REG - BHP Group Limited - BHP 2023 AGM Speeches and Presentation

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01/11/2023 07:00

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RNS Number : 9556R  BHP Group Limited  01 November 2023

Exchange release

1 November 2023

 

BHP Annual General Meeting 2023 speeches and presentation

The following documents are attached and will be presented at the 2023 Annual
General Meeting of BHP Group Limited to be held today:

 

1.           Chair address

2.           CEO address

 

In addition, the AGM presentation has been submitted to the FCA National
Storage Mechanism and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)

These documents can also be accessed via BHP's website at bhp.com/agm

 

 

Authorised for release by Stefanie Wilkinson, Group Company Secretary.

 

 

 

 

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 BHP Group is headquartered in Australia

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BHP Group Limited AGM

1 November 2023

Ken Mackenzie, Chair

 

Welcome to everyone with us here in South Australia today and watching online.

Our results for the 2023 financial year demonstrate BHP's focus on
consistently executing our strategy to deliver results.

Our operating performance and financial results were strong, and we made good
progress towards our social value targets and goals.

We believe our company is well positioned to continue to create value today,
and for decades to come. I'd like to take this opportunity to explain why,
focusing on:

·    Our approach to safety, culture and capability

·    Our role in a sustainable global future

·    Our strong, consistent performance and returns, and

·    Our focus on social value

 

Safety and culture

At BHP, safety is our number one priority. The two tragic fatalities this year
at Western Australia Iron Ore and at Olympic Dam were stark reminders of the
reason why safety must always be our number one priority.

Our commitment to the goal of zero fatalities and serious injuries at BHP
remains unwavering. We are continuing to drive our safety culture to eliminate
fatalities and serious injuries.

This safety culture goes beyond operational safety and includes addressing
sexual harassment, racism and bullying in our workplace. We still have more
work to do, but we are making progress on our commitment to provide a safe,
inclusive workplace culture where everyone can bring the best of themselves to
work.

 

Our role in a global future
Mining, and BHP, have a clear and undeniable role in the critical global
energy transition required for more sustainable development.

Metals and minerals produced from mining are essential for decarbonisation,
the energy transition and to meet the demands of a growing population, who are
increasingly urbanised and seeking a higher standard of living.

Over the last three years, we have made strategic decisions to reshape our
portfolio to align with these global megatrends.

We unified our corporate structure to provide greater strategic flexibility,
we merged our former petroleum business with Woodside to create a top 10
global independent energy company, and we approved an investment of $5.7
billion US dollars to develop Stage 1 of the Jansen project in Canada, with
first production expected in late 2026.

And just yesterday, the Board approved a further investment of $4.9 billion US
dollars for Stage 2 of that project, which Mike will touch on shortly.

This deliberate reshaping of our portfolio, positions BHP to create value for
today and into the future. We now have a portfolio that stands to benefit from
the increased demand generated from the global megatrends playing out around
us.

Our portfolio includes copper for renewable energy, nickel for electric
vehicles, iron ore and higher-quality metallurgical coal for the steel
required to build decarbonisation and other new infrastructure, and we're
moving into potash, which we expect to be vital for food security and more
sustainable farming to support a growing population.

Our recent portfolio changes continue this theme. We are consolidating our
metallurgical coal portfolio in Queensland to focus on the higher-quality
metallurgical coals preferred by our steelmaking customers.

 

Copper South Australia

And our successful acquisition of OZ Minerals in May this year adds
complementary copper and nickel assets and creates an exciting opportunity for
BHP here in South Australia.

We are combining the Carrapateena and Prominent Hill mines acquired from OZ
Minerals with the Olympic Dam asset and Oak Dam project, to create a new
copper province - which we call Copper South Australia. This new copper
province will unlock long-term value and create significant synergies.

But it's essential to understand - and I know Mike is going to talk about this
shortly - that the right conditions will need to be met for Copper South
Australia to compete with other options in our Capital Allocation Framework.

Beyond this available growth from our existing assets, we have four further
levers to pursue growth: technology and innovation, early-stage entry,
exploration and mergers & acquisitions. We are making good progress on
each of these fronts. But it's important to note that we are not pursuing
growth for growths sake, but to create value for shareholders.

 

Strong, consistent performance and returns

We use our Capital Allocation Framework to assess the most effective and
efficient way to deploy our capital. It is deeply embedded in our decision
making, and is one of the reasons we have been able to consistently deliver
substantial shareholder returns and create financial and social value for our
partners and stakeholders.

 

FY23 highlights

In the 2023 Financial Year, we had earnings of more than $13 billion US
dollars. These results were delivered against a back drop of global
uncertainty, weaker commodity prices and inflationary pressures.

We also continued to produce strong margins and a consistently high baseline
of cash flow.  Over the past decade, we have delivered average margins of 55
per cent and generated average net operating cash flows of $20 billion US
dollars per year. This stability is a hallmark for BHP and demonstrates the
quality of our portfolio and the consistency of our returns, despite the
cyclical volatility in the resources sector.

Using our Capital Allocation Framework, this year's result has flowed through
to a full year dividend to shareholders of $1.70 US per share, fully franked,
which was a 64 per cent payout ratio. This was the third largest ordinary
dividend in our history.

To put these results into context, over the last two years, BHP has been the
largest dividend payer globally across all sectors and the largest dividend
payer on the ASX100.

In terms of total shareholder returns, over the past 5 years, our total
shareholder return was approximately 15% per annum, and includes delivering
more than $50 billion US dollars in cash dividends to our shareholders.

We also created significant financial value in the communities where we
operate through payments to suppliers, wages to our employees, contributions
to communities and taxes and royalties paid to governments. In the 2023
Financial Year, our total economic contribution was over $54 billion US
dollars. This includes $2.6 billion US dollars paid to local suppliers who
support our operations.

 

Social value

We are also continuing to deliver tangible outcomes in each of the six pillars
of our social value framework, which are focused on decarbonisation, the
environment, Indigenous partnerships, workforce, communities, and supply
chains.

The work we do in these areas is vital to our business. Delivering social
value can help us become a partner of choice with customers, suppliers and
communities.

Addressing operational greenhouse gas emissions is an important part of our
commitment to sustainability. We have a Scope 1 and 2 decarbonisation target
of at least a 30% reduction in our operational greenhouse gas emissions by the
2030 financial year compared with our baseline 2020 financial year. In the
2023 Financial Year, we further reduced our operational emissions by 11 per
cent from the previous year, and we remain on track to achieve our 2030
target.

Our future progress towards greenhouse gas emissions reductions won't be
linear as we look to grow our business, but we have a comprehensive plan that
is underpinned by clear actions that support emissions reduction now and
through to the 2030 Financial Year.

 

Our relationships with Traditional Owners and other Indigenous partners are
some of the most important relationships to BHP. We operate on the traditional
lands of Indigenous peoples at many of our locations in Australia and around
the world. We partner widely with Indigenous communities and have long-term
agreements with Traditional Owners and First Nations partners.

These are critical relationships for BHP's ability to start new projects,
expand existing projects, and to grow our business.

We recognise that we can contribute positively to the lives and aspirations of
Indigenous peoples and communities by providing opportunities for employment
and supporting Indigenous enterprises. This year we spent more than $330
million US dollars with Indigenous suppliers globally. This is more than
double last year's figure.

We are the largest Indigenous employer in the Australian resources sector with
over 8 per cent Indigenous employment. In Chile, our Indigenous employment is
close to 10 per cent and at our Jansen Potash Project in Canada it is almost 8
per cent.

Finally, this year we published our Reconciliation Action Plan which we
developed in partnership with Traditional Owners. This was the sixth iteration
of our Reconciliation Action Plan since 2007.  We remain committed to
incorporating Indigenous perspectives and voices into the way we operate and
manage our business, and to working closely with Traditional Owners.

 

Board and succession, and conclusion

Now, before I hand across to Mike Henry, I would again like to acknowledge and
thank Terry Bowen who will retire as a director at the conclusion of this
meeting.

And I am pleased to confirm that Michelle Hinchliffe will step into the role
of Chair of the Risk and Audit Committee following Terry's retirement.
Michelle brings significant experience in risk management and financial
controls.

In closing, I believe that BHP is in a strong and exciting position.

It is a belief powered by the global megatrends - population growth, increased
urbanisation... and the energy transition which are all increasing demand for
mineral resources.

We've made a number of strategic portfolio and structural changes over the
last three years. And we are further positioning our portfolio to benefit from
that demand.

We will continue to drive a culture of safe and reliable operations while
maintaining rigorous capital discipline- and we are making good progress on
social value, which is vital for sustainable long term shareholder returns.

Thank you for your continued support and for investing in the future of BHP.

It is now my pleasure to invite your CEO Mike Henry to speak with you.

Thank you.

 

Mike Henry, CEO

 

Thanks Ken, and thanks to everyone here with us in Adelaide today and watching
online.

 

Safety

I will start with safety, and 2023 was a difficult year from a safety
perspective for the Company.

Tragically two of our colleagues lost their lives while on the job. This
included a fatal incident at the Olympic Dam asset here in South Australia.

Our thoughts remain with their families, friends and colleagues. These events
underscore the absolute importance of safety first. We remain resolute in our
commitment to eliminating fatalities and serious injuries across BHP.

 

Strong operational performance

Turning now to broader business performance, as you've just heard from Ken,
this financial year we delivered another strong set of results.

We met production guidance across all of our four commodities, and achieved
record annual production at Western Australia Iron Ore, Olympic Dam and
Spence.  We managed inflation well.

We made a significant economic and social contribution to the regions where we
operate, and delivered US$8.6 billion cash back to shareholders in dividends.

We have continued to expand and execute our suite of growth options, and that
includes progressing projects, advancing studies, and exploring new prospects.

We continue to invest in technology, innovation and early-stage options.

And of course, we undertook the successful acquisition of OZ Minerals.

 

Operational performance

In terms of underlying operations, this year we demonstrated strong
performance across the business, thanks to the efforts of our more than 80,000
employees and contractors.

Now if I unpack that a bit…

Western Australia Iron Ore achieved record production volumes and remains the
lowest cost of the major iron ore producers. In fact, our iron ore operations
generate around five US dollars more per tonne in free cash flow than that
reported by our largest competitor, and when you multiply that by the hundreds
of millions of tonnes we produce each year you get a sense for the relative
performance of this asset. We are ensuring we get maximum returns for every
dollar of shareholder capital invested in this business.

In Copper, Escondida's production increased by five per cent, year-on-year.
Unit costs increased by 17 per cent, primarily driven by inflationary
pressure. This was a solid outcome in the context of what other producers are
experiencing; however, we remain very focused on mitigating the impacts of
inflation.

We achieved record production at Spence following higher concentrator
throughput, and at Olympic Dam, with continued strong performance at our
concentrator and smelter.

This disciplined operational performance has underpinned continued, strong
returns to shareholders. In fact, BHP was among the highest dividend payers
globally in the 2022 calendar year, of any company in any sector.

Portfolio and growth

Of course our business isn't just about today, it's about delivering value for
shareholders long-term, so I do want to spend a few minutes on portfolio and
growth.

The resources industry is cyclical, and commodity prices will always impact
overall sector profitability.

This cyclicality is a key reason why we seek to have assets that are low on
the cost curve. This ensures they are more resilient at all points in the
cycle.

This allows us to focus even more intensely on managing the things within our
control - safety and productivity. It allows us to do all we can to maximise
the returns from the assets we operate and the capital we have invested in
them.

We seek a portfolio of assets that is deliberately structured to take
advantage of the megatrends occurring across the globe.

We see potential for growth in those commodities essential to the needs of
urbanisation, decarbonisation, and a growing population, and we are making the
investments needed to unlock productivity, progress towards decarbonising our
assets, and deliver growth.

We're working hard to define the path forward for Escondida which is the
world's largest copper mine and resource 1  and which is well-placed to be one
of the most responsible copper producers globally, given its transition to
full renewable power and desalinated water usage.

At WAIO, we produced 285 million tonnes of iron ore in FY23, progressing
towards 305 million tonnes per annum, with studies into reaching 330 million
tonnes underway. Iron ore is essential for the steel needed for infrastructure
for the energy transition and ongoing urbanisation.

 

 1  On a contained metals and equity share basis

Significant growth opportunities ahead

We also have a significant, exciting growth path ahead of us in potash in
Canada. Potash, used in fertilisers, will be essential for food security and
more sustainable farming, against the backdrop of a growing global population.

We believe the long-term fundamentals for the potash market are compelling and
they have further improved since we sanctioned Jansen Stage 1. Stage 1 is now
32 per cent complete - and remains on budget and ahead of its original
schedule, with first production expected late in the 2026 calendar year.

And just yesterday the Board approved the decision to invest US$4.9 billion
into Jansen Stage 2, underscoring our confidence in potash and marking the
next phase of our growth in Canada.

Stage 2 will help to transform Jansen into one of the world's largest potash
mines, doubling production capacity to 8.5 Mtpa, and positioning BHP as one
of the leaders in the global potash industry.

And we're able to deliver Stage 2 at a lower capital intensity because of the
infrastructure delivered in Stage 1.

Jansen is a world-class asset in an investment friendly jurisdiction.  It
will create value for generations to come.

We have continued to increase our copper and nickel prospects globally. These
interests include Oak Dam in South Australia, Kabanga Nickel in Tanzania, and
Ocelot in the United States. They also include projects in Serbia and Peru,
and the Filo del Sol project in Argentina and Chile.

We are also consolidating our coal portfolio to focus on the higher quality
metallurgical coals that are increasingly preferred by our customers - most
recently through the up to US$4.1 billion divestment of our Blackwater and
Daunia mines, part of the BMA business, which we expect to complete in the
fourth quarter of FY24.

Creating potential for future growth

And of course, there's OZ Minerals. Bringing OZ into BHP creates the potential
for further growth in the near and long term, in the newly aggregated copper
province for BHP assets here in South Australia.

We believe that with stable and competitive government policies in place in
South Australia, there will be a strong case for future capital investment in
these assets relative to other potential investment options in our portfolio.

I really do want to thank Premier Malinauskas and his government for the
constructive way we are working together towards delivering this shared
objective.

Globally, the mining sector is at a crossroads. The energy transition and
broader decarbonisation efforts are expected to progressively shift demand
growth towards future-facing commodities. A massive wave of capital investment
will be required to meet demand for these minerals.

Within this environment of heightened global competition, Australia has a
once-in-a-generation opportunity to capture an outsized share of this
investment flow, and enjoy the far-reaching future economic and societal
benefits it could deliver. However, we can only succeed if we are willing and
able to compete.

This will require government and industry to work together to improve the
competitiveness of Australia's mining sector so that the nation can enjoy the
future benefits this opportunity can bring.

It's against this backdrop that we are closely watching policy changes at the
Australian Federal Government level, some of which risks our national
competitiveness.

In particular, BHP shares concerns of the broader business community that the
Australian Government's Same Job Same Pay proposal will increase costs and
reduce Australia's investment competitiveness at a time when competition for
investment is fierce globally and other nations are working to become more
competitive and more attractive.

Prior to the last election, we were on the record as supporting the principle
of focused legislative reform to protect vulnerable and low paid workers.
However, the Same Job Same Pay bill goes well and truly beyond this. The
proposed changes are not about 'closing loopholes' but are the most
significant and far-reaching changes to Australian workplace relations since
WorkChoices.

BHP strongly opposed the Same Job Same Pay bill not only because of the damage
it threatens to do to our business, but also for the hit it will have on
Australia's economy, to Australian jobs and to Australia's productivity and
international competitiveness.

The bill could reduce the value of any potential growth plans for a copper
province of BHP assets here in South Australia by up to US$2 billion. And it
risks directly impacting dividends for the 17 million Australians who hold BHP
shares directly, or indirectly via superannuation.

This is not just about BHP. These concerns are shared by businesses large and
small across the country, and getting these policies wrong risks impacting
Australians' retirement savings.

A competitive labour market with strong links between labour costs and
productivity is essential to the long-term success of our industry and the
Australian economy. We will continue to engage the Australian Federal
Government constructively, together with the wider business community to
highlight the negative impact of these policies.

 

Delivering strong social value

When it comes to growth, the opportunities that we're able to access and
develop cannot be realised without delivering strong social value. Social
value goes hand in hand with long term shareholder value.

Our access to the best resources, markets, partners and talent is contingent
on making a positive contribution to society and building strong relationships
with partners, local communities, and First Nations peoples.

Our approach is disciplined and proactive, and it's delivering tangible
outcomes. This year we:

·             Reduced our operational greenhouse gas emissions by
11% from the year prior, and we remain on track to achieve our 2030 target to
reduce operational GHG emissions by at least 30 per cent from FY2020 levels.

·             We doubled our spend with Indigenous suppliers
globally to more than US$330 million and here in Australia, we released our
sixth Reconciliation Action Plan which was recognised with 'Elevate' status by
Reconciliation Australia.

·             And we further advanced female employee
participation to more than 35 per cent globally - more than double from 2016
when we set our aspirational goal to achieve gender balance in our employee
workforce by the end of FY2025.

Social value is fundamental to our success and future competitiveness and is
an important point of differentiation from our competitors.

 

Creating value now, and into the future

Before I conclude, I'd like to echo Ken's thanks to Terry Bowen for his
extensive contributions to the Board and the company. Terry has brought a
wealth of experience and insight over his time with BHP, and I wish him the
best in his future ventures.

At BHP we're focused on creating value now, and into the future. We think and
plan in decades.

By 2050 the global population is projected to be around 10 billion, about
two-thirds of whom will live in urban areas. These global citizens will quite
rightly be seeking to improve their standard of living - raising demand for
housing, better food, consumer goods, cars, infrastructure, power and
utilities.

These factors, together with the energy transition, are very metals and
minerals intensive. The two to four-fold increase in demand we expect for key
BHP commodities over the next three decades, versus the three decades past,
presents both challenge and opportunity.

BHP will continue to plan strategically, responsibly, and consistently in
seeking to help meet that demand.

We will maintain our focus on operational performance, delivery, and growth.
We will remain disciplined in capital allocation, as we create value and
generate returns.

I am confident in the strength of our company, now and into the future, and
greatly appreciate your ongoing support.

Thank you.

 

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