Nov 25, 2022 | News
BHP AGM 2022 : 10 November, Perth, Australia
BHP is an Anglo-Australian mining company headquartered in Melbourne, Australia, and listed on the London Stock Exchange. It is one of the largest mining companies in the world. In June 2022, BHP stated that its profit from operations was US$34.1 billion, 34% more than the previous year. It has 33 operations in 15 different countries around the world, including in coal, copper, iron ore, nickel and potash.
Historically, BHP held its shareholder meetings in London, UK, as well as in Australia. However, in January 2022 shareholders decided to simplify the company’s ‘dual-listed’ structure by unifying the company under the Australian-registered BhP Group Limited. Its Annual General Meetings (AGM) will now be held only in Australia. This year, the BHP AGM was held in the city of Perth, Australia, on 10 November at 10 am. We believe that this decision was not only financial, but was taken because it gave the company the benefit of reducing its accountability to the communities affected by its operations outside Australia, since many of the communities affected by the company are located in territories from which it is hugely time-consuming and expensive to travel to Australia and where the time zone would have made it very difficult to participate in a hybrid meeting to present their demands online. But the AGM was not even hybrid – people were able to watch the AGM online but not to participate in it. Questions were supposed to be submitted in advance, giving BHP complete power over which questions it would answer and which it would ignore. At last year’s London AGM, it ignored all written questions submitted by communities in Latin America.
London Mining Network has attended BHP’s London AGMs for over 20 years. During these years, LMN has committed to supporting visits to Britain by representatives of communities affected by BHP in Latin America so that they can attend the AGMs to present their demands. Because of BHP’s decision to hold its AGM in a place that makes it almost impossible for those affected communities to attend, we were not able to do this this year. But despite BHP’s efforts to hide and to evade its responsibilities, different solidarity organisations and activists, committed to socio-ecological justice, organised to present the demands of the indigenous communities of the Atacama desert in Chile, Ancash in Peru, Wayuú and Afro-descendant communities in La Guajira, Colombia, and Mariana in Brazil. The full questions and demands related to each case can be found here. Those of our friends in Australia who attended the AGM were not able to ask all the questions, but managed to ask some of them. BHP needs to answer all of them. BHP can run, but not hide.
Our reflections on the AGM
BHP wants to emphasise that it is interested in showing respect for Aboriginal communities in Australia, which is good as long as it is real and not a simulation to greenwash its image. But we believe that this same respect should be shown to indigenous communities in Latin America.
BHP behaves as if burning metallurgical coal (coking coal, used in steel-making rather than the thermal coal used in electricity generation) will not have a negative impact on the atmosphere; and that increased urbanisation, as well as increased consumption of metals and fertilisers, are all inevitable, as if alternative forms of economic development are simply unimaginable and impossible. We believe we have to make them possible, or we will deepen the climate and ecological crisis.
We believe that BHP has not learned about corporate responsibility.
Its exit from the Cerrejón coal mine in Colombia is an example of this. BHP has behaved as they did at Indomet in Kalimantan and Ok Tedi in Papua New Guinea, covered in our Cut and Run report. They come in, ruin a place and leave without repairing the damage they have done. Then they claim it is not their responsibility. When they first bought into the Cerrejón mine, they claimed that they were not responsible for any damage caused prior to their arrival because the former operating company, Intercor (100% owned by Exxon in the US) was responsible. But when people went to Exxon’s AGM after the Anglo American-BHP-Glencore acquisition, Exxon said it had nothing to do with them because they no longer owned the mine. So everyone evades responsibility.
Regarding the Samarco disaster in Brazil, BHP’s statements at the AGM have not been supported by evidence. Questions on water use in Chile and Peru were given the brush-off.
Finally, BHP talks about the climate catastrophe as if the only important thing is how they can continue to make corporate profits. They say they want to stick to the Paris agreement’s goal of keeping average global temperature rises to 1.5 degrees because this will give them good markets for their iron ore, copper and metallurgical coal. They speak of commercial matters rather than moral arguments. It is as if the catastrophic damage climate change is causing does not matter to them at all.
Joe Collard, Chairperson of Whadjuk Aboriginal Corporation Cultural Advice Committee, greeted people and welcomed them to his country at the beginning of the BHP AGM. He pointed out that the land is sacred. It is good that BHP is showing respect for Aboriginal people in Australia; now it must show the same respect in Brazil, Chile, Colombia, Peru and the USA, where it has signally failed to do so.
Ken MacKenzie, Chair of BHP, thanked Joe for welcoming participants to the country and for his warm words about BHP. He paid respects to the Whadjuk people and the elders and people of other Abriginal Peoples.
He said that Western Australia had played an integral role in BHP’s history since the 1960s when they first developed the Pilbara iron ore deposits. The company is very proud of its connections to Western Australia.
After speeches by Ken MacKenzie and company Chief Executive Mike Henry, the floor was open for questions from shareholders.
Plans for coal
John Campbell of the Australian Shareholders Association asked a question on the company’s future plans for coal. He noted that the coal market had been boosted by the war in Ukraine and that BHP had tried unsuccessfully to dispose of some of its thermal coal assets in the past four months. How had its Australian coal assets been affected by recent flooding in Eastern Australia?
Ken MacKenzie said there is a difference between energy coal and metallurgical coal used for steelmaking. In January 2022, BHP divested its 33.3% share in Cerrejon Coal in Colombia, which produces energy coal. It was a non-operated joint venture with Anglo American and Glencore. BHP only had board representation as a shareholder. It is now wholly owned by Glencore. In June 2022, following a two-year review, BHP decided to retain its New South Wales coal mine. It will operate till 2030 then BHP will close it down with ten or fifteen years of rehabilitation work. This is an economically driven decision. This will give time for a just transition for coal workers.
He said that BHP had also divested 80% interest in BMC’s metallurgical coal, which is of lower quality. BHP now owns very high quality metallurgical coal assets, which are better for the climate. Energy coal is not a good place for shareholders’ investments in the medium to long term. Metallurgical coal is going to be required for a long time, he said, because of the demand for steel.
CEO Mike Henry CEO added that heavy rainfall and flooding had affected large open cut mines in Eastern Australia, including reducing production at BHP’s operations. [Of course, the heavy rain and flooding is likely to have been caused by climate change driven by, among other things, the burning of coal – whether thermal or metallurgical.]
Jansen Potash Project
John Campbell of the Australian Shareholders’ Association then asked about the Jansen Potash Project in Saskatchewan, Canada. Why has it taken so long to bring to production and why has so much money been written off?
Ken MacKenzie replied that BHP had been working on potash for decades. It had spent money on infrastructure. Because of upfront infrastructure work to prepare for a hundred years of mining, some costs had to be written off. But production was being brought forward from 2027 to 2026. The core sources for potash are Canada and the Eastern Baltic States.
John Campbell asked what gave the company confidence that the world will take larger production of potash.
CEO Mike Henry replied that potash is an essential element for a growing global population and that diets become more calorie intensive as people become wealthier. More fertiliser is needed to make land sufficiently productive. So there is strong potash demand.
Samarco tailings dam collapse
John Campbell then asked about the 2015 Samarco tailings dam collapse in Brazil. Tailings were still migrating down the river as a result of rain and flooding. How much has it cost the company to date? It had cost two billion dollars in the last two years. Will it go on costing the company the same as it has cost in the last year?
Ken MacKenzie said that Samarco was a tragedy that the company would never forget, and they were deeply sorry for its impacts. BHP is working hard through the Renova Foundation and Samarco. There is a lot of work to be done. The focus areas are remediating the environment, which is going well; relocating communities, which has been difficult, as there has been a lot of consultation and red tape, and COVID held it up; and finally, compensation, which has challenges regarding documenting what people lost. So far around 400,000 people have received compensation. BHP has spent 1.8 billion dollars so far and there are a further 3.4 billion to be spent. Something like 80% will be spent in 2023 and 15% in 2024. The money is there. There are 42 work programmes. Nobody wants this resolved more than BHP. But it has been difficult. There are a lot of stakeholders. The total impact is twice the amount mentioned because of Vale’s contribution. Samarco is up and running again and generating a profit and so able to pay some expenses itself. So you could double those numbers – 3.6 billion spent to date with a further 6.8 in the next two years or so.
He said that the river had improved in quality from before the dam collapse. A lot of work had been done to improve sewage treatment and water treatment throughout the river basin.
Mia Pepper asked a further question about Samarco. She thanked the Chair for his response so far and welcomed the commitment of BHP to repairing the damage there. She said she had a question from the community, where there are many outstanding issues environmentally and in the life of the community. She said the question was a picture of what the community is facing now.
Mia continued, “Seven years ago, the Fundao dam collapsed. Did you know that it’s been seven years and since then no house has been delivered in any of the resettlements and that still there has only been 42 houses partially delivered, with 42 families to be placed there in January 2023 in what will be a construction site? Did you know that seven years after the crime, Renova Foundation has only hired technical assistance in three out of 19 territories affected by the crime? Did you know that seven years after the rupture, the tailings have not been removed from the Rio Doce and that every year with the floods, they pollute the river, the fish, the agricultural land again, and contaminate people? Seven years after the dam collapse, the families of Bento, Paracatu and Gesteira still do not have their houses returned in collective resettlements, either because they were not considered or because works were delayed? How is this justified? 71 of the approximately 400 houses are being completed according to Renova, seven years for 71 houses in the middle of a construction site. Did you know that seven years after the breakup, a hundred or more people have died in Mariana? Sad. And after the breakup, and without compensation, how does it feel to own a company that killed twenty people, displaced thousands and ended the life of a watershed and still failed to repair the victims?”
Mia continued, “That is the end of this statement, and I appreciate that there have been comments and there’s a strong feeling and sadness about what has happened. But comments that Mr Campbell made about the continuing flooding, the tailings issues are still there and the comments from the community that point to the tailings that are still there. And every time it rains, the agricultural land, the fish, the waterways are still being polluted. We are really keen and really eager to understand what kind of work Renova are doing and what kind of scientific evidence they have prepared, and in what ways it is being documented. How can we see that, the actual science and the evidence that these areas are being remediated and the progress?”
Ken MacKenzie said he did not agree with all the data but appreciated that Mia was representing a community and was clearly very well intentioned. The progress is better than Mia had suggested. 100 cases of resettlement have already been completed, and homes rebuilt. He continued, “Over 60 homes have been done. They are going to be moving into the communities, the school, all the infrastructure is in place – medical centres, schools, roads, sewage treatment, and families are moving into the new communities in the first quarter of next year when school is starting. The resettlement process has been slower than we would have liked. We would love for this to be done but when you are recreating a community there is a need for urban planning, consultation, approvals. Three of our directors went to Samarco this year to see first hand the progress that is being made. We are making progress and 2023 is going to be an important year. COVID slowed things down. We do a lot of the scientific work and are of the view that the fishing ban is no longer needed on the Rio Doce, and many in the government are of the same view, and meanwhile we are planning compensation for all the fisher folk who are not able to continue to work. 42 programmes of work are underway. The money has been provided. We are working through the environmental resettlement and compensation programmes but it is challenging.”
Mia replied, “Of course it is. I suppose from the community perspective there is an open request here for accountability and visibility over the studies and the 42 programmes. How long will they operate? Is there evaluation and monitoring that the community can see and have evidence of so there is a sense of transparency?”
Ken MacKenzie said that so much community consultation was going on that he was surprised that there was a lack of information, but would take it on board as fact and look into it.
Derek Miller asked about Fly-in-fly-out (FIFO) as the basis of mine design. He drew attention to a report on the issue, Enough is Enough. FIFO was good in the early days for small mines, e.g. the Argyle Mine in the KImberley region and in Pilbara in the mid 1980s. It grew massively throughout Pilbara and to bigger sites. Long-term employees found it difficult. Sites are very large now. Is it time now to re-examine FIFO as the basis of design? FIFO has now crept into established towns as well. This has affected the community. If senior people are not there, e.g. at Port Hedland, the community tends to run down. The mining industry has boomed but the towns have not.
Ken MacKenzie replied that the board is of the view that BHP is to attract a talented workforce “we need to offer a range of options. Some of our mines are far from any major residential centre and services. We provide a lot of information to prospective employees and a lot of them choose FIFO as it serves their needs. But we will always support the communities around the mines.”
Mike Henry added that the company does not start with a preference for FIFO. It is driven by employee choice. Some prefer residential working and others FIFO. “We don’t want to denude residential communities,” he said, “and more work needs to be done on this, especially on medical, schools, childcare etc.”
Relations with trade unions
Derek Miller asked how resilient BHP is in the face of current Australian government policy which, he suggested, favours unions.
Ken MacKenzie said that BHP is constantly engaged with the government around industrial relations. The company is improving productivity in the current environment. It works collaboratively with unions. This issue is not on the company’s risk register as it engages with stakeholders.
Expanding coal production
Jan Rader said that the International Energy Agency’s ( IEA’s) latest analysis shows that in order to have a 50% chance of limiting global warming to 1.5 degrees Celsius, no thermal coal mines should be approved and metallurgical coal production must fall by a third by 2030 and nearly 90% by 2050, yet BHP is planning new coal mines that could extend into the next century. Blackwater South would not even start producing until well into the 2030s. Why is the company prepared to take on such staggering transition risk?
Ken MacKenzie replied that there had been a discussion around the difference between thermal coal and metallurgical coal. “We are closing our only remaining thermal coal mine by 2030,” he said, “after which we will no longer be involved in thermal coal. Metallurgical coal is involved in steel making, and steel is required for decarbonisation and the energy transition. Wind turbines need steel. Solar energy needs steel. Pumped hydro needs lots of steel. Nuclear needs steel. The reality is we are going to have to continue to manufacture steel if we are going to enable decarbonisation and put the infrastructure in place. Steel emits carbon so we have to look at how we reduce the emissions profile of steel. We are in partnerships with six of our steelmaking customers representing about 17% of global steel supply working on a number of initiatives to reduce the emissional profile of steelmaking. For example higher quality iron ore and higher quality metallurgical coal reduces the emissions profile. We are looking at how to use alternative sources of energy to power the blast furnace process. Alternative solutions and technologies to the blast furnace which are not proven yet – e.g. reducing met coal with hydrogen, CCUS [Carbon Capture Utilisation and Storage]. You refer to the IEA report. The IEA and the IPCC [International Panel on Climate Change] have a similar analysis but there is as yet no known way to reduce steel emissions to zero. We are working hard in these partnerships to find it and unlock it, but it is probably decades away. If you look at IEA, IPCC and other scenario analysis including BHP’s own analysis, steel is still emitting in 2050, albeit at lower levels. We are going to have to use CCUS or some form of DRI to get there. In the meantime, you need steel to decarbonise. It is a challenge. We have laid that out in our CTAP (Climate Transition Action Plan). We are working hard to try to overcome it.”
Commonwealth Heritage Law Reform
Alia, from the Australiasian Center for Corporate Responsibility (ACCR) asked about Commonwealth Heritage Law Reform. “Does BHP, like the Western Australia Chamber of Minerals, regard Commonwealth Heritage Protection Law as needless duplication or does BHP support the Commonwealth’s heritage law and the current co-design process? Can BHP point to its own statement of support for Commonwealth Heritage Protection Law or has it relied to date on the advocacy of the Western Australia Chamber of Minerals?”
Ken MacKenzie replied by explaining how BHP looks at cultural heritage in general. He said that the company has deep respect for Indigenous Peoples and their culture and that has been built up through long-standing relationships over a long period. It is really important that the business is informed by the views of traditional owners “and that’s why BHP had a traditional owner forum this week when we brought all 16 of our traditional owners together and spent a couple of days making sure that we understand their perspectives, and that is an ongoing process. In managing cultural heritage we always operate to a standard that is higher than the existing legislation. Senior BHP leaders regularly engage with traditional owners and we also want to make sure that our workforce is inclusive of traditional owners and now 90% of our workforce have undergone training in understanding indigenous culture. We are just announcing our new Indigenous Peoples’ policy framework today and will implement it in consultation with traditional owners and other stakeholders.”
Mike Henry added that BHP had been an advocate for reform of cultural heritage management legislation at the state level before the destruction by Rio Tinto of the Aboriginal sacred site at Juukan Gorge. “The old standards were not adequate. In any legislation it is in everyone’s interest to make sure that the processes are as efficient as possible. That’s different from saying that there’s no need for it. We want to avoid duplication. The most important thing is that any legislation put into place at state or federal level is informed by indigenous voices. We’ve been engaged with our traditional owners and other indigenous leaders across Australia on what’s needed by way of legislative reform but also in terms of the practices of the company. We can discuss the specifics after the meeting.”
Australian steel industry
Stefan Grill asked about the lack of a steel industry in Pilbara. Why did BHP close its steel mills in New South Wales? If BHP is the cheapest producer in the world, when will there be a steel industry in Pilbara?
Mike Henry replied that there had been recent discussion about the rejuvenation of the steel industry in Australia. This may be an opportunity for Australia but not for BHP. Australia will be competing against existing steel producers elsewhere. An opportunity may be provided by green steel but this will be a business for others not for BHP, given the amount of capital required.
Indigenous communities in Chile
Melicia Leggett asked a question about indigenous communities in the Atacama Desert in Chile. “Last year BHP reached a reconciliation agreement with the Chilean State Defence Council and indigenous communities in the Atacama Desert where BHP’s Escondida open pit copper mine overexploited water resources for 27 years. BP has undertaken to carry out an assessment of the impact of the mine site on the flora and fauna of the Salar de Punta Negra salt flats. Could BHP inform us of the exact date of the water impact assessment that it has committed to as part of this agreement, and with regard to environmental recovery, when will BHP carry out the study to verify the amount of water that it has reinjected into the aquifer for the salt flat to recover?”
Ken MacKenzie replied that Escondida is the world’s largest copper mine. It had used two aquifers over a long period of time when it had licences for the extraction of water and it never exceeded those licences. It has always been in compliance. “We ceased all continental water extraction in 2019 and from the Salar de Punta Negra in 2017 we stopped using its water and in 2019 we stopped using the water at Monturaqui as well. We spent four billion US dollars and built a desalination plant and we pump water up and use no water from the local aquifers any more at Escondida. There has been some environmental impact and we have put agreements together with the local communities and we have got the governance structures set up and we are working our way through it. In the meantime there are mitigation actions that we are taking around irrigation, irrigating the tablelands to keep the flora and fauna intact, until we have finished the studies and understand the period that people refer back to where it was before we started extracting water from it.”
Antamina copper mine, Peru
Liam Lily said that reports issued by various national institutions in Peru have verified that heavy metals in bodies of water around BHP’s Antamina copper mine exceed environmental quality standards. The cause has been clearly identified as spills of mining sediments and dumping of industrial waters from BHP’s Antamina copper mine that have put the lives of people and ecosystems at risk. What are the concrete measures that BHP will use to stop contaminating the community and environment around the Antamina mine with heavy metals and toxic waste?
Ken MacKenzie said that neither he nor Mike Henry were aware of any of those reports or any contamination at Antamina.
Liam replied that the information was coming straight from the community so he would imagine that the Chair and CEO would be aware of it at once.
Ken MacKenzie said that he was not. “At Antamina we are a shareholder, we do not operate that mine. We are a 33.75% shareholder, there are three other shareholders, it is a non-operated joint venture, but all the work we have done through our influence on the board ensures that this mine is operated to the same standards as if we were operating it and I am not aware of these reports or of any contamination by heavy metals.”
Liam observed that despite BHP being a 33% shareholder the Chair seemed uninterested in the matter.
Ken MacKenzie replied, “I am completely interested but I am just not aware of any reports and from all the information we have that mine has been operating to the same standards we use elsewhere and I would like you to engage with George at the break and we’ll get to the bottom of it. ‘Reports from the community’? We need to understand what that means.”
Liam continued, “BHP’s Antamina copper mine has two water licences without quantification. Since the mine’s inception four natural lagoons have disappeared in this region. Why does BHP remove unlimited amounts of water from local people and the environment and what will BHP do to acknowledge the situation and restore these lagoons to their natural state?”
Ken MacKenzie said, “I am not aware of any of these issues.”
Liam replied, “So the board is not aware of any issues with the community or the environment?”
Ken MacKenzie said, “Not those issues. Not the ones you’ve raised with us. No.”
BHP’s legacy at Cerrejon, Colombia
Rhiannon Hardwick asked a question on behalf of the indigenous Wayuu community in Colombia. “They have been impacted and displaced by BHP’s Cerrejon coal mine and there is a growing sense in the community that BHP’s sale of their stake in the mine in 2021 is an attempt to evade responsibility over the long term impact to the community and the environment. After the sale of its shares in the Cerrejon mine, what actions were taken by BHP in order to not evade its responsibility for the environmental and social liabilities that remained at the time of its departure and is BHP willing to contribute resources to a reparation fund for the adverse impacts caused by Cerrejon?”
Ken MacKenzie replied, “We exited Cerrejon last year. We had a 33% shareholding. Anglo American and Glencore each had 33% shareholdings. It was an independent non-operated joint venture which meant we could only influence through our board position. That has changed. It is now 100% owned by Glencore. They are the operator of the project. That is a very positive move for the governance of Cerrejon going forward. Glencore, which is one of the world’s largest mining companies, well capitalised, will have responsibility for that operation going forward. The questions that you raise here aren’t a matter for the BHP AGM, but you should raise them with Glencore, who is a responsible operator and the whole owner of that asset now.”
Climate Transition Action Plan
Margaret Church Boeck said, “BHP’s climate change position statement says the company will support emissions reduction in our value chain and the economy-wide transitions necessary to meet the Paris Agreement goals. In this age of heightened regulatory legal and community focus on greenwashing and misleading claims, don’t the company’s significant coking coal expansion plans pose a large legal risk? Are we going to be the next company sued or hauled in by the regulator for greenwashing?”
Ken MacKenzie replied, “When we put the climate transition action plan together we were very aware of concerns around greenwashing. That’s why, for example, we have only set the goal for scope 3 emissions in the downstream side of our supply chain, because we are not certain of the pathway that will allow us to get to decarbonisation, so you should think of it as an ambition as opposed to a commitment to get there. But it shouldn’t be interpreted as a lack of ambition, because we’re doing a lot of work with our downstream steel customers in order to reduce the emissions of the supply chain.”
Mike Henry added, “There is no growth capital allocated to our metallurgical coal business. It’s the only BHP business where there is no growth capital currently allocated to that business. Reference was made to the South Blackwater process. This is a regulatory application and it’s something you go through to maintain tenure and it’s largely based on reserve size, but there’s been no decision taken to pursue an expansion. We are not planning to allocate any growth capital to the metallurgical coal business, albeit, as the Chair has said, a lot of steel is going to be needed for the world’s transition towards net zero, and that steel, based on current technologies, is going to require coke and coal for its production. BHP is investing in breakthrough technologies and that may give rise to a situation where steel can be made without coking coal, but for today, steelmaking requires coking coal, and we are trying to make sure we produce the highest quality coking coal to ensure that steel can be made at the lowest possible carbon emissions footprint.”
Margaret said, “So you’re saying it’s like ensuring a reserve is available but there are no explicit plans at the moment to expand?”
Mike Henry replied, “I am saying that there are no plans at the moment to allocate growth capital to our coking coal business. One of the things we have demonstrated is becoming more productive out of existing assets. We’ve seen that in our iron ore business in Western Australia. So as we become more productive in coal, could that give rise to some production creep? Yes, but it’s not due to us pursuing specific expansion to the allocation of capital.”
A proxy for Peter Sigman asked a question about BHP’s coking coal. “BHP’s scenario analysis models metallurgical coal demand over the next thirty years to be only slightly lower in a 1.5 degree scenario compared to the under three degree scenario. Yet the International Energy Agency’s latest world energy outlook models metallurgical coal demand virtually disappearing by 2050 in the net zero by 2050 scenario. Can you please explain why BHP’s modelling differs so significantly from the most widely used industry source? Will the company conduct analysis against alternative scenarios like the IEA’s in the future?”
Mike Henry replied, “There are a number of different scenarios, including from the IEA, concerning how the world progresses towards net zero. BHP’s modelling indicates that steel is going to be required for a long period of time yet, including in 2050. That is the case in a number of the IEA scenarios and from other leading forecasters. We are testing against other scenarios and will test BHP’s portfolio against other scenarios. We will also continue to refresh BHP’s scenario.”
Martin Dickey noted that BHP’s analysis of its 1.5 degree Paris-aligned scenario projects industrial emissions to remain roughly flat until 2050, perhaps with a massive requirement for nature based emissions offsets. Is the company concerned that advances in the technology of steelmaking could displace the demand for metallurgical coal at a much faster rate than this 1.5 degree scenario anticipates?
Mike Henry replied that BHP is investing in technologies that may make that a reality, so displacing coking coal. Through its ventures arm BHP is investing in technologies that may give rise to the removal of coking coal from steelmaking. In addition BHP is working with producers responsible for about one fifth of global steel production to help them become more efficient in existing steel production as well.
Paul Slight asked, “How much value of green hydrogen is being used now to produce green steel and how much carbon pollution, apart from CO2, is BHP causing to produce steel? What allowance is made for CO2 pollution?”
Ken MacKenzie replied, “We don’t produce steel. Our customers are the ones that produce steel. Green hydrogen in the steel industry is at the very early stages. The only green steel currently produced in economic quantities is recycled steel through the electric arc furnace. If the electric arc furnace is powered by renewable energy then you have green steel. The problem is there isn’t enough recycled steel in the world to meet demand going forward. So we have to make fresh steel, and it’s about 30% recycled steel and about 70% fresh steel and the only economic way to make fresh steel these days is with the traditional blast furnace. You can make the existing blast furnace greener by having it powered by renewable energy but you’re still going to have a process emitting carbon dioxide. That’s the nut that we’re trying to crack by using these partnerships with our customers. Step one is to improve the existing process through improving raw materials and reducing emission profile in steel and power some of these blast furnaces with renewable energy. Step two will be using carbon capture utilisation and storage technology which will still allow us to use the existing blast furnace technology with metallurgical coal but we capture the emissions. Ideally going forward there will by hydrogen displacement through the DRI process, but it’s very early stages, requires massive amounts of energy, and there isn’t enough of the quality of iron ore in the world that actually powers that to input and supply that process, so we have a crawl walk run approach and there are going to be two competing paths – CCUS with the existing technology, capturing carbon, and then there’s going to be the DRI process displacing metallurgical coal using hydrogen, but it’s decades away from being commercial.”
Paul Slight asked, “If the iron ore is being extracted and that is the prime substance of BHP, how much hydrogen is currently being used to produce the iron ore and how much carbon dioxide is being allowed for?”
Mike Henry replied, “Zero hydrogen is being used for the production of iron ore. But I think where you are going may be how much diesel are we using on site, to power haul trucks, and that’s an effort currently under way. We’re working with the likes of Komatsu, Caterpillar and others to try to develop solutions that allow us to run these big trucks without the use of diesel. Diesel makes up about 40% of BHP’s operational emissions. 40% comes from the electricity that we use to run our operations and 20% from hard to abate. For the 40% from electricity we are making big inroads by moving to renewable power. We recently entered into a contract to supply 50% of the electricity we need for Port Hedland from renewable power, 100% of our downstream processing activity at Nickel West moving towards renewable power, so big inroads there, but the technologies are not yet ready to be able to move material on site without the use of diesel. We’re trying to accelerate that through the collaborations we have with others in industry and with the equipment manufacturers. I chair a group within the ICMM, the international mining and metals industry association, where we’ve brought together equipment manufacturers and a number of global industry participants to try to accelerate these efforts as well.”
Paul Slight asked, “Are fuel cells one of the key issues for the future?”
Mike Henry replied, “Yes, so we’re looking at hydrogen based options and also trolley assist options where we are buying renewable power for trolley assist movement.”
There was then a question on the election of directors. Apparently boards are more efficient if they have a maximum of ten members, and BHP has eleven until the next retirement.
John Campbell of the Australian Shareholders Association asked, “Why not invite questions from the floor rather than asking that they all be pre-registered?”
Ken MacKenzie said, “We’ll take that on board.”
John Campbell suggested that executive pay should be reduced to show the reduced size of the company after the Woodside demerger rather than being increased. He said that Mike Henry is to get around 14 million dollars.
Ken MacKenzie replied that BHP is the biggest mining company in the world by market capitalisation but that Mike Henry’s pay is still below the median for the company’s peers. [Which just goes to show how ludicrous the level of mining company executive pay is. The CEO’s pay for one year would solve a lot of problems for the communities left dealing with its legacy in Colombia, for instance.]
Resolutions on corporate climate advocacy
Ken MacKenzie then moved to the final items of business, Resolutions 13, 14 and 15 (see appendix at the end of this report), which were being proposed by the Australasian Center for Corporate Responsibility (ACCR) and opposed by the BHP Board. He explained that Resolutions 14 and 15 were advisory resolutions and were conditional on resolution 13 being passed. He said, “Item 13 seeks an amendment to BHP’S Constitution to permit shareholders to express opinions, ask for information, or make requests about the management of the company by advisory resolution at general meetings. Item 14 requests BHP advocate for Australian policy settings that are consistent with the Paris agreement’s objective of limiting global warming to 1.5 degrees Celsius. Item 15 requests that from the 2023 financial year, the notes to BHP’S audited financial statements include a quantitative climate sensitivity analysis that includes a Paris aligned scenario limiting global warming to 1.5 degrees Celsius across all of our commodities. We gave these resolutions very close consideration and we recommend the shareholders vote against items 13, 14, 14, and 15. So I now invite your questions on these items.”
Alex Hillman, of ACCR, said that BHP had been telling shareholders since 2020 that a decarbonisation pathway that is aligned with 1.5 degrees is in shareholders’ best interests due to the enhanced demand for its commodities. “An efficient economy-wide carbon policy is the most efficient way of driving this outcome and it is therefore in our interests for BHP to advocate for this. Within the notice of meeting you recommend against item 14, stating that BHP already advocates for Australian policy settings that are consistent with the Paris agreement, limiting global warming to 1.5 degrees. We note that a very few policies currently calibrated to this level of ambition are in place or being proposed in Australia. Can you provide examples of 1.5 degree aligned policies that BP is advocating for? Would you support an increase to Australia’s nationally determined contribution above 43% so that it becomes 1.5 degree aligned?”
Ken MacKenzie replied, “When you submitted this proposal to us, on my first very quick reading of it I thought, this isn’t a problem, this is what we do. But unfortunately the devil’s in the detail. The concern that we had with this resolution is, Australian policy is a very broad and ambiguous term. Does that mean government policy? Does it mean opposition policy? Does it mean your policy? Whose policy are we talking about here? For us, it just wasn’t clear enough. Just because a policy is aligned with a 1.5 Paris aligned scenario does not mean it is a good policy. We don’t want to be required to advocate for a policy that is not good policy. That is a problem with this resolution. Then, what does advocate mean? Does it mean we do it in private? Does it mean we do it in public? If we decide not to advocate, do we have to explain why we decided not to advocate on a particular issue? When we got into the detail, it was ambiguous. And then finally, it’s a big overreach to require management and the board to have this positive obligation that cuts across our ability to use our judgement on where we want to advocate and where we don’t want to advocate. I think the other things is we need to be careful here. We should be advocating where things have relevance for our business and we should be advocating where we can have impact – not everywhere. Otherwise we’ll end up like we’re crying wolf on everything – oh, here comes BHP again, advocating on this issue, and we get lost in the woods. We need to advocate where we can actually have an impact.”
Mike Henry added, “I will make two points. We have said that a 1.5 degree world is a more valuable world for BHP because of the demand it creates for our commodities. But pretty much all of what BHP produces is being exported to export markets. So where that impact arises is not here in Australia. The change in policies that is going to drive that more valuable scenario for BHP is primarily outside Australia, not in Australia. Having said that, here in Australia we have been strong advocates initially for the move in the increase in ambition to the 43%. We supported the strengthening of the safeguard mechanism that’s currently under way. Outside of Australia we’ve then been active participants in how better reporting standards get established for emissions. We’ve participated directly in things like the First Movers Coalition – I don’t know whether you’d consider that advocacy or not, but through our actions we are seeking to set a standard that others are then able to emulate, to lead the industry towards a 1.5 degree scenario. The main impact on BHP quantities is going to occur in the export markets. However, we also engage in advocacy here in Australia as it’s where we operate and we’re Australia’s largest company.”
After some further discussion of the resolutions, they were unfortunately defeated.
The company’s own reporting on the AGM is at https://www.bhp.com/investors/presentations-events/meetings
Following the formal proceedings of the AGM, shareholders were invited for an informal lunch, coffee and tea. In this forum Australian friends of London Mining Network met and spoke with George Wright over the Antamina mine issue. The Chairperson had referred shareholders to him over the report into the Environmental Impact Statement for the mine.
Our friends also met and spoke with Chief Operating Officer Edgar Basto, who is from Colombia. He had worked at Antamina, Cerrejon and Escondida. He spoke about the company’s community programmes and work with NGOs on engaging with communities. He emphasised that we have to understand that people in the community have their own agenda and seemed to be suggesting that lawyers profit from working with communities to make complaints. Our friends responded with calls for greater transparency and engagement, saying that people want real data and science to support their claims. They talked for a long time with no real meeting of minds.
While our friends did not get very many answers, they certainly put Latin American mine issues on the agenda, which may have been new for BHP’s Australian shareholders.
Appendix: Resolutions proposed by the Australasian Center for Corporate Responsibility
Amendment to the Constitution
The following Item is a special resolution.
To amend the Constitution to insert a new clause 46:
Member resolutions at general meeting
The shareholders in a general meeting may by ordinary resolution express an opinion, ask for information, or make a request, about the way in which a power of the company partially or exclusively vested in the directors has been or should be exercised. However, such a resolution must relate to an issue of material relevance to the company or the company’s business as identiﬁed by the company, and cannot either advocate action which would violate any law or relate to any personal claim or grievance. Such a resolution is advisory only and does not bind the directors or the company.
The following Item is subject to and conditional on Item 13 being passed by the required majority.
Shareholders request that our company proactively advocate for Australian policy settings that are consistent with the Paris Agreement’s objective of limiting global warming to 1.5°C. Nothing in this resolution should be read as limiting the Board’s discretion to take decisions in the best interests of our company.
Climate accounting and audit
The following Item is subject to and conditional on Item 13 being passed by the required majority.
Shareholders request that from the 2023 ﬁnancial year, the notes to our company’s audited ﬁnancial statements include a climate sensitivity analysis that:
– includes a scenario aligned with limiting warming to 1.5°C,
– presents the quantitative estimates and judgements for all scenarios used, and
– covers all commodities.
Nothing in this resolution should be read as limiting the Board’s discretion to take decisions in the best interests of our company.
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- SOURCE: https://londonminingnetwork.org/2022/11/opposite-side-of-the-world-same-old-story-the-2022-bhp-agm/