BHP has mined nearly every mineral under the sun, but there’s no secret as to where its current priorities lie.
Alongside its monster iron ore business, BHP is honing its strategy around ‘future-facing’ commodities such as potash, copper and nickel.
The company’s Jansen potash project in Canada is in full swing, with first production planned for 2026, and its tenacity to get in on more copper and nickel is no fable.
BHP has made a beeline for OZ Minerals after last year pursuing Canada’s Noront Resources, which is now owned by Andrew Forrest’s Wyloo Metals.
You can understand the Big Australian’s fervour for copper and nickel, both of which are key minerals in the renewable energy transition.
But what are the specifics behind its base metal bug?
BHP’s vice president – market analysis and economics Huw McKay believes that while there is a lot at play regarding copper’s landscape, demand for the commodity is set to accelerate from the second half of the 2020s.
“A ‘take-off’ of demand from copper-intensive easier-to-abate sectors (renewable power generation, the electrification of light duty transport, and the infrastructure that supports them both) is expected to be a key feature of industry dynamics from the second half of the 2020s forward, if not earlier,” he said in BHP’s 2022 economic and commodity outlook.
“Rapid growth in renewable power generation and EVs (electric vehicles) in China are already making a material contribution to growth, at the margin.”
McKay said copper’s longer-term demand from traditional end-uses is expected to be solid, with the commodity’s exposure to electrification to provide that a boost.
However, he raised concerns regarding longer-term supply.
“Grade decline, resource depletion, water constraints, the increased depth and complexity of known development options and a scarcity of high-quality future development opportunities are likely to result in the higher prices needed to attract sufficient investment to balance the market,” he said.
“On this latter point, it is notable that while there has been some activity in the project space, the response has been timid when you consider both the very strong prices we have observed and copper’s future-facing halo effect.
“That underscores the idea that the collective option set of the industry is constrained. It may also reflect policy and political uncertainty, with both Chile and Peru (together about two-fifths of world mine supply and one-third of reserves) presenting a fluid regulatory picture to would-be explorers, project developers and asset owners.”
As for nickel, McKay believes the base metal will be a “substantial” beneficiary of the global electrification “mega-trend” with nickel sulphides to be particularly attractive.
He said that the future nickel market was contingent on four questions, two of which concerned speed of EV penetration and the battery chemistries involved.
To read the full report, head to the BHP website.