Mike Henry speech at World Mining Congress 2023

World Mining Congress 2023

Original text from BHP

Thank you Jillian, and good morning everyone.

Firstly I’d like to echo the thoughts of our hosts in acknowledging the Traditional Owners of the land on which we meet.

I am pleased to be here today.

This is a pivotal time for mining. 

The past few years have seen a marked increase in awareness on the part of policy makers  of the importance of metals and minerals, not only to the functioning of the economy today, but the functioning of the economy of tomorrow and, critically, to the urgent global effort towards decarbonisation.

Ongoing population growth, urbanisation, rising global living standards, renewal of ageing infrastructure, and decarbonisation of the global energy system all mean the demand for many metals and minerals will grow, even as existing resources are depleted. 

This demand outlook brings with it significant opportunity for companies, countries and communities.

But it also brings significant challenges in terms of the quantum of capital required, as well as the need to develop and operate new mines in a way that creates the greatest possible social good, while minimising the consequent externalities. 

Global efforts to solve one ESG problem – climate change – must also deliver everlower impacts on other dimensions of ESG – water stewardship, biodiversity, and First Nations heritage to name a few.  

Rising to the challenge is going to require effort from all key actors in the system – industry, government, investors, communities. 

I think conferences like this are an important opportunity for us to come together to share perspectives, and advance understanding and solutions.

I’m going to talk today about what it is we are trying to achieve, about our responsibilities, both in industry and in government, to make it possible, and the challenge we need to take on to get there faster, more sustainably, and more efficiently.

I’d like to start with the numbers.

We need a massive wave of capital investment – perhaps an additional US$100 billion per year in capital investment in the resources sector – if the world is to get on track to meet the Paris aligned 1.5 degree scenario.  

That is going to require significant multiples of metals and minerals in coming decades compared to the last few – two times as much copper, four times as much nickel, twice as much steel, twice as much potash – and so on for the other critical metals and minerals. 

The mega trends of population growth, urbanisation, rising living standards and decarbonisation are significant and momentum is building. 

They are changing the economic and social norms of the world in which we live.  

This next period of innovation will be an evolution in the energy we consume, how we produce food for a growing population, and how we continue to raise living standards while taking better care of people and of the environment.    

It’s the future of a planet of 9.7 billion by 2050, with more than two thirds of people living in cities. It’s a future of improved standards of living, better jobs, better diets and better access to health care and education.  

It’s a future that requires more mining, responsibly done.

For nations, mining brings the opportunity for secure jobs, economic development and investment – as well as secure energy solutions and food supply chains that sustain lives and livelihoods. I am sure everyone in this room knows the impact that mining has had on Australia.

Australia would not be the country it is today, wouldn’t have the living standards Australians enjoy today, without mining.

In the 2021 financial year, the minerals sector alone contributed almost 10% of Australia’s GDP, and almost 30% of corporate taxes at the federal level.

Last year, royalties from resources accounted for approximately 40% and over 20% of the non-GST revenue of Western Australia and Queensland respectively.

It is truly the national golden goose.

For the mining industry, the opportunity is to continue to create significant benefits for investors, employees, contractors, and suppliers through finding and producing the metals and minerals the world needs. We can also create lasting value for the communities we work in and with and the traditional owners of the lands on which we operate.

The world is in transition. It will be a different world in 20-30 years. I believe it will be a better world. A more sustainable world, with higher average standards of living, for developed and developing nations alike.

We have a shared responsibility to enable that change.

Industry and governments each have roles to play. Without the industry taking risk, continuing to deploy capital and operating to ever higher ESG standards, the future won’t be met, or can only be met in part.

Without governments in resource rich nations establishing good governance and without governments ensuring that investment settings are attractive, the meeting of this better future will be constrained by a lack of willing capital due to perceived risks, or by lack of sufficient pace in deploying capital due to slow permitting processes.

Our responsibilities in industry are clear: 

First, find the minerals the world needs. Then extract them safely, and in a way that has a positive social and economic effect and minimises environmental impact.

Get those materials to where they are needed, safely and in increasingly sustainable ways.

And finally work positively and cooperatively, for mutual benefit, with all stakeholders needed to make the above happen – government, investors, communities and First Nations.

The way we have explored, extracted and developed minerals in the past will not be enough to guarantee success or meet the demands of the future.

Resources are becoming harder to find, harder to extract. 

Modern mining recognizes this needs to be done in a way that protects land and culture, and provides sustainable prosperity for a broad range of partners and stakeholders. 

The way we discover, operate, refine, transport, and transact in the metals and minerals the world needs will not be done the same way in the future as it has been done in the past.

This will take a higher level of ambition and stronger commitment to collaboration.

The challenge should not be underestimated. This has been recognised by companies and countries alike, igniting a strategic competition to secure critical minerals supply chains, the likes of which the world has not seen since the industrial revolution.

Innovation is key. Better exploration, extraction, refinement, transport, manufacture… more efficient, more sustainable, safer and faster.

In fact our Chief Technical Officer, Laura Tyler, will speak more about this tomorrow and I’d encourage you all to go along.

Technology represents one of the biggest opportunities to lift productivity and expand output. It also creates secure roles and opportunities across all gender, age, regional and language backgrounds.

From new scanning and scouting techniques to autonomous haulage; artificial intelligence and machine learning to decision automation and value chain performance modelling. Today, the opportunities to innovate and invite good ideas into our companies, and being more prepared to take calculated risks in developing and implementing technology are immense.

The progress we make towards our goal will depend on how much we can improve the way we currently do things.

For governments to fulfil their responsibilities to future generations, there are three main tasks:

First, governments of all nations have a responsibility to provide strong institutional and regulatory confidence. A stable and safe socio-political environment in which businesses have confidence in institutional governance and regulators, where policies on everything from trade to labour to intellectual property rights are predictable and stable.

Second, developed nations have a responsibility to lead efforts to foster a dynamic, commercial and open market with conditions that encourage competition and productivity. To reduce barriers to entry to increase competition and enable productive businesses to thrive.

And third, all nations must progressively pursue an economy-wide transition to net zero emissions. Actively positioning policies that encourage industry to produce the critical minerals needed for renewable energy, batteries, and electric vehicles and appliances.

The race among nations to contribute to solving this challenge – or to secure their share of the attendant opportunities – is on, and it has brought with it not only greater government interest, but also greater government intervention. 

Nation-states are seeking to lock in secure supply of key minerals. This is an understandable reaction to the growing appreciation for the indispensable nature of these minerals and to concerns about the magnitude of the challenge that needs to be met in terms of new supply.

Governments are striving to secure their own critical mineral supplies must ensure they don’t undermine the outcome the world needs to achieve – where in fact a combination of pragmatic international cooperation and competition can accelerate the energy transition.

The pace of change is already increasing. The global competition to ensure competing and partnering jurisdictions have the right policy settings and industry actions in place to capture these opportunities is intense and growing.

This is for a good reason. It is those countries and governments that best position themselves now that will benefit the most – and those who do not that will be left behind. The assets and investments of the future are being planned now; and once capital momentum starts building in one direction, it’s very hard to turn it back again.

Mining is regulation heavy. It is greatly impacted by trade policy, taxation, permitting, industrial relations, and labour policies. 

Governments need to ensure their policy settings encourage investment, allow sensible free trade, and make the path to accessing more materials easier and faster for companies that operate responsibly. 

These settings are the framework for the way nations will secure their own future and how they will contribute to global progress.

Many have been taking action. 

We’ve seen in the U.S. the Inflation Reduction Act – US$370 billion in spending and tax credits to support low-emissions industries and supply chains, reportedly spurring US$150 billion in utility-scale renewable and other zero-emissions power investments in its first 8 months, and which also led the Minerals Security Partnership to stimulate government and private sector investment.

Canada has its own Critical Minerals Strategy, has allocated CAD$1.5 billion to support critical minerals projects, and signing several critical minerals cooperation agreements.

The EU Commission has announced its Green Deal Industrial Plan and is looking at establishing a Critical Raw Minerals Club to foster trade agreements.

Last week the Australian government released its Critical Minerals Strategy, and we look forward to working further with them on a critical minerals list that reflects the best interests of the nation.

I did see some criticism that the new Strategy didn’t contain even more by way of subsidies. For what it’s worth, I think this is absolutely the right approach. 

Trying to match the Inflation Reduction Act is a losing proposition. Australia is simply too small.

What governments here – federal and state – should focus on are those things within their control to make investment fundamentally more attractive. Not simply due to the sugar hit of a subsidy. 

There is enough investment appetite for good projects under the right conditions.

What the Australian resources industry needs is better productivity and fiscal settings. Faster permitting. An industrial relations system that delivers productivity, flexibility, and competitiveness to drive job creation and wage growth. Predictability and reduced risk. Under those conditions, the capital will flow.

I think the Australian critical minerals strategy recognises the importance of the opportunity ahead. Made even more critical for Australia than some other nations given that the race is on here to replace those exports that will become challenged in a faster decarbonising world. 

I wish I could say that all the settings are moving in the right direction, but unfortunately, for the nation, that is not the case.

We’ve seen positive work from the Australian Government in stabilising our relationship with China, and in recognising the importance of stability in the fuel tax regime by ruling out changes to the Fuel Tax Credit ahead of the last Budget, as well as increasing migration and access to skills.

In South Australia, the Government is working with the private sector as they seek to facilitate the development of the Northern Water Supply project, which has the potential to support a myriad of opportunities across the state in mining, agriculture, and defence.

And the Western Australian Government recently announced an investment of $40 million to support critical minerals exploration in that state, via their Sustainable Geoscience Investments package.

But worryingly, some policies are taking us in the wrong direction and are going to make Australia less competitive: this includes recent and proposed changes to industrial relations legislation, particularly the Same Job Same Pay legislation and multi-employer bargaining.

Capital is global. It will flow to where the risk/returns ratio is most attractive.

Where governments act unpredictably and unreasonably, they increase risk for investment. 

We experienced two very different approaches in our global business in the past year. 

In Chile, there was a push to raise copper royalties. Notwithstanding a government for the strong left, they engaged industry, and sought to understand and to work towards an outcome that struck a balance between public needs and what was required to keep industry and the country competitive.

This process of engagement played out over the course of several years. It was respectful, with a focus on understanding and collaboration.

Both the outcome and the process lent themselves well towards maintaining investment attractiveness and BHP will continue to invest there.

By way of contrast, and it saddens me to have to say this on this stage and in this place, but I think we owe it to our host state and to this audience to be honest – here in Queensland, the approach to raising royalties could not have been more different.  No industry engagement, no effort to understand and no interest in understanding.

The near tripling of top end royalties makes Queensland the highest coal taxing regime in the world. I repeat, the highest coal taxing regime for mining in the world. 

In this case, both the outcome and the process have meant for BHP that we have opportunities to invest for better returns and lower risk elsewhere around the world, as well as here in Australian states like Western Australia and South Australia. And we will not be investing any further growth dollars in Queensland under the current conditions.

Capital flow is the lifeblood of this sector and the settings to attract and facilitate capital are going to be the key determinant in whether we are collectively able to rise to the challenge and capitalise on the opportunity ahead.

The challenge we face is massive, among the most ambitious and important we have faced as a global community for quite some time.  Not only is the scale of the challenge massive, the pathway through that challenge is narrowing. To succeed, we need every variable working in our favour.

No one actor can get there on their own.

There’s a window now for a collaborative and co-dependent effort.

Where governments ensure policies, fiscal settings, approval frameworks, and trading arrangements attract the investments that the world needs to underpin the energy transition. 

Where the investor ecosystem supports companies and projects, applying a consistent and fair lens across the industry with a clear-eyed view of the vital role mining needs to play in a net zero global future.

And where the resources industry constantly seeks to raise standards and find better, more efficient, more sustainable and safer ways of delivering resources while truly partnering with communities and First Nations.

As you participate in the Congress this week, and have the discussions and exchange of ideas that make events like this important, let me leave you with this thought.

The world is on a path to what we must ensure is a better future. We will have substantially more people on this planet, seeking higher standards of living, that need to be supplied and powered by resources extracted, refined and used more sustainably.

This industry is critical to enabling that future. And the opportunity is large.

If we deliver on this opportunity, we deliver for the world. For economies, societies and communities.

Change is coming fast, and we all – governments, investors, and the entire industry up and down the value chain – have to do things better and make it easier for each other.

Through our actions, the mining industry can be a force for change; a catalyst of the most significant shift in global megatrends.

We have time to plan and invest for the future, but no time to lose.

The decisions we make in the short term will shape our world for decades – perhaps centuries – to come.

I look forward to the contributions of other speakers across this World Mining Congress, and I thank you again for the time you’ve given me today.