Johan van Jaarsveld, BHP, at the Melbourne Mining Club 5 October 2023.

Yes, Christy, thank you, and very good to be here in my hometown today. I think if we sort of step back and we think about the megatrends that you hear us talk a lot about—urbanization, decarbonization, and electrification of all kinds of value chains—there is just, you know, it sort of gets you to this point where in terms of strategy we needed to think about how do we play these megatrends because they're going to absolutely change our lives and they're going to change the way we're living, they can change almost the way the world operates in a sense. And for BHP, what that means is we have a strategy that's now focused on increasing our portfolio exposure to copper, to nickel, and also to potash. And it's a massive opportunity, as folks know, many of you in this room involved sort of on the critical mineral side, but at the same time the challenge is also daunting. So if you think about copper, we estimate that currently there's about 16 million EVs on the road today, and this is going to go to about 400 million by the end of the decade. Now, just to build those additional EVs, we're going to need about 26 million tons of copper and 15 million tons of nickel. Now, to supply that, you get the perspective when you think about Escondido, which is the largest copper mine in the world in the BHP portfolio, produces just over one million tons of copper currently. And so you need 26 of those Escondido productions just to build those EVs that we see appearing between now and the end of the decade. And then we haven't talked about renewable power that has to be built out and electrification and the charging infrastructure. So a massive role for this entire industry, including BHP, to play in supporting these megatrends that we see. And the strategy is really based on achieving additional exposure for our portfolio to those megatrends.

So given the magnitude of the challenge, if you like, we think about growth in five buckets. So first of all, there's the growth that we can generate from our existing portfolio. Some great assets, great resource bases, and the onus is on us and our responsibility to our shareholders to make the most of those resource bases, to extract more from them, and to bring cash flows forward. So that's sort of the first bucket, using the stuff we've got. Then the second bucket is around technology and what we can do to make uneconomic resources economic, the application of technology. We can come back to that later potentially. And then we're looking at early-stage options. That's where we buy options in resources that other folks have discovered, and that in the fullness of time, as it de-risks, may be a BHP resource or maybe not, but we create an option in our portfolio. The fourth bit is the conventional exploration, and we have sort of doubled our exploration budget over the last few years, and then this will continue to go up. And then we augment that with programs like Explorer that you've just seen, where it's sort of a different approach to increasing that funnel of opportunities that goes into the exploration portfolio. And then obviously finally we've got M&A.

Yeah, I can. So BHP Ventures, we've kept it by design quite quiet over the last few years. Started it about three years ago. We've looked in the last three years, we've looked at about 2,000 opportunities. So on average we look at about 700 a year, and we've made sort of between 20 and 30 investments. And we've really targeted these investments at points in the value chain where a technology unlock would actually make a huge difference, either to our own operations or to the cost curve, if you like. So some of these are public, some are not. I mean, if I take an example, one of the investments that's public is our investment in Boston Metals, for instance, where this is a company based clearly in Boston, and some of the first investments there we've done in conjunction with Bill Gates's family office. But it's a technology that will ultimately help the steel industry decarbonize. So in that case, we invested in a few rounds of the early-stage funding, and then we also have a trial running with them around using our Pilbara ore in steelmaking that doesn't use any carbon. So, and where they are right now is on that sort of scale-up curve, and we've literally now made steel in the sort of the tens of tons quantums with this technology using our Pilbara ore and looking at other ores from around the world, and without actually any carbon. So these sort of technologies will change not only our scope three emissions but obviously be very beneficial to some of our customers, and this is the sort of thing that Ventures does. The other big benefit from Ventures is you become part of that ecosystem, the sort of Silicon Valley technology ecosystem, in the dialogue. And we've established internally a way of that information flowing back constantly in real time to the strategy teams, to the business development teams, and to the innovation teams as well. So that informs a lot of the decisions that we make on the ground in terms of the new technologies that we see coming over the horizon, and that's the other big benefit of the Ventures team.

Because it's early-stage opportunities, it's not as large as you think. So in terms of sort of, they're scattered around the world. Most of them are based on the west coast of the U.S. But, you know, you should think sort of single, very low double-digit numbers. So in terms of the insights that you gain and the dialogues that you have versus the number of people that you have to add, this is actually very good sort of bang for your buck, if you want to call it that.

So it's been going decently. We sort of went through a phase there, you know, when we were simplifying the company, where we sort of took our foot off the pedal a little bit with exploration. Now you can see the exploration budget for greenfields is now over 100, and sort of in total exploration we're spending about 300 a year now. But really it's the application of technology that has really moved the needle for us. And, you know, I just had a chat to Hugh Morgan here, you know, we've from even from the WMC days, you know, there's so much geological data that we acquired and that BHP produced in our last 130 years, and we've actually digitized all of that now. And it's about 11 terabytes, and running sort of AI analysis through that, it sort of brings this agnostic view to the interpretation of the data, and it's helped the exploration team to discover our last two discoveries, i.e., Oak Dam, that you'll hear us talk a lot more about in South Australia. That comes out of 1960s data, and it's a WMC geologist that produced those data decades ago, and so they sort of get another run at discovering something via the AI, if you like. And then there was a more recent one in Arizona, again using existing data. But just the power of that analysis that AI brings, and the one that we had a discovery in Arizona recently, we called Ocelot, and you will hear us talk a little bit more about that in the future as well. So very sort of exciting. Some of the exploration is how we used to do it, and then this technology overlay makes it a lot more exciting but also a lot more efficient, if you like.

Yeah, so I think this is one way where it's a bit different from the BHP of the past. We are more open to partnering, and you would see us on the early-stage option strategy, we will always partner with folks, recognizing that in some cases we don't have the operating expertise in some of these countries, but that's where the resources are. And in other cases, you know, you do it for risk-sharing purposes as well. We think we bring certain technical skills and certain sort of financial size to a transaction. At the same time, our partners bring a different view of the world, a different risk appetite, and putting this together in partnerships where that partnership creates an option for BHP, this has sort of been the approach. So Kabanga as a case in point, you would have seen us make some investments in Bricks and Metals in Midland. We've obviously made the investment in Filo as well, Filo Mining, that's got a great asset down in Argentina. And I think this is very much the way of the future for us. And then as the asset de-risks, with the benefit of the partners' capabilities, our capabilities, we have the opportunity to turn our exposure up over time or down if it doesn't develop like we expect going out. But on a risk-reward perspective, we think it's a real winner sort of for both sides.

Yeah, so the idea, and we're very proud of Explorer, you know, the idea came out of a bit of strategy work we did to try and answer the question how we can become the capital provider of choice for early-stage mining companies. And as you sort of go through that thinking process, we went through all the normal stuff that, you know, it should be a fund, should we seed the fund, you know, do you do early partnering, and eventually settled on this idea of starting an incubator program. And then adapting that, and there are some of these in Silicon Valley today, Y Combinator is a good example of one, and you know, we have Airbnb today as a result of that, and Dropbox and a few other things that you would know. And we basically amended that to work for mining because you have slightly longer lead times, and then went from basically a concept to being in the market with it in about four months. So sort of a very sort of agile approach to and sort of say, okay, let's start this thing, let's put one foot in front of the other, and let's see where this goes. And then we staffed it up with folks that, you know, was sort of excited about the concept. Nobody in that team has any experience doing anything like this, but we just decided we're going to back our team and give them some free reign, and Explorer is the result. So over 200 applications in the first year, we had seven companies come out the back end, you know, that we've put through the program, and they're now free to go and raise capital, and they have the right structures in place and management is trained up. And in the case of three of them, we've also decided to make investments. They're under no obligation to take our money, but that's sort of the cadence that we established over the last year. And we've just opened the applications for next year's round. And then I think where this ends is over time we're hoping to do an annual cadence of sort of Explorer, and any of these early-stage mining companies that will sort of get a bit of a boost, get access to BHP technology, people, expertise, and capital can apply and go through the program. And hopefully, you know, we learn, well, not hopefully, we absolutely learn from them in terms of their view of the world, their view of geology, and hopefully they benefit from us as well, you know, in terms of having a better company at the end of the day and getting there quicker. And that's sort of hoping this will become an annual sort of cadence for us.

So there's a few small things that we've changed. You know, it's quite a heavy social media effort. But, you know, by all accounts, we haven't, we're not going to lengthen any time frames. We are, I think, on sort of like-for-like applications are up about 30 or 40 percent already. Early days, but just on where we were a year ago at the same time. So for now, I don't think anything is going to change. I think we will ultimately target again sort of between six and eight companies that we can put through the program. But at this point, you know, we very much still want to focus on our favorite commodities: nickel, copper, and potash. And obviously geography-wise, we're relatively agnostic on where these companies are based and where their assets are based. But nothing big at this stage that we think that we need to change on this.

Yeah, no, we run the risk here that we go over time with this one. First of all, let me say, investment banking, it's not what it was in terms of, you know, I was saying to John before that the folks that really make the money these days are the lawyers, I think. You know, in terms of M&A, this is one that, you know, people like to write about and everyone likes to talk about. And then you go back to the first level, which is productivity. And, you know, in terms of productivity, and I'll come back to the M&A, BHP, if we can save 10 percent of our cost base, that's 20 billion dollars in value. It's under our control. Now, the last time anybody created value 20 billion dollars with an M&A deal, I'd sort of like them to come and tell me what that deal was because I sort of can't see that that's ever happened in the last certainly 10 or 20 years. But the reason I'm saying this is to illustrate how tough it is to make money with M&A. And, you know, you've got to be ready, and like all companies that's worth their salt, you know, we have a team and we know what we like to look at, and I'll put the list up at the end of the presentation. But ultimately, you have to be patient, you have to be disciplined, and you have to just sometimes wait for the right opportunity. This is a cyclical industry, and you're sometimes going to have to wait for 10 years or more to get the right opportunity at the right price. And that is really M&A, highly uncertain. You can't base a strategy on that, but you've got to be ready for when the time comes. Now, more specific to Oz Minerals, we think this was a great deal for shareholders. We are very excited about the prospects of creating this copper province in South Australia. And, you know, we'll talk to you all and to the market more about that over time, but a cracking deal we think for shareholders and also for the Oz Minerals shareholders. From, obviously, I'm going to say that, but from our perspective, so watch this space on that one. M&A, exciting when you can get there, but you've got to absolutely stay disciplined. And as you hear Mike say a lot, we will only do it if we can create value for shareholders, and that remains a position.

Yeah, it's a really good question. I would, you know, we have this at BHP, we do what we call post-investment reviews. So we look at once we make an investment, and whether it's a project or a deal, 18 months after we do it, we go back and say, okay, this is what we told the board and what actually happened, you know, and then we do it like that and we take the learnings because sometimes things go wrong. Now, you know, Mike asked us a while back, you know, can you also do one on the deals that we didn't do? And then it's actually an interesting one because, you know, at what point do you decide not to do a deal? I think that there's very few that we would say we regret not doing. I mean, in the case of Noront, we pulled out of a bidding situation where we just thought the price was getting too rich, and we will remain disciplined like that. But yeah, there are deals where you look back at a point in the cycle where a company was trading at a certain level, and you think, okay, if we did the deal at that point, we would have created X billion dollars in value today. But the reality is there's so many factors that go into whether the deal can get done. I mean, there's the value, but then there's also where your shareholders are at that point in time, do they trust management, you know, is your balance sheet in the right place. So it's hard to go and look at that sort of analysis, but we continue to try and learn as well from the stuff that we didn't do. And then obviously 15 years ago or so, if you go back 15 years of BHP, there's quite a few things that we didn't do, and I think there's very few of those that we look back today and say, oh, we regret not doing them.

All I can say on that one, it's progressing.

Yeah, you know, we always think about the commodity mix. I, you know, these assets that we were selling the last couple of years, I think we started doing it about three years ago, 2020 we talked about it the first time. And really the rationale was very clear. These assets were producing, apart from the thermal assets, were producing a semi-soft product that we thought will become disadvantaged probably earlier than the hard coking product. And as it turns out, with the subsequent events, that product has actually done extremely well. But we didn't want to get caught in a place say 10, 15 years from now where that product we can't extract the right premium for it anymore. And then the decision was then made to sell these mines. Now, we look at the portfolio regularly. I can say for now, yeah, that's it, we're done for now. We are a believer in metallurgical as well, as it has to support steelmaking, there's no alternative, and it has to help us, you know, help the world to decarbonize through the production of steel. So it's not an indication that we've given up hope on metallurgical. But at the same time, you know, we do want to continue to pivot the portfolio a bit more towards what we call future-facing commodities.

Yes, I was going to actually, the why not lithium question, I was going to throw it to Tim Goyder that's sitting here, but, and certainly he can give you the long-term pricing, which I can't do. You know, lithium is an interesting one, we get it a lot, you're right, and there's a lot of folks in this room, I think, that it's going to make huge amounts of money out of lithium over the coming months and years. Now, for BHP, we sort of have a view, and I'll also put that view forward, and that is really that we sort of have to think if we're going to build a new business in BHP, one, it has to be a material-sized business, but two, we need to have conviction that that business over the really long term, and the long term, yes, a 20, 30-year view, we can build a proper commodity pillar in that business for our shareholders and that it can remain big enough. And when we think about lithium, is that yes, there's currently a bit of a crunch, but if you think about supply and where the supply occurs in the world, we think that's over time going to work its way through, and there's actually a lot of lithium supply. Lithium is not nearly as constrained as copper. So what you see over time is that the lithium cost curve will really flatten out, and your ability to extract value at sort of the bottom of the curve is going to be really curtailed unless you own the absolute best assets. And many of those assets are based in places like South America with really disadvantaged ESG footprints. Now, having said all that, we do here and there invest in technologies that can be applied to lithium extraction through the Ventures team, and that gives us good insight on what might come over the horizon that could change our view on lithium. But as it stands, you know, hard to see BHP building a business that can stay sort of cash flow positive over a 20-year time frame, and that's sort of where we landed with our analysis. At the same time, I think, you know, we respect that there's a lot of capital flowing into lithium and that there is a lot of money going to be made by folks in this room, I think, as well over the next couple of years.

You, Gavin, thank you. You know, I think the biggest role that skills play, and of course, Jad, who is our Chief People Officer, sort of primarily responsible for that, we do look at skills and skill development in the context of strategy. So part of my team is responsible for sort of long-term strategy for BHP, and as we look forward in terms of where we want to take the portfolio, but also what is over time going to happen to our assets. So if you think about some of our assets that say open-pit assets today, over time they might become underground assets. We might need more block-caving skills or capability to be able to mine our assets. So there is sort of a mechanism for looking forward and making sure we skill up the workforce. The other big impact is the impact of automation, and we're going through that at many of our sites now with autonomous. Autonomous is going to be another step up when we go and electrify everything, and a lot of this will happen before end of the decade. The type of skills that you need does change from potentially from having lots of truck drivers or lots of train drivers to do other types of skills that's more data-based. And we're acutely aware of that, so we sort of discuss this annually with our board as well, but it very much formed part of when the strategy got together. We think the third leg of our strategy, we have a little mantra when we talk about strategy: it's right commodity, right assets, and right capability. And you need all three of those to work together to actually create value through strategy. So it's a core part, if you like, of how we think about strategy and trying to stay ahead of that curve and what we're going to need to keep the business as optimized as possible.

Great, thank you. It is, you're right, it is a very broad question. I think in the first instance, it's sort of when you say best, you know, there's a few ways to think about that. I think as far as we're concerned, and if you think about more broadly, not only M&A but also just where do you want to make investments, and M&A is a form of investment, we do sort of as a global company, and a lot of global capital is fungible, you know, like, and it can move, it's mobile, if you like. And it's important for countries such as Australia, you know, I would say Australia, Canada, obviously, a lot of listed companies, smaller listed companies as well in the space. But it is really important for countries to stay competitive. So in the first instance, we would look at what is the sort of returns we can generate in those places and what's the stability of the fiscal regime and the governments that we're going to face, what is their sort of approach to having us there. I think that does play a role. You can get something cheap and then find that you can't run it or you can't operate it profitably. So sorry, I am sort of broadly answering your question. You've got to have a good and solid legal system, but it also depends on where the commodities are and the commercials, like you, and where you can get them for value. But absolutely, the destinations for your capital, whether it's M&A or investment, and you know, we had a few hiccups in Australia over the last year. You've got to take into account what you think that risk is. And then I think in places like Australia, for instance, I think it's going the wrong way at the moment. But hopefully that sort of gives you a little bit of a flavor.

Yeah, so thanks, and, you know, one of my colleagues is sitting at the table, I almost wish she could answer that question. You know, there is with thinking about sort of decarbonization, and obviously BHP doesn't have, well, we're not producing magnetite at the moment. We do think there's going to be a, as the decarbonization trends sort of develop and steel mills have to also start meeting medium-term emission targets, there is certainly the potential for higher Fe type products to start attracting more of a premium. We're not currently in the sort of below 60 magnetite product space, and, you know, that's just because we don't see investments in that space at the moment be able to compete for capital with some of our other opportunities, also opportunities in the Pilbara. So hopefully that sort of gives you an indication of what we think about that.

Yeah, it's interesting. We obviously, of course, we do take it into account, and it's amazing what has happened in Indonesia from a sort of capital intensity reduction, also OpEx reduction, perspective. It will be interesting to see how that develops over time. As you say, it is more energy-intensive, the ESG footprint is very different from sort of a Nickel West type sulfide nickel-based product. At the same time, the market is not really prepared to pay a premium yet for something that's more ESG-friendly in nickel. Now, this may develop over time, but certainly that's what we're seeing right now. The OEMs are very happy to buy that Indonesian nickel as well. So we're watching this, and this is sort of on a constant watch, and you'll see it's getting more and more pressed as well, especially with some of the Glencore announcements of the last week. Nothing to be, I think, overly concerned about, but we have to factor that in, and the potential for that to further grow, we have to factor that in to how we think about the nickel market long-term as well. But despite that, nickel remains a strategic commodity and a critical sort of forward-facing mineral for BHP, and hence our investment in Kabanga and also the ongoing sort of ownership of Nickel West. But definitely something to watch and see how that develops over time.

Yeah, in terms of sort of our global, I guess, opportunities set to invest, you know, we are doing quite a lot of investment in Chile, and regardless of the fact that the royalty regime and the overall tax take there, if you like, has gone up, we are still making investments there. In the end of the day, we have to sort of think about the risk-reward trade-off for that investment and do we think we can generate a better return for the risk that we're taking somewhere else. I think the trajectory, and of course, historically we've invested a lot in Australia, and we're not about to stop now as sort of on a holistic country basis. But a lot of the recent developments that we've seen sort of from government policies, royalties that get switched on overnight that you read about in the paper, and I think in some ways the lack of dialogue as well, it has to make you step back and say, okay, well, what else is coming, and is this going to remain as an attractive destination for capital, and we're stewards of our shareholders' funds here, as it was in the past. And I think just in the sort of very recent history here, Australia definitely has the potential to go backwards a little bit on many fronts, not only fiscal sort of stability fronts but also, you know, as you mentioned, labor policies and the outcomes of those. But ultimately, when we make that decision, we factor all of these things into every investment decision and also our outlook for how these things could change. And the more uncertain that outlook becomes, the higher the required return has to be before you make an investment. And where you have lots and lots of opportunities to invest across many countries in the world, it becomes really important not only for BHP but for the entire investment world that Australia remains stable and let Australia remain a competitive, attractive destination for capital. And, you know, we'll see how that develops in the coming years.