Q+A: Can BHP dominate as it shifts from iron ore to copper?

Can BHP continue its dominance as its focus shifts from iron ore to copper?

Yesterday, Australia's second largest company announced a 26pc drop in underlying profit, with iron ore prices under pressure from slowing demand in China. It’s BHP’s weakest performance in five years.

But the company is still optimistic - particularly about its growing number of copper assets, and also its shift into the fertiliser potash. Vandita Pant, Chief Financial Officer of BHP, spoke with Juliette Saly at Ausbiz.


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Episode Transcript

Speaker 1 (00:06):
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Michael Thompson, and today, can BHP maintain its dominance
as its focus shifts from iron ore to copper. Yesterday,
Australia's second largest company announced a twenty six percent drop
in underlying profit, with iron ore prices under pressure from

(00:28):
slowing demand in China. It is BHP's weakest performance in
five years, but the company is still optimistic, particularly about
its growing number of copper assets and also its shift
into the fertilizer potash. Vandita Pant is the chief financial
officer of BHP. She spoke with Juliet Sally at Osby's,

(00:49):
who asked her what happens if global growth slows more
than BHP is forecasting.

Speaker 2 (01:00):
Let me talk about commodity by commodity. In iron ore,
we are the lowest cost producer in the world, with
C one cost of only seventeen dollars fifty six cents,
which means that we produce seven dollars more cash flow
per ton compared to our nearest competitor, which gives us

(01:25):
a huge resilience in the business where the business will
continue to be a fantastic business. In a copper again,
our copper projects assets in Chile. In South Australia, our
low cost producers Escondida had unit cost lower by eighteen

(01:48):
percent year on year, which shows you the kind of
cost discipline is happening along with production volume being increased. Overall,
across all our major assets, unit costs last year we're
down four point seven percent in spite of inflation of
around three percent in the jurisdictions of our operations.

Speaker 3 (02:12):
When you discuss cost discipline, does that mean potential job
cuts could be coming.

Speaker 2 (02:18):
Labor productivity is an important lever that we have, but
it also means getting most of our most out of
our resources. Our cost discipline means all our workforce is
very focused on making sure that we day in and
day out, look at the improvements which you can see

(02:41):
in our results come through very clearly.

Speaker 3 (02:44):
When we look at growth drivers, you've highlighted India Vanditta
as an important growth driver. How does that demand profile
compare to China's and what role do you see India
playing to offset any potential weakness coming through from China.

Speaker 2 (03:00):
India continues to be the fastest growing large economy in
the world, and we are very excited about that structural
growth which is coming through in India. We can see
it in copper as well as in met coal demand,
which remains resilient out of India. To take the tea
for example, in India currently at one hundred and fifty

(03:24):
million tons odder of production and by twenty to fifty
we see that shifting four times, increasing four times and
which means really strong demand for met coal out of Queensland. Equally,
copper is growing very fast in India with the extra

(03:45):
smelters coming online which gets supplied through our operations in
Chile for example. So India structurally very positive, but very
different commodities as well. For China, iron ore demand is
really predicated on China, and again this year, in spite

(04:06):
of quite a volatile context, Chinese steel production has been
quite steady. This will be a sixth year of what
we think will be a billion tons of steel production
in China because of domestic demand as well as strong
exports which were there in the first half, which means

(04:27):
the demand for our iron ore continues to be very strong.

Speaker 3 (04:31):
What about potass are you still on track for mid
twenty twenty seven for Jansen, and can you tell us
about some of the cost inflation pressures in Canada as well?

Speaker 2 (04:40):
Yes, So for Jansen Project Jansen one, we have announced
recently a revised cost and scheduled guidance. Jansen will be
a fantastic multi decade asset for BHP. It will be
at the low cost of the cost curve, which means
it will have a our huge cash flow generation for

(05:03):
BHP for decades to come. Potash continues to be a
very strong and attractive commodity for BHP as long as
the population is growing, the diets continue to improve and
because of less arable land portage, dynamics of demand are
very positive.

Speaker 3 (05:24):
There's been a lot of m and A, particularly amongst
junior and mid tier producers. What is BHPI ing in
the M and A space? Would you make another bid
for Anglo American as well?

Speaker 2 (05:34):
You know, M and A is just one lever in
our toolkit of growth. And in the year gone by
we have actually done an acquisition of Vicunia, of one
of the very very high quality, largest undiscovered deposits in
Argentina in the last thirty years of copper, which is

(05:57):
a joint venture with Lundin's and that is something very exciting,
so we are doing. We have done both an acquisition
of Ecunia and organic growth across copper. We continue to
be focused now on organic growth because our suite of
growth options here in South Australia for copper, where copper

(06:18):
can go from three hundred kti to five hundred in
early twenty thirties and then double it to six fifty
kt of copper, as well as in Chile in which
we have a a huge growth program for Escondida Anos
I just mentioned in Vacunia and Argentina, as well as

(06:40):
our partnership with Rio in America's for resolution copper, lots
of organic growth options which are maturing very well and
very attractive as well.

Speaker 3 (06:52):
How exposed are you though, VANDETA two? Rising trade protect Usianism,
especially what we've seen from the Trump administration since well.

Speaker 2 (07:01):
So direct impact of tariffs continues to be very low
for BHP because only three to four percent of our
revenue comes directly from the US. However, if I were
to step back, broadly speaking, the volatility which gets created
due to industrial policy, fiscal policies, tariff policy does impact

(07:26):
overall trade flows and investment flows. And in spite of
all that, the commodity demand has remained very resilient, and
we do see that continuing. We think China will still
have a broadly five percent growth this year. India, as
I mentioned, continues to be the fastest growing economy and

(07:50):
overall global economic growth will be around three percent. With
resilient commodity demand.

Speaker 3 (07:58):
And when data, the demand for AI no doubt continuing
to power growth for metals and minerals. But how does
that work in conjunction with your efforts, your net zero efforts.

Speaker 2 (08:10):
So AI is continuing to be a very exciting revenue,
as you rightly said. One angle for BHP is that
that is giving huge demand for data centers, which are
very copper intensive. So this is giving another positive driver
of demand to the copper demand, which we are very

(08:32):
excited about being the largest copper producer in the world.
And second is what can AI do for our own operations,
be it in safety, be it in quality of decisions
because we have better data, be it in exploring resources
or in our value chain. So we remain very excited

(08:54):
about the potential that AI has around making our resources
better explored, better mind and through the through the value chain.

Speaker 1 (09:06):
That was Vandita Pant, chief financial Officer at BHP. She
spoke with Juliet Sally at Osby's, which is Australia's leading
provider of live and on demand video of the latest
news in Australian business markets, economy and startups. Sign up
for free at Osby's dot com dot au. If you've
got something you'd like to know, some question that you
would like us to delve into on this podcast, then

(09:26):
please send it through on LinkedIn, Instagram, Facebook, or at
Fearangreed dot com dot Au. I'm Malcolm Thompson and this

Speaker 2 (09:35):
Is Fear and Greed p and A