Former BHP executive Alberto Calderon issues stark warning to mining industry, Australia

Alberto Calderon says total carbon emissions of BHP and Rio Tinto were each around the total of the entire Australian nation, although both were below Brazil’s Vale and Canada’s Teck mining giants. Picture: Aaron Francis/The Australian

When Alberto Calderon addresses the Melbourne Mining club everyone is on the edge of their seats. They know that the former Orica chief executive and BHP executive focuses on key issues that the mining industry often prefers not to talk about.

But no one was prepared for this week’s address which will change the carbon debate in Australia plus the role of crypto currencies as a rival to gold.

Calderon is a remarkable CEO. He transformed Orica, and now as CEO of AngloGold Ashanti, his strategies have sent the gold miner’s shares sky rocketing (AngloGold is listed in the ASX and has mines in Australia, Africa and South America).

Calderon revealed that on the basis of 2019 data the total carbon emissions of BHP and Rio Tinto were each around the total of the entire Australian nation, although both were below Brazil’s Vale and Canada’s Teck mining giants.

And carbon emissions from producing gold bars were less than half the total carbon emissions from “mining” the crypto currencies Bitcoin and Ethereum.

Australia’s carbon emissions are in the vicinity of 500 million tones. Calderon quoted BHP’s 2019 emissions at 483 million tones and Rio Tinto’s at 541 million tones.

The BHP figures include the oil and gas operations that have been transferred to Woodside and coal operations that have been sold. In addition they include an estimate of the emissions, not just at the mine site, but also from shipping ore and smelting steel – the so called “stage three” emissions. Accordingly they estimate emissions from BHP and Rio customers in China, Japan and elsewhere so are obviously an approximation.

Neither BHP nor Rio can control how their customers make steel from iron ore. But the US is demanding that “stage three” emissions be included in totals and in the post Ukraine world where globalisation is set be reduced, the Calderon emission calculations out of OECD data will eventually be globally adopted.

Naturally the miners believe this is unfair.

But the emerging carbon emissions world will have many aspects that are unfair for Australia. Sadly, three of our top companies – BHP, Rio Tinto and Woodside – will be high carbon emitters. Many institutions may lower their exposure to the stocks with consequent implications to the ASX.

Rival iron ore miner, Fortescue was not included in the Calderon figures. Its main shareholder, Andrew Forrest, has been buying Australian cattle stations.

Australian cattle emit far less carbon than those raised fed in feedlots and Australia has the potential to use its vast rural lands for carbon storage.

BHP may need to consider a similar strategy to be able to offer “carbon neutral” iron ore. It is developing Potash in Canada which takes it into the rural sphere.

Woodside has been undertaking small scale tree planting. Iron ore miners will need to think seriously about using their abundant cash generation to work on better ways to produce steel. This is a new era for Australia’s mining industry.

Calderon’s Melbourne Mining Club address was really a wake up call for the entire nation because a large amount of the trade surpluses that Australia is now enjoying are not sustainable in a longer term carbon reducing world.

Unless we can develop far better ways of producing metals this is going to be a major issue for the nation after 2030.

Calderon is now in the gold business and believes that gold will be an increasing store off savings value in the post Ukraine world. Central banks have seen what can happen to their paper currency reserves when sanctions are imposed. Many have decided to increase their gold holdings. It is expected that the current level of around 13 per cent will rise by about a third and then continue to increase.

Calderon emphasised that in the recent world uncertainty gold had performed well as a store a value whereas cryptocurrencies have fluctuated. As a gold producer he is obviously biased but Calderon pointed out that institutions wanting to lower the carbon content in their resource investments can do so by lifting their investment in gold.

The listed gold companies emissions total only 78 million tonnes and they‘re coming down rapidly.

If we are moving to a world where carbon content will play an increased role in institutional investment portfolios then certain industries are vulnerable – global agriculture emits 9,000 million tones of carbon; iron and steel 3,550 million tones and aviation 938 million tones.

Clearly, agriculture has scope to substantially reduce emissions. The world may start with the feed lot system of growing cattle which dominates North America.

Many believe that the political forces in the US to defend this practice will outweigh the carbon drive. But may leave a wonderful opportunity for Australia and perhaps an outlet for the enormous funds being generated in the current iron ore coal and gas booms.