BHP warns energy crisis could repeat in metals

14th October 2021

BHP chief executive Mike Henry has warned governments and investors that a well-intentioned focus on environment, sustainability and governance issues could hamper the world’s decarbonisation agenda and trigger price shocks similar to those rattling world energy markets (reports The Australian Financial Review).

Mr Henry has aggressively pushed BHP towards the decarbonisation trend by seeking to divest the company’s entire portfolio of oil, gas and thermal coal assets while broadening its exposure to metals such as copper and nickel that are required for electric vehicles and renewable energy.

BHP produces most of its copper in Chile, where the government is redrafting the constitution and planning to raise mining royalties, while US legislators have twice in the past seven months rescinded approvals for BHP and Rio Tinto’s Resolution copper project despite President Joe Biden’s big push into clean energy and electric vehicles.

Speaking at a conference run by London’s Financial Times, Mr Henry did not single out particular governments, but said the “reality” was that government actions were stifling the development of “future facing” commodities.

“Some of the policy overlay that exists currently will work against the world’s need for more of these commodities quickly and reliably,” he said.

“I start from the perspective that policymakers are smart, thoughtful people, but they are also needing to manage multiple priorities and multiple constituencies at the same time.

“Sometimes the fact that things are not coming together in as tight a way as the world needs them to, or as quickly as we would like, is not necessarily due to a lack of understanding, It is due to the complexity of the stakeholders that are involved and the various tensions that need to be navigated.”

Asked whether the world could be sleepwalking into a situation where its decarbonisation goals were hampered by a shortage of metals such as copper, Mr Henry said: “Yes, in short.

“To some extent, that is the history of the resources sector. It is why we have such a cyclical industry.”

The comments come after legendary copper explorer Robert Friedland declared in April that copper was fast becoming a matter of national security while KPMG global head of mining Trevor Hart said in May that geopolitical power could in future move from oil-producing nations to those that produce “critical minerals” such as lithium, graphite, vanadium, cobalt and indium.

Mr Henry said investors’ growing focus on ESG issues could also have unintended consequences.

“The demands from investors are laudable, and they are something that we should all be celebrating and supporting,” he said.

“In any time of significant rapid change like we see on the ESG front, of course there are going to be unintended consequences and imperfections in the way the system operates along the way.

“In terms of unintended consequences, yes, there are some. For example, in the strong push for decarbonisation with the ensuing implications in terms of copper demand, nickel demand and so on, the world does need more copper supply to be brought to the market more quickly, and the same for nickel.

“Without a concurrent focus on community, water stewardship, biodiversity and so on, you could see unintended or bad consequences on those ESG fronts. So, as we all look to grow supply in those commodities, it is important that it is done with a broad-based focus on ESG.”

Mr Henry said governments, miners, investors and other stakeholders needed to work together to ensure capital flowed to the companies and projects that could deliver the commodities the world needs in a way that also delivered good outcomes for traditional owners, the environment and other stakeholders.

“The challenge for all of us is to come together and get the system operating in the way that the world needs it to operate as quickly as possible.” he said.

BHP’s London shareholders will get a say on BHP’s climate credentials on October 14, when a non-binding vote on BHP’s climate transition plan is held at the company’s annual meeting for British investors.

Proxy advisory firm Glass Lewis urged shareholders to vote against BHP’s climate plan, but rival proxy adviser ISS Governance advocated in favour of the resolution.

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