Slowing global trade will make fighting climate change harder, says BHP exec

Mega-miner BHP takes a longer view than most.

The Melbourne-based company, with copper, iron ore, coal and nickel mines in Australia and South America, looks at broad global trends that will shape markets for 20 years to half a century when choosing investments. Decarbonization, electrification and population growth are the trends that they’re paying attention to.

“We’re going to need more copper. We’re going to need more nickel,” says Rag Udd, president of BHP’s (NYSE: BHP; LSE: BHP; ASX: BHP) Minerals America division. “We’re going to need more potash, and that’s where we’re trying to make strong investments into those jurisdictions working at very high ESG standards.”

Speaking to The Northern Miner on the sidelines at the Eighth Australia-Canada Economic Leadership Forum in Toronto this week, Udd warned that the drift away from freer trade as countries prioritize security of supply for key materials, will hinder decarbonization.

“What we’re beginning to see in various forms around the globe is different countries looking to shore up or secure their own chunk of critical minerals or the natural resources necessary to solve a problem in their jurisdiction,” he said.

“That creates a world where trade no longer necessarily flows in an agnostic fashion and as a result of that, things will go slow. And if you’re trying to achieve the Paris goals, it’s going to be very hard to meet that in the current world.”

Udd, who’s been with BHP since 1997, noted that the world is already behind in delivering the resources needed to achieve the Paris Agreement goals to limit global warming to 1.5° Celsius.

“It requires investments of about US$100 billion a year for at least the next decade. We’re at a fraction of that at the moment, and if countries start to put in place restrictions that actually slow down that investment or block natural trade routes that potentially align or where natural differentiations can occur, that will actually slow down the process as well.”

So where is BHP looking to invest to bring on new supplies of critical minerals? The company has a natural affinity for both Australia and Canada, which similarly boast stable regulatory and fiscal policy as well as quality deposits, strong mining expertise and capital markets.

“I think both those countries have the ability to really supercharge the pathway towards decarbonization as a society as a whole.”

In Canada, BHP is building its Jansen potash mine in Saskatchewan, expected to start production in late 2026. The $7.5-billion mine will be BHP’s first operation in Canada since it sold its majority stake in Ekati — Canada’s first diamond mine — in 2012. The company’s also made technology investments to halve its water use and carbon emissions per tonne compared with average rates of existing potash mines.

‘Natural advantages’

Although there’s been some anxiety about Canada being able to compete with the U.S. Inflation Reduction Act, Udd said countries like Canada and Australia simply can’t match the inducements offered by the world’s largest economy.

The good news is that they don’t have to.

“For a mining company, we’re looking for not just those inducements to bring you (in), but what’s that country or jurisdiction going to look like over the next 20, 50, 100 years in terms of regulatory certainty, policy,” he explained. “So, where I think Canada and Australia have natural advantages is regulatory streamlining; really becoming much more efficient in terms of how we think about permitting processes.”

The countries could also differentiate themselves through a focus on productivity, industrial relations and energy policy to ensure that there’s enough clean energy capacity and availability, he said.

Permitting times in Canada are coming under increasing criticism as being too slow, but during the opening panel of the forum on July 18, Udd surprised moderator Janice Stein with a positive view of Canada’s regulatory regime.

“I’m actually, on balance, fairly favourable on Canada in terms of what I see on permitting processes,” he told delegates at the invitation-only event. He added that his frame of reference includes South America and the U.S. where “permitting’s not necessarily simple either.”

Speaking to The Northern Miner later in the day, Udd expanded on that by singling out Ontario Mines Minister George Pirie’s recent permitting reform through the Building More Mines Act, passed in May, as “quite pragmatic.”

“I think what would be even better is if we saw that applied across all the provinces and then actually manage to find a way to actually take away the overlap that exists between federal and provincial permitting so that there is really almost a one stop shop for permitting,” Udd said, emphasizing that doesn’t mean lowering standards. “Point of fact, I think BHP is an organization that typically goes above what the regulatory standards are because we aspire to lead in terms of environmental matters across the globe.”

Public perception

Udd says the resource extraction industries are still “relatively misunderstood.” But he has noticed an improvement in public perception over the past five years.

“I have seen a shift in perception around what mining actually contributes to society as a whole. I think some of that has started to take place as the industry has started to become a bit more vocal about what we do contribute beyond jobs and taxes. I think we need to amplify that even further,” he says, adding the onus is on the mining industry to improve how it’s perceived.

The company’s Compromiso Minero or “mining commitment” initiative in Chile, for example, has brought together over 100 mining companies, suppliers, and other aligned industries to highlight what resource extraction contributes to society and how it can be done in a responsible way.

A core principle for BHP is to focus on creating “social value” when it enters a community or jurisdiction. The concept includes looking for ways to help to “improve the planet,” accelerate decarbonization, create a safe work environment, and make sure its workforce represents the diversity of the communities in which it works.

The heft of the company, which recorded US$65 billion in revenue last year, means it can play a powerful role in local communities.

“One of the great things about working with BHP is you’ve got the ability to shape society in terms of where we’re going,” Udd said.

For example, in Chile, the company helped create a market for renewable energy. Its Escondida and Spence copper mines, achieved net zero scope 2 emissions (purchased energy) in 2022. The mines, which account for a whopping 9% of total power demand in Chile, previously relied on power generated by coal.

It also invested about US$4 billion in a desalination facility to pump seawater over 160 km to Escondida — the world’s largest copper mine — instead of relying on Andean aquifers for water.

And at Jansen, it’s worked to build long-term relationships with local Indigenous communities, as well as business opportunities. Since mid-2021, the company has awarded $470 million in contracts to Indigenous businesses in the region.

“We really want to be in a spot that when people think about, we know we’re going to need these raw materials for decarbonization, for population growth, for these other mega trends that are playing out, we want them to be thinking ‘we would like to partner with BHP,’” Udd said.