27 September 2022
Hello everybody, it’s great to be back at Perumin, this time in person from the beautiful city of Arequipa
Many of you might wonder why BHP is in Peru, especially as we currently don’t have direct operations in the country.
But the truth of the matter is that BHP has a long shared history in Peru:
We own slightly more than a third of Antamina – while we don’t operate, we have an active interest
We’ve been running an Exploration office in Lima since 2012 and have multiple exploration projects in six regions of Peru
And historically, we had a presence at Tintaya
We want to expand and grow our shared story in Peru…
We share many of the same convictions and challenges with Peru, and I am certain that by working together, we can create mutual benefit and a long-lasting relationship.
So today, I am here to tell you why we are optimistic about the future of mining in Peru, and what BHP has to offer to be a part of that future.
RESOURCES FOR THE FUTURE
At BHP, our purpose is to bring people and resources together to build a better world.
Our aim is to grow “future-facing commodities” that feed the demand of the world’s unstoppable megatrends: decarbonisation, electrification and population growth.
Demand for commodities that can support these trends will increase: copper to accelerate the energy transition, nickel for batteries in electric vehicles, potash for sustainable agriculture and food production, and iron ore for the infrastructure needed to support development.
The opportunities for the industry and for Peru to meet these demand are immense.
In the next 30 years, the world will need more than double the copper than what has already been produced in the last three decades.
For BHP, we are already a top three global producer of copper: we’ve operated Escondida in Chile, the largest copper mine in the world, for over 30 years, and we have the largest copper endowment of any company globally. Based on our experience in South America, we know that Peru has a huge opportunity to grow its contribution to the decarbonisation solution.
Peru and Chile already are top 2 worldwide producers.
But we know that meeting the world’s demand and increasing production is not enough. We focus on bringing to the table - shared and sustainable development.
I’ve spoken about copper, and the role it plays in the global energy transition. Another focus for BHP, in terms of meeting the world’s needs is Potash, a natural fertilizer that will be crucial for feeding a growing population.
In Saskatchewan, Canada, we are building the most sustainable potash mine in the world, with an investment of almost US$6 billion. First production is planned for 2027, but we’re looking at opportunities to bring this forward to 2026. We understand how relevant the fertilizer industry has become, especially after the war in Ukraine and the disruptions to supply chains in the Former Soviet Union.
We have both an opportunity, and a responsibility, to provide food security to a growing population.
BHP IN PERU, A COLLABORATING STORY
Coming back to copper, at BHP, we have a plan in Peru: we want to strengthen our presence here, and be the strategic partner of choice for your country, a country that is already very significant in the production of copper, but has the potential of being an even more important player.
For BHP we already see so many things for the country and our company to celebrate:
We are very proud of the management and workforce team at Antamina –where we are shareholders. Antamina is seeking approval to extend the lifespan of their operations until 2036. We would love to see that businesses life extended! We are also enthusiastic about our exploration efforts – a key pillar to our global growth strategy. We’ve been conducting exploration efforts in Peru for over a decade:
Today, we have significant exploration efforts taking place in 6 different Departments in Peru.
We are present in Ancash, Apurimac, Arequipa, Ayacucho, Cusco, and Huancavelica.
Just weeks ago, BHP received their initial permit approval to start drilling in Jatum Orcco, located in Huancavelica.
Another excellent exploration milestone in our development plans in Peru! We have developed an excellent relationship with the nearby communities - engaging at an early stage.
Lastly, I’m very excited to share with you that BHP will invest around US$12 million in Exploration projects in Peru over the next ten months.
GROWTH AND COMMON CHALLENGES
I’d like to now talk about future growth.
When we think about growth, it is important to recognize that the expectations of society are shifting.
On balance, BHP sees this as a net positive, but it’s important to acknowledge the implication of these expectations.
Mining companies are expected to:
Engage in good faith, through permanent dialogue with communities and indigenous peoples, especially those that live nearby mining operations.
Raise and strengthen ESG standards, which contemplate challenges such as protecting biodiversity and managing the potential negative impacts of mining operations.
Develop sustainable projects that create positive contribution to people, economies and suppliers. With an understanding that mining projects go well beyond the lifespan of the operation.
Advance in inclusion and diversity in mining, with the challenge to incorporate more female representation in the industry to ensure that everyone has equal access to opportunity.
And partner with government to build institutional capability for a strong, responsible, transparent and sustainable mining and exploration industry.
These expectations are all against a global context of uncertainty:
the COVID pandemic, potential recessions, rising costs, inflation, and disrupted supply chains.
And, it’s important to recognize that this is against a backdrop of a world that will need more commodities.
If we want to increase copper production while meeting the rising expectations of society, we going to need to partner much more closely with governments, communities, and others to ensure that we are as efficient and productive as possible.
CONDITIONS FOR A THRIVING INDUSTRY
Shifting more specifically to Peru, Peru has unique set of conditions to thrive: a privileged geological landscape, a long mining tradition, and a general stable macroeconomic context.
When we participated in last year’s Perumin, I reinforced the concept of “social profit”. As a 137-year-old mining company, we know things can change quickly.
Nevertheless, we need some conditions that provide a foundation for investment. Mining thinks and plans for decades. Thus, the conditions that are needed to attract and maintain mining investment, include:
Fiscal stability to achieve long-term success for major multi-decade investments
Legal certainty for stable business conditions
And, clear pathways to permitting to assure investment
I have just read an inspiring study from señora Claudia Cooper - supported by the Instituto de Ingenieros de Minas de Peru. The message is loud and clear: the mining sector in Peru has become not only a relevant source of revenue for the country; not only a source for good quality jobs for almost a million Peruvians; but a crucial underpinning for the entire economy.
As Claudia Cooper puts it, this indirect impact explains to a great extent the marvelous growth of Peru in the last decades - reducing poverty and providing better living conditions to the entire society.
And as the evidence suggests, the investment in this sector has contributed to stabilize the country’s macro fundamentals, as it provides a stable source of foreign investment, bringing foreign currencies, introducing cutting edge technology to the country, helping internal savings, balancing external accounts, among several other benefits.
What’s the key aspect that explains this virtuous cycle? The legal certainty and fiscal stability that the country has provided to both local and foreign investors.
I think Peru has a great opportunity ahead. I know the years of the pandemic have been harsh for all of us. But as I said, there is a growing demand for copper in the world, and Peru has all the potential to grasp that opportunity and unleash a new positive cycle as it has done in the last 25 years.
Now, I hope I have been able to convey our interest in Peru. I would like to tell you a little more on why we think BHP is a partner of choice.
First of all, I think we agree in a vision for the future: more copper, sustainable growth, more development opportunities for new projects that will help solve global challenges, and improved relationships with host communities.
BHP brings a specific way of doing mining to the table, which translates into a strong operating system, a disciplined growth strategy, and a Social Value framework based on three pillars: people, planet and prosperity.
Social Value means that when we become part of a community or country, we bring much more than just investment.
This has many examples:
Globally, we have progressed our gender balance agenda, with 30% of our workforce currently being women, and a global aspiration to be gender balanced by 2025 – ensuring that everyone has equal access to opportunities.
We have been pioneers in topics such as desalination. In Chile, we were the first mining company to build a desalination plant and with US$4 billion invested over 15 years, Escondida now operates exclusively with desalinated water, as well as the new Spence concentrator.
We are transitioning our operations to be supplied by renewable energies globally. In Chile, Escondida and Spence, are already supplied by renewable energy and have transitioned away from fossil fuel based energy
We have established a Climate Transition Action Plan where we have a goal that will lead us to be net zero by 2050. o We are partnering to decarbonize our supply chain with companies such as Caterpillar, Ford, Tesla, Komatsu, amongst many others.
And we are partnering with other mining explorers and companies, BHP recently launched BHP Xplor, a global program that is in the search for startups in the early exploration stage, to help discover minerals all around the world. We are committed to work with you – if you have any innovative ideas, tell us about it – maybe we can partner!
And if we look at Peru, we have a very clear example:
During the pandemic, we supported local communities where BHP has exploration projects through initiatives such as the Ananda Project in the Chaccaro Community to promote local employment and support social and productive infrastructure.
In conclusion, at BHP we believe that contribution is more than just creating profit. It’s about generating social value and shared
prosperity for all. It’s about becoming an intrinsic part of the countries that we are a part of.
We see that Peru is ready for the future, and we want to be partners in your success.
Let’s work together to make this country an even bigger leader in the copper industry.