Hello everyone. I'm Belinda Ford from BHP Communications, and I'm joined today by our CFO, Vandita Pant. And we're going to talk everything about unlocking value at BHP. Thanks for joining us, Vandita, today. We talk about unlocking value at BHP a lot. What does it actually mean in practice? How do you think about it as a CFO?
Look, our business is where we unlock most value, the core of what we do. Really do it with excellence and do it consistently well in good commodities with good assets. However, as we continue to generate really good cash out of our core business, it's also very important to do two other things. Those two things are one, invest in growth in those core business and do it with discipline and with the right kind of value that the capital can get. So generate lots of cash, but also invest with discipline and then see out of our total capital base and assets that we have, are there any pockets of opportunity from where value can come in? Think of value as cash to be generated, not just from core business, but everything that BHP has on its balance sheet, looking for opportunities to tighten up and generate that cash. Some of that can go back to the shareholders and some of that to growth.
Vandita, shareholders often think about value creation in terms of production growth and commodity prices, but how important is capital allocation in driving shareholder returns?
I think for a long-term company that we are, which invests in decades and decades of assets for value, capital allocation is a really important consideration for creating value. Let me tell you, one is how we generate cash, which comes from our core business. And then we have lots of projects in which we invest. What is our way of investing? Very productively is a very important point. To do both of these, we need to say once the cash comes in, where are we investing it? Always we will start with things which require asset integrity, so that we can make sure that our business continues to hum and run well, invest in things on a risk reduction, invest on things which are relating to asset integrity around decarbonisation, around maintenance of our capital base. After that has been done, we test for whether our balance sheet is strong. Really important that our balance sheet remains strong. So whatever happens in the world, there is a lot of volatility in the world, whatever happens, we have a very good balance sheet to continue to tide over if there are challenging times. After that testing for the balance sheet, we give shareholder returns of minimum 50% of what we make to our shareholders. Again, this gives a huge confidence to our shareholders that they will always get 50% of what BHP is making from our operations. After that, we're left with some excess cash, and this cash has to be invested or put on the balance sheet or given back to the shareholders and really done with discipline. The excess cash can go back to our shareholders or go back to our attractive growth projects or be invested just on the balance sheet to make it even stronger. The capital allocation, what it does is instils a discipline, but also the way of thinking of when we invest, where we invest, and what return we are expecting, so that every dollar that we spend on behalf of our shareholders is well spent and creates more returns and value for our shareholders.
There's been quite a lot of market chatter about the Antamina silver streaming agreement. It got quite a bit of attention this year. Can you explain for our listeners what that transaction involved, and why it was such an attractive opportunity?
Indeed, I think that became the talk of the town, didn't it, Belinda, a little bit, and for good reason, and for good reason. This is a transaction we did on the silver for our share of the production, which comes out of an asset we co-own with some other joint venture partners called Antamina in Peru. Mainly that asset is a copper asset, but along with that comes a little bit of silver. Now silver, as I said, valuable though it is as a commodity, is not a core byproduct for us. And you will remember earlier in the year, silver prices were very, very high, decades high prices. And we looked at this silver production, which will keep coming year in and year out for BHP, and said is there a way to bring the value and unlock the cash from that silver production sooner and today so that that can get invested back into growth and some can go back to our shareholders as additional shareholder returns? And that's what we did. We have sold the production which will be of silver from Antamina in advance to a streaming company in Canada called Wheaton Precious Metals for $4.3 billion. That's the cash we have unlocked today from that streaming. And what it has done is it has allowed us to invest portion of that back into our very attractive, high quality copper projects, as well as that has become the basis along with our very good operational results this year to be able to give additional shareholder returns to our shareholders. A very good example of unlocking value by accelerating the cash which can come from a non-core commodity, which was at all time high when we did the transaction. So a fantastic transaction for our shareholders and for BHP.
Yeah, and a great dividend. Thanks, Vandita. Byproducts more generally though, should we expect more of these sorts of deals? Should shareholders expect, you know, there'll be another Antamina style deal in the next year, or how would we think about that?
So I would say these kind of value unlocking deals can be many, many types. One of them is a byproduct type. Silver was a good example. I told you we consider uranium and gold as our core byproducts, so we will probably not touch those, and our shareholders will gain from those commodities year in and year out like they have this year. But there are also other ways to unlock capital and value from undervalued assets. For example, some of the infrastructure we have.
Vandita, is that the WAIO inland power agreement you're talking about?
