BHP chairman Ken MacKenzie has not ruled out shutting down its Mount Arthur coal mine in NSW if no buyer can be found for the mining giant’s last thermal coal mine.
The miner sold its Columbian thermal coal interests mid-year leaving the wholly-owned Mount Arthur open cut mine in NSW to be sold within a year to meet its target to exit the commodity.
Speaking at the dual-listed miner’s Australian annual general meeting on Thursday, Mr MacKenzie said current high coal prices had not shifted the company’s view about the attractiveness of coal for power stations. However, with no news of potential buyers, when asked if the company would consider shutting down the operation instead of selling it, Mr MacKenzie said, “we remain open to all options”.
BHP chairman Ken MacKenzie.Credit:Peter Braig
Mr MacKenzie said BHP has had no access to the Chinese market for its thermal and metallurgical coal in 2021 and he did not expect that to change in the near term.
BHP, along with the world’s other leading miners, is under pressure from investors and wider society to respond to the worsening climate crisis. It has adopted climate targets less stringent than some competitors. It has vowed to cut its direct emissions by 30 per cent by the end of the decade and hit “net-zero” emissions by 2050. Last month it announced expanded targets requiring the shippers of its products and suppliers of goods and services to reach net-zero by 2050, as well as a “goal” for net-zero Scope 3 emissions across its entire value chain.
Thermal coal represents only about 1 per cent of BHP’s EBITDA and its most significant initiative to decarbonise its portfolio is the planned scrip sale of its petroleum division to Woodside.
After BHP’s 60 years in the oil and gas business, Mr MacKenzie sees strong demand for oil and gas “at least for the next decade and likely beyond”.
“However when we look at petroleum compared to the other mineral commodities in our portfolio we think it’s going to struggle to compete for capital. Cost of capital in petroleum is going up.”
The difficulty in finding capital is one driver for Woodside embracing BHP’s oil and gas assets as the near term cash flow from the Bass Strait and Gulf of Mexico assets would help the LNG specialist finance the $US12 billion ($16 billion) Scarborough LNG development it plans to sanction in December.
BHP has a 26.5 per cent interest in Scarborough and climate-focused shareholders peppered the chairman with questions on every aspect of the project. Mr MacKenzie pointed out that even if the Woodside deal did not progress it had the option to exit the project leaving Woodside the whole owner.
“There is still a way to go with this transaction,” Mr MacKenzie said.
Mr MacKenzie and chief executive Mike Henry said the mining giant was well placed in a world heading towards limiting global warming to 1.5 degrees with an increased focus on nickel for batteries and the large commitment to potash in Canada.
Apart from decarbonising its portfolio BHP’s other transformation planned for 2022 is the elimination of its dual UK and Australian listing, a hangover for the BHP Billiton merger two decades ago.
Asked why simplification of its corporate structure has taken 20 years, Mr MacKenzie said previously the business case for the move had not been strong enough. However, transaction costs have reduced and the UK entity only contributes 5 per cent of earnings compared with 40 per cent 20 years ago.
“This means a number of the key barriers to reunification have been removed.”
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