Why BHP expects to make a fortune from net zero emissions

Posted: 1 November 2021 2:52 pm
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BHP's share price is predicted to remain resilient despite world leaders looking to act on climate change.

As world leaders gather for COP26 climate talks, BHP reminds investors it will play a major role in the transition to net zero, its CFO states.

During an Australian Shareholders Association (ASA) webinar on Thursday, BHP's chief financial officer (CFO) David Lamont explains why net zero is actually a positive outcome for the mining company.

In fact the CFO notes that under a 1.5 degree scenario BHP would be in its strongest possible position.

"We expect 4 times the nickel, 2 times the amount of potash, 2 times the amount of copper and 1.8 times the amount of steel will be required in the next 30 years compared to the last 30 years."

Mega-trends falling in BHP's favour

According to the CFO, it is not just climate change, but a number of mega-trends that will help drive the mining sector forward.

Although he explains a decarbonised world is one of the greatest tailwinds for the mining sector.

"So the world is changing, in ways that play to BHP's strengths. Mega-trends like decarbonisation, electrification, population growth and higher living standards will drive strong demand for many of our commodities," Lamont explains.

BHP ventures

Lamont also explains during his presentation that the Morrison government's technology not taxes approach, which has been heavily scrutinised by world leaders, could act as another tailwind for BHP.

Highlighting BHP's efforts in this sector, Lamont notes it could be a positive for the business long-term.

"We are looking at things all the way from how do we displace diesel through our operation, to how do we improve our sustainable operations through the use of batteries.

"We are also looking at how do we better [refine] the ore we actually process and do that in a way that is less energy intensive," the CFO explains.

He also pointed out that BHP is looking into "green steel".

"We are looking at carbon capture and what we can do on that front," he said.

"But one that is also exciting for us is a partnership with Boston Metals. What they are looking at is the electrical process or chemical aspects of steel making and how we can reduce the reliance of metallurgical coal into the current steel manufacturing," Lamont said.

Iron ore price battered but remains high

BHP's share price has recently pulled back following the near halving of iron ore prices over the last 6 months.

Despite strong pullbacks in the price of iron ore Lamont remains bullish on the commodity.

Iron ore prices remain sluggish following a reduction in steel output from China as well as coal exports.

The price of iron ore fell from a recent record high of over US$220 a tonne sitting at around US$120 per tonne.

"Now the price has come off. But I would just say to you that $120 is above our long-term view of prices.

"I love when I read in the media that the iron ore price has collapsed. I would take US$120 into perpetuity if we could be guaranteed that because we have a very robust business at $120 a tonne," he concluded.

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