27 July 2023
Thank you Ursula, and good afternoon everyone.
Before I begin, I would also like to acknowledge the Traditional Owners of the land on which we are gathered today – the Wurundjeri and Bunurong People of the Kulin Nation. I pay my respects to their Elders, past and present.
I also acknowledge the many Traditional Owners and Indigenous groups across Australia on whose lands BHP operates every day, and with whom we form partnerships based on respect and a shared vision for the future.
I also want to thank the American Chamber of Commerce in Australia for inviting me to speak at this event.
Today, I am going to reflect on what it is that has enabled Australia to become a superpower in iron ore and metallurgical coal, and how we as a country can adapt our way of thinking in order to capture a similar but different prize on offer, in the form of critical minerals like copper and nickel.
In particular, I will refer throughout this address to three things:
- And stability for investment.
I’ll elaborate on that shortly.
As you may have detected in my accent – while I live in Melbourne, I am not from Melbourne.
Like more than one-in-three Melburnians, I am a migrant.
I was born in Ireland and grew up on a dairy farm in County Kerry, and after completing my tertiary studies in science and physics – like many of my fellow countrymen and women at the time – I embarked on an adventure to Australia not long after graduating.
It was a transformational decision for me. I joined BHP in the mid-1990s and fell in love with Australia and the resources sector, and since then have been fortunate enough to work in the sector in many jurisdictions around the world.
Most recently, I spent 10 years in the United States before moving back to Australia late last year to lead BHP’s Australian operations.
So, for me, the opportunity to engage today with the American Chamber of Commerce here in Australia is a particular privilege.
My time in the US was spent in Houston, Texas.
Being back in Australia I am noticing some differences between Melbourne and Houston.
In Houston you supported the Astros in baseball and the Houston Texans in football. There were no other acceptable choices.
Here, in Melbourne, it’s not so clear cut.
There are no fewer than nine AFL clubs in Melbourne – and let’s not forget Geelong.
Who should I support?
Suffice to say that question has been a source of much counsel and direction, and often the first query I receive from new neighbours and colleagues.
I’m not here to declare an allegiance – there isn’t enough time for such a debate today – although one plug I will make is for the AFL women’s competition, which BHP is proud to partner with.
I am very much looking forward to the start of the women’s season in September.
Today, I want to turn to another playing field – that of resources and particularly critical minerals. And the question I pose to you today is:
What will it take for Australia to become a critical minerals superpower?
In seeking to answer this question, we can reflect on where we are today.
Australia is one of the world’s leading mining nations, having attracted decades of investment in iron ore and met coal in particular.
This investment has translated into enormous benefits to the Australian economy and the Australian people.
If we take a single year – the 2022 financial year:
- The mining sector generated 37 per cent of Australia’s export revenue…
- Supporting more than one million jobs…
- Paying the highest wages… and
- Delivering an estimated 64 billion dollars in company taxes and royalties.
To put that number into perspective, the mining sector paid enough taxes and royalties in one year to support Medicare’s entire budget for two years.
In addition, roughly 17 million Australians benefit from the mining sector, either as shareholders or via their superannuation.
Put simply, the resources sector in Australia has been a bedrock of our economy and standard of living.
It’s also helped Australia to largely escape the recessionary cycles that have thwarted other economies, as well as evading the worst impacts of the global financial crisis and the COVID-19 pandemic.
So, we can take much confidence from the way in which Australia has built itself into a global mining powerhouse over the past few decades.
But we should also ask ourselves:
What has enabled Australia’s multi-decade economic resilience?
I’ll call out three factors.
- First, a high quality and prolific endowment of foundational resources. In other words, the rocks.
- Second, the skills and talent to unlock that endowment – the “knowledge economy” that Australia has built up around the sector.
- And third, a stable and reasonable investment and policy environment.
These three key conditions have allowed Australia to evolve into a global leader in the minerals sector.
But as we look to the future, that formula of good fortune and stability is fundamentally changing.
Today, the global economy is shaped by the mega trends of population growth, urbanisation and decarbonisation – along with geopolitical volatility.
It’s of particular significance to Australia because, arguably, we have more to lose… and more to gain than many others.
Our way of life and standard of living depends on foreign capital and demand for our goods and services.
We need a competitive resources sector if we are to provide future generations of Australians with the same standard of living that we enjoy today.
While the resources that have underpinned Australia’s prosperity will continue to do so for decades to come, we expect demand for iron ore, coal and natural gas will moderate and decline over time as China moves through its period of steel intensive development and global decarbonisation plays out.
So, when we think about critical minerals, it’s not just about capturing more opportunity. It’s about supporting the diversification, growth and future resilience of the Australian economy.
The energy transition cannot happen without mining.
The need for everything from batteries to electric vehicles to wind turbines to the infrastructure of electrification is creating unprecedented demand for what we produce today, as well as for the endowment yet to be developed.
This will drive demand for critical minerals such as copper and nickel.
A World Bank analysis of the mineral intensity of 10 low-carbon energy technologies found copper was essential to all 10 – and nickel was essential to 9-out-of-10.
In a plausible upside case, we estimate there could be well over 400 million electric vehicles on the world’s roads in 2030 – up from about 16 million today.
Building those vehicles could require up to 26 million tonnes of copper and 15 million tonnes of nickel.
That does not include the materials that will be required to charge them, or produce the zero-carbon electricity that will power them.
To put that in perspective, Escondida – the world’s largest copper mine – produces about 1 million tonnes of copper per annum.
All of that should bode well for Australia, what we produce today will continue to be in strong demand for decades, and the growing demand for copper, nickel and other critical minerals provides the basis for continued economic strength.
But the future won’t be gifted to Australia.
It can only be achieved with deliberate effort, and the right choices.
To maintain Australia’s economic resilience, we will need to step up again and outcompete other nations.
And to achieve that, we will need the same three factors that got us to this point to take us forward, that is: the rocks, the skills, and stability for investment.
But, this time around, we need to think about them differently.
First, the rocks. The quality and accessibility of the resource is where it all starts.
Unlike Australia’s iron ore and metallurgical coal endowment – which were found in large quantities and close to the surface – our critical mineral resources, particularly nickel and copper – are deeper or more remote or individually smaller in scale.
This can make them more complex and more expensive per tonne to produce.
Australia has significant copper resources, and the potential to be a significant copper player. The South Australia copper province is a case in point - with high grade deposits, but they are deep beneath the surface and require underground mining methods – this has the effect of smaller scale mines.
In Chile, one of Australia’s key competitors, copper endowments are larger in scale, closer to the surface – allowing for open-pit mining methods.
This translates to a higher cost-per-tonne to develop and operate copper mines in Australia, despite our high-grade endowment.
What about nickel?
Australia has high quality resources, and one of the largest nickel reserves in the world.
However, we face stiff competition from Indonesia’s large nickel reserves that are more accessible and can be extracted through open pit methods.
And Indonesia is highly motivated to aggressively invest in technologies to produce nickel at scale and do so sustainably.
Having a large resource base in the face of aggressive demand growth is a powerful stimulus – it reminds me of the US’s success in unlocking its shale gas resource base.
Investing in horizontal drilling and hydraulic fracturing technologies ultimately led to the transformation of the US energy landscape and the global gas industry.
The point I am calling out here is this.
Yes, Australia has many large, high-quality resource endowments.
But we cannot afford to assume that we will have the same degree of comparative advantage in critical minerals as we have enjoyed in iron ore and metallurgical coal.
As I said before: it all starts with the rocks – the quality and quantity of deposits and the degree of difficulty and cost involved in extracting those deposits drives the investment decision.
Let me now turn to the know-how. One of Australia’s biggest advantages has been the “knowledge economy”.
It has built up over decades from finding, to building, to producing our resources at every point along the value chain.
However, the talent pipeline is drying up.
Nearly 50 per cent of the world’s skilled engineering workforce will reach retirement age over the next decade.
At the other end of the pipeline, we see university enrolments dropping off as sentiment towards careers in mining declines.
The number of mining engineering graduates in Australia dropped by 74 per cent between 2015 and 2022.
This sharp decline comes despite mining offering some of the highest skilled and paid careers in Australia.
And it compares to a 39 per cent drop in the US over the same period.
Annual apprentice completion is also the lowest it’s been for 23 years, with numbers falling, year-on-year, for the past decade.
Coupled with a shrinking talent pool, the cost of labour continues to rise in Australia.
Australia has one of the highest labour costs in the world – around 12 per cent higher than in the US.
We are proud to be a high-paying industry, especially when you consider that many of the employment and business opportunities our sector generates are in regional areas.
However, we need to match that position with sector-leading productivity.
That’s not happening today, in fact labour productivity has declined by 8 per cent while labour costs have doubled.
Clearly, this is not sustainable.
Changes to industrial relations policies are of particular concern, and like many businesses we believe they will have a negative impact on Australia’s competitiveness and jobs.
To be more competitive, we must be more productive.
This means investing in people, skills, and technology.
Without that, we cannot hope to unlock productivity or national competitiveness.
The third critical dimension of competitiveness is stability for investment.
Looking into the rear-view mirror, policy and regulatory stability have made Australia one of the world’s most attractive countries for mining investment.
However, that stability has taken a hit of late.
Australia’s relative tax competitiveness has declined since 2015, with our company income tax now the third highest in the OECD.
By comparison, the US has reduced its company income tax rate more than any other country since 2015 – creating an additional competitive advantage for them.
Stability and competitiveness in fiscal and policy settings will be incredibly important to Australia’s ability to secure new multibillion dollar, multi-decade investments.
To give perspective, an estimated 100 billion dollars of additional capital investment each year will be needed in the resources sector to meet with world’s decarbonisation ambitions.
That’s quite the prize.
But winning this race won’t be easy.
The field is crowded because the benefits are so compelling.
Other nations are aggressively moving to secure supplies and investment – as shown by the ambition and sheer scale of the US Inflation Reduction Act.
Canada is using initiatives like its $4 billion Critical Mineral Strategy to secure its position.
Indonesia, as I mentioned, continues to boost nickel production and attract downstream processing – and the European Commission’s Green Deal Industrial Plan is designed to increase their competitiveness.
That’s why I welcomed last month’s launch of the Australian Government’s Critical Minerals Strategy – as well as the recently-signed Australia/US Climate, Critical Minerals and Clean Energy Transformation Compact.
However, to be globally competitive Australia will need to do more.
A Productivity Commission report found that Australia’s regulatory processes are unduly complex, duplicative, lengthy, and uncertain.
Between 2014 and 2020, the average time for the assessment and approval of resource projects under the EPBC Act increased from 716 days to 940 days.
That’s two-and-a-half years before we’re even able to look at the rocks.
Canada is harmonising their approvals processes. Australia should follow suit.
Australia can’t compete on subsidies with large economies like the US.
But we can make sure that our policy settings are attractive to new investment.
Industry and government have a shared responsibility to work together to create the conditions needed to bring more capital into Australia to fund our nascent critical minerals sector.
So how could Australia begin to better seize this critical opportunity at this critical moment?
I acknowledge the growing recognition among Australian business and political leaders of the need for deeper and more focussed engagement on how we can capitalise on the massive transformations underway in the global economy.
There is energy and urgency in this conversation.
There is also goodwill.
What hasn’t yet been crystalised is a shared vison on where our country can go.
A goal to which we can all strive: a national secret sauce that will set Australia apart, and set Australia up for success.
I believe the secret sauce should be competitiveness.
Recapturing Australia’s competitiveness is a national ambition where we all benefit.
It is an ambition which we can all share.., and play our part in. It’s also an ambition that can be measured and tracked.
A singular focus would allow Australia to draw the threads of every policy debate, every reform proposal, and every conversation – such as today’s – towards a constructive endpoint, and always asking ourselves: Will this make Australia more competitive?
Thinking that critical minerals is another boom waiting to happen will not serve us well.
Last time, Australia was in the right place at the right time.
We had significant tier 1 deposits – the rocks – the skills to deliver and stability for investment.
Circumstances are different today. Global demand is shifting. Supply chains are changing. Competitors are acting. And Australia must act, too.
Though I am qualified only to speak of the competitiveness challenges in my own industry, I know through my engagement with business leaders in other sectors that similar competitiveness challenges exist, along with a sense of urgency to address them.
I am very positive about the opportunity and our ability to deliver, through a national focus on Australia’s competitiveness with a shared sense of purpose, co-operation and good will.
But we have work to do.
Today, in the foothills of a critical minerals boom, Australia has high quality but immaturely developed resources, with a dwindling talent pool, and a less certain investment environment.
We are at risk of losing our competitive edge, and with it our future prosperity.
We need to find new ways of doing things, and work more closely together – across governments, industry, and business.
That’s what other countries are doing – right now.
If we want Australia to become a superpower in critical minerals we must – in the national interest – do the same as a matter of urgency.