to lead the sector. Together with our partners, we have converted our operations in the countries where we are present into the world's largest mining operations. We are sure that we can also continue to build value and grow together here in Ecuador.
- The future is clear, the future is now. And we want to be a part of this journey.
- Thank you very much.