BHP’s Mike Henry begins to join the dots on king copper plan

BHP’s Mike Henry has wasted little time in joining the dots on his freshly minted $9.6bn OZ Minerals deal, as he stakes the ground on another of South Australia’s copper deposits.

Henry has prioritised copper as the mineral to reshape BHP by shifting the earnings dial in coming decades, while the vast iron ore operations of Western Australia deliver merely industrial-standard growth.

The bet on copper plays into BHP’s belief that it will be central to the great renewable shift out to 2050, with a wave of investment in wind turbines and electric vehicles bringing a step change in demand for the base metal. If all goes to plan, one day copper could represent as much as 45 per cent of BHP’s earnings, from about 20 per cent currently.

Even as Henry is bedding down OZ’s Prominent Hill and Carrapateena copper mines in South Australia, he has elevated work on the relatively close Oak Dam resource, which is now being defined as an “exploration target” inside BHP.

This has seen more intensive work on the site in a bid to get a more accurate understanding of the size of the copper deposit and how the mine is likely to perform.

The once-dormant site is now busy. After recently securing initial environmental approvals, BHP is running nine drill rigs at Oak Dam, with 11 rigs expected within a few months.

A 150-room camp is being built and it is working with Indigenous communities as it prepares to submit an application to convert the Oak Dam tenement from an exploration licence to a retention lease, the step needed to build an early access decline.

Currently there’s a wide range of resource estimates, from 500,000 tonnes to 1.7 million ­tonnes of copper located from 700 metres underground. Drilling so far has given BHP a better read on the grades. The site is just 65km southeast of the “anchor” mine of Olympic Dam, which will help keep processing costs low.

BHP’s Olympic Dam copper smelter. Picture: BHP

In May, after taking control of OZ, Henry outlined an aspirational target for BHP to grow over time to produce at least 500,000 tonnes of copper cathode from its South Australian operations annually. Part of this includes an expansion at Olympic Dam, with drilling under way going as deep as 1.5km underground, and the block cave development at Carrapateena. But Oak Dam is also part of Henry’s thinking in hitting the numbers.

At the same time, BHP is in the very early stages of studying a two-stage smelter at Olympic Dam to pick up all the extra capacity. In the past two months there has been a small volume of copper concentrate shipped from OZ’s Prominent Hill mine to Olympic Dam for processing.

Oak Dam had been earmarked as a prospective site since 1976 by the old Western Mining, but the focus even then remained on the massive, high-grade Olympic Dam site, which for years underpinned its operations.

Ultimately, BHP acquired Olympic Dam through WMC, but while delivering volume, it has struggled to steadily grow output. Last year the site delivered around 212,000 tonnes of copper concentrate. The addition of OZ’s two South Australian copper assets has seen production guidance increase by as much as 46 per cent, which means BHP expects to deliver as much as 340,000 tonnes at the top end of guidance next year. By comparison, production forecasts across all of BHP’s other operations, from iron ore to metallurgical coal, are between negative and single-digit growth, underscoring the suggestion the mining giant is already running at full capacity.

Westpac’s blueprint

As the nation’s employment market continues to defy gravity, Westpac chief executive Peter King has gained some confidence about the mortgage market, which he says is holding up better than what the bank was anticipating six months ago.

But it comes down to where interest rates are set to peak. Next week’s release of quarterly inflation numbers will set the tone about whether there’s two or even more rate hikes to come. “As we approach certainty on where interest rates peak, I think you might see people more confident to come into the housing market”.

‘Work to do’: Westpac CEO Peter King. Picture: Jane Dempster

Overall demand is still soft in mortgages as borrowers adjust to higher rates and a 3 per cent serviceability buffer to insure against more rate hikes.

However, King said the “fundamentals are probably looking better in the mortgage market”.

King was talking to The Australian following a major reshuffle in his executive team, which from the outside has all the hallmarks of succession planning.

King, 52, is relatively young for a bank CEO, but next year he’s coming up to three decades at Westpac.

He rose through the ranks to become deputy chief financial officer in 2011, then promoted to CFO in 2014. Prior to the Austrac money-laundering scandal breaking in late 2019 King gave 12 months notice of his retirement, but the exit of Brian Hartzer months after saw him take the interim role. Then John McFarlane then named him as full-time chief executive to see through the rebuild of Westpac. McFarlane plans to step down in December.

King tells The Australian he is not going anywhere. “I’m here and I’ve got plenty to do,” he said. However the move to put institutional boss Anthony Miller in a business banking and wealth role is the surest sign the former investment banking is being tested in a critical consumer position, a prerequisite for a chief executive.

But thrown into the mix is the re-emergence of Jason Yetton, returning to the retail banking role. The thinking inside the bank is that it will be a two to three-year process before a new CEO is named.

King declined to be drawn about succession inside the bank. The unwinding (again) of business banking from retail banking was based on what’s best for Westpac.

“The changes are about the future. They’re about sharpening our focus and growth,” King says.

Here the retail bank, which includes the Westpac and St George brands, will get a greater focus as a standalone unit under Yetton, who has also done stints at Commonwealth Bank and digital-focused lender SocietyOne in recent years. Yetton previously ran Westpac’s retail banking business under Gail Kelly.

“We’re in a rising interest rate environment. We know that will make it harder for some customers. But one of the benefits of having Jason in the team is he’s been through cycles before,” King said.

Meanwhile small to mid-sized business banking is nominated by Westpac as a growth area, and King says Miller has delivered across the institutional business in improving returns.

“I’m really happy that we can have Anthony move across from institutional banking and focus on both growing that business and improving the service,” he said.

While interest rates have climbed quickly, King says stress in Westpac’s lending book is at historical lows.

“We know that people have got to deal with cost of living increases, interest rate increases, and the fixed rate rollovers, and some of that’s impacting on cashflow. So it’s still going to get harder for some, but I think we’re as well positioned as we can be.”

[e-mail]