BHP flags intent for more joint ventures

BHP has signalled a greater focus on building joint exploration ventures with junior miners.

BHP will look to exploration at early-stage partnering, says CEO Mike Henry. Picture: Aaron Francis/The Australian

BHP has signalled a greater focus on building joint exploration ventures with junior miners as it looks to boost its exposure into “future-facing” commodities such as copper and nickel.

With plans under way to sell some of its Australian coal mines and ageing gas assets, including its share of the Bass Strait fields, the mining giant is looking to recycle spending into commodities with a strong growth profile over the next few decades, complementing earnings from its iron ore and metallurgical coal assets.

“We already have businesses in copper and nickel, but we would like to be able to grow those businesses in future, because we think there’s some pretty attractive value in returns that can be generated for shareholders. So, we have to secure more options to be able to do so,” BHP chief executive Mike Henry told a retail shareholder forum on Thursday.

Partnering with smaller miners will be one path to boost its exposure.

“BHP will look to exploration at early-stage partnering. So exploration means us going out and finding new resources. You’ve seen us do that recently with the Oak Dam deposit in South Australia,” Mr Henry said.

“On the early-stage partnering front, we’ve entered into exploration partnerships. So we’ve gained a toehold in early-stage resources in Canada, in Mexico, in Ecuador. And we’ll look for more of those opportunities.”

M&A would also be considered, although Mr Henry said BHP had strict criteria for any dealmaking opportunities. “It has to be really attractive assets in the places that we like and for an attractive price. And those factors don’t line up that frequently. So we don’t have a strategy that is reliant upon acquisitions,” he said.

“We have done some small acquisitions. So in the past half, we were successful in securing more nickel resources through the acquisition of the Honeymoon Well tenements in Western Australia. So lots of levers to pull, all that are going to help us be successful in increasing our exposure to what the world’s going to want more of in the coming decades.”

BHP plans to join ExxonMobil in selling its Bass Strait oil and gas assets off the Victorian coast in a potential $US2.5bn ($3.5bn) deal while also potentially quitting its North West Shelf LNG stake once a tolling deal has been set up by the West Australian joint venture.

Still, Mr Henry said it remained a believer in the oil and gas sector over at least the next decade based on its assumption that demand would eventually return as the pandemic eased, but it would focus on finding the right balance for its portfolio.

“Notwithstanding the near-term reduction in demand, arising from COVID, we believe that as the world comes out of COVID that there’ll be a recovery in demand. The stronger demand coupled with how quickly production from existing facilities declines means that the world’s going to need more investment in a new supply of oil,” Mr Henry said.

“That balance will come in part through taking assets where there’s less upside for or less remaining upside for shareholders like Bass Strait and divesting it.”