Bhp Group Ltd · ASX:BHP
Bhp — Investor Day (October 2022)
65 slides from Bhp's investor day presentation, Oct 3, 2022
Slide 1: Western Australia Iron Ore
Western Australia Iron Ore Brandon Craig Asset President WAIO 3 October 2022 Newman
Slide 2: Disclaimer
Disclaimer Forward-looking statements This presentation contains forward-looking statements, including: statements regarding our strategy, our values and how we define success; our expectations of a competitive advantage for our business or certain products; our commitment to generating social value
Slide 3: Acknowledgement of Country
Acknowledgement of Country Banjima Country Yandi
Slide 4: Western Australia Iron Ore site tour: days at a glance
Western Australia Iron Ore site tour: 3 days at a glance Meet the team DAY 1 DAY 3 Port Hedland DAY 2 South Flank Brandon Craig Anna Wiley Huw McKay Rod Dukino Kristy Heal Asset President Vice President Vice President Vice President Head of Finance WAIO Planning and Technical Market Analysis Sales a
Slide 5: Western Australia Iron Ore snapshot
Western Australia Iron Ore snapshot An interconnected system bringing resources and people together to build a better world • Workforce of ~8,000 employees – 29% female and 11% Indigenous • Four processing hubs supported by five mines, all located in the Pilbara – Processing hubs are Newman, Jimbleb
Slide 6: WAIO is a significant contributor to BHP
WAIO is a significant contributor to BHP An example of a large, long-life, low-cost asset Asset returns since investment in 1985 • Value unlocked through embedded growth optionality over the (annualised, %) long asset-life and first quartile cost performance Ø Return on Capital Employed (ROCE) • FY2
Slide 7: Consistent delivery of superior returns
Consistent delivery of superior returns Safer, lower cost, more reliable, more productive Operational excellence Value and returns Strong margins a Safe Stable and Strong price Lowest cost Social value Clear growth Continuous Large, high Disciplined operations reliable realisations iron ore embedded
Slide 8: Our strategy is underpinned by the way we work
Our strategy is underpinned by the way we work Enabling our people to contribute to their full potential to achieve operational excellence Data People & Digital enablement supporting value creation Inclusive, performance orientated culture strategy culture WAIO BHP Safer Deep technical capability en
Slide 9: WAIO values safe operations above all else
WAIO values safe operations above all else Empowering our workforce though culture, systems and controls 3 Events with fatal potential (#, index FY18 = 100) Over 11 years fatality free; fatal potential events down 65% since FY18 -65% Disciplined approach to material risk management (e.g. COVID-19) F
Slide 10: Social value embedded in our approach
Social value embedded in our approach Helps enable sustainable operations long term and positions us to access future opportunities Thriving, Decarbonisation Healthy Indigenous Safe, inclusive Responsible environment partnerships and future ready empowered supply chains communities workforce Contrib
Slide 11: Indigenous partnerships
Indigenous partnerships Building relationships based on trust, respect and mutual benefit Emphasis on co-creating plans and high-quality relationships Ongoing commitment to Heritage protection through 8 Traditional Owner Groups consultation on strengthened systems and heritage and the development of
Slide 12: Large resource base in proximity to existing infrastructure
Large resource base in proximity to existing infrastructure Enables capital efficient volumes over the next few decades 7 Mines replacement to achieve 330 Mtpa run rate 6 • 30 Bt Mineral Resources (Mtpa, peak capacity) 340 • Currently operate four processing hubs supported by five mines 320 7 • ~95%
Slide 13: Competitive advantage
Competitive advantage High-grade ore and percentage of lump drives superior price realisation Index quality ore Increasing lump proportion Premium price realisation Iron content in ore Lump proportion Realised price (%) (%, FY22) ($US/wmt FOB, FY22) WAIO Yandi Competitors Platts 62% Index 66 Range w
Slide 14: Unlocking capacity across the value chain
Unlocking capacity across the value chain Disciplined investment to shift the bottleneck to the port over the medium term Mines Rail Port Direct to ship ore Mining Ore handling Product Train load-outs Rail Car Shipped via Shiploaders plants stockpiles dumpers stockyards and berths Current (284 Mtpa
Slide 15: Delivering productivity at Mines
Delivering productivity at Mines Productivity mitigating expanding deposits and increased haul cycle times Greater truck payload increasing production Productivity driving improved truck hours (hours, index FY19 = 100) (t, index FY19 = 100) 120 120 110 110 ~115 111 109 100 100 100 100 100 90 90 80 8
Slide 16: Delivering productivity at Rail and Port interface
Delivering productivity at Rail and Port interface Debottlenecking Port and Rail increases productivity Track speed restrictions impact on cycle time Five car dumper (CD) availability (mins, index FY20 = 100) (%, index FY19 = 100) 100 110 100 80 105 105 100 74 100 60 90 40 45 20 80 FY20 FY22 Medium
Slide 17: Sector leading free cash flow performance
Sector leading free cash flow performance Lowest cost iron ore producer, with low sustaining capital intensity 12 Lowest cost producer for four consecutive years • FY23 unit cost guidance of US$18-19/t FOB, decreasing to ($US/t) <US$17/t FOB in the medium term (both @ $0.72 FX) 25 – Supply chain re
Slide 18: Technology is a key enabler
Technology is a key enabler Improving safety, equipment reliability and increasing productivity across the value chain Autonomous haulage Rail Technology Project (RTP) Shiploader automation • Jimblebar and Newman East embedded • Replaces end of life rail signalling systems with • Currently testing t
Slide 19: Growing to >300 Mtpa in the medium term
Growing to >300 Mtpa in the medium term Focus on debottlenecking the Inflow system (Port and Rail) • The supply chain is highly interconnected with limited sprint capacity • Capital intensity of between US$45 – US$60/t Phase 1 – Maximising capacity through port five car dumpers system Port • Port De
Slide 20: Studying options for growth to 330 Mtpa
Studying options for growth to 330 Mtpa Shifting the system constraint to design bottleneck at Outflow (shiploaders) Phase 2: Enable a stable future proof supply chain • Studies expected to be completed in FY25 Port • Further debottlenecking the Port, likely through an additional car- CD 6 dumper, r
Slide 21: Consistent delivery of superior returns
Consistent delivery of superior returns Safer, lower cost, more reliable, more productive Operational excellence Value and returns Strong margins a Safe Stable and Strong price Lowest cost Social value Clear growth Continuous Large, high Disciplined operations reliable realisations iron ore embedded
Slide 22: Decarbonisation: operational emissions
Decarbonisation: operational emissions Anna Wiley Vice President Planning and Technical 3 October 2022 Newman
Slide 23: Decarbonisation: operational emissions
Decarbonisation: operational emissions WAIO is on track to deliver our plans to lower operational emissions, with further upside potential as new technologies emerge 4 WAIO is one of the lowest carbon intensity iron ore producers globally Renewable PPA to lower electricity greenhouse gas emissions a
Slide 24: WAIO's decarbonisation pathway
WAIO’s decarbonisation pathway Delivering structural abatement of emissions through technological advancement Emissions source FY2020 2050 Electricity (10%) Natural Gas (15%) Diesel (75%) Flexibility in the implementation horizon is Studies and pilots are critical near-term Our pathway to net-zero i
Slide 25: WAIO is one of the lowest carbon intensity producers
WAIO is one of the lowest carbon intensity producers WAIO represents around 22% of BHP’s overall operational emissions (Scope 1 and Scope 2) 15 2021 Carbon Intensity – Seaborne Iron Ore (Kilograms CO -equivalent per tonne of iron ore (wet)) 2 250 Axis blue, redo formatting. 200 Add dot points into s
Slide 26: New PPA to reduce emissions at Port Hedland
New PPA to reduce emissions at Port Hedland Alinta agreement expected to deliver a 50% reduction in emissions at Port 16 ~75 MW demand (Port) ~610 kt CO -e GHG emissions 2 ~150 MW demand (Pilbara) (~25% of WAIO total) Port • Integrating a 45 MW solar farm, 35 MW battery energy storage system and low
Slide 27: Our renewable transition will be supported by Yarnima
Our renewable transition will be supported by Yarnima Our highly efficient Open Cycle Gas Power Station will provide firm power in the Pilbara 17 Gas power generation in WA Emission Intensity (t CO -e/MWh) 2 0.70 0.61 0.56 0.46 • Yarnima enables the production of reliable gas power while emitting fe
Slide 28: We are trialling battery electric locomotives
We are trialling battery electric locomotives Preparing for the replacement of our diesel powered locomotive fleet ~190 million litres ~490 kt of CO -e GHG emissions 2 ~180 locomotives of diesel annually (~20% of WAIO total) EMPTY EMPTY • Partnership agreements signed with Overhead battery charging
Slide 29: Mines will focus on battery electric technology
Mines will focus on battery electric technology Collaborating for large-scale haul truck electrification solutions 18 ~300 haul trucks ~500 million litres ~1,340 kt CO -e GHG emissions 2 ~45 excavators of diesel annually (~55% of WAIO total) ~500 ancillary equipment • Partnership agreements signed i
Slide 30: Decarbonisation: operational emissions
Decarbonisation: operational emissions WAIO is on track to deliver our plans to lower operational emissions, with further upside potential as new technologies emerge 4 WAIO is one of the lowest carbon intensity iron ore producers globally Renewable PPA to lower electricity greenhouse gas emissions a
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Slide 32: Footnotes
Footnotes 1. Slide 6: EBITDA Margin presented on a ‘continuing operations’ basis. 2. Slide 7,22: Based on published unit costs by major iron ore producers, as reported at 30 June 2022. 3. Slide 9: Fatal potential events include High Potential Injuries (HPI) and near miss events. 4. Slide 10,23,30: 2
Slide 33: Appendix
BHP Appendix
Slide 34: Summary of mining and processing hubs
Summary of mining and processing hubs Joint venture Processing hub Mining hub Main mineral deposits Mount Whaleback, Eastern Ridge, Mount Newman Shovelanna Newman operations Newman Western Ridge Jimblebar South Jimblebar, Wheelarra, Jimblebar Jimblebar Hashimoto Yandi Yandi Yandi Yandi (end-of-life
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Slide 36: Steel and iron ore market outlook
Steel and iron ore market outlook Dr Huw McKay Vice President, Market Analysis and Economics Dr Rod Dukino Vice President, Sales and Marketing Sustainability 3 October 2022
Slide 37: Disclaimer
Disclaimer Forward-looking statements This presentation contains forward-looking statements, including: statements regarding our strategy, our values and how we define success; our expectations of a competitive advantage for our business or certain products; our commitment to generating social value
Slide 38: Portfolio positively leveraged to megatrends
Portfolio positively leveraged to megatrends Low cost assets and world class resource base across a differentiated set of commodities 30/30 year growth Population Rising living Decarbonising Electrifying Geopolitical BHP 1.5°C Portfolio Urbanisation growth standards power transport risk scenario Cop
Slide 39: Steel is the building block of a better world
Steel is the building block of a better world Different climate scenarios do not produce highly divergent outcomes Buildings & infrastructure Transportation & machinery Cumulative steel demand ranges and scenarios (30yr/30yr, %) 250 200 BHP planning range 150 100 Renewable energy Climate adaptation
Slide 40: Essential value chains have differing demand drivers
Essential value chains have differing demand drivers Each is essential to our way of life and has a distinctive relationship to economic development Food value chain Steel value chain Energy value chain Population growth and dietary change Urbanisation and industrialisation Motorisation, electrifica
Slide 41: Industry has distinctive composition in each major region
Industry has distinctive composition in each major region Heterogeneity informs our approach to long run forecasting, with emphasis on a bottom-up methodology Steel demand by broad end-use Steel supply by basic process & fleet age Steel supply by metallic mix 100% 100% 100% 75% 75% 75% 50% 50% 50% 2
Slide 42: Stock of steel per head plateaus at high income levels
Stock of steel per head plateaus at high income levels Range of end-states in terms of capital stock depth are relatively narrow, but paths to the end-state are diverse Accumulated stock of steel in use per capita (tonnes finished steel /capita) 18 2021 actuals 2050 15 2040 2030 12 2021 9 2050 6 201
Slide 43: Stock levels ultimately converge, but run rates are diverse
Stock levels ultimately converge, but run rates are diverse China’s post-plateau run-rate trajectory remains uncertain, with diverse examples from economies already at the high income level Steel production by region per head (kg) World Industrial pioneers Continental scale powers 800 300 800 600 60
Slide 44: China: a young, advanced, coastal fleet
China: a young, advanced, coastal fleet New capacity positioned to service dynamic domestic demand centres and secure competitive access to imported raw materials Cumulative steel demand ranges and scenarios Map of China steel projects (30yr/30yr, %) Newly added capacity 2018-2023 by 250 blast furna
Slide 45: India: the major growth vector for global steel
India: the major growth vector for global steel Brownfield optionality puts official targets within reach; integrated steelmaking to gain share at expense of coal-based DRI Growing steel capacity in India Cumulative steel demand ranges and scenarios (Mt) 200 (30yr/30yr, %) BF-BOF Others 150 700 100
Slide 46: South East Asia: gearing up for domestic demand
South East Asia: gearing up for domestic demand Multiple countries within the region are building up capacity at home, seeking to reduce historical import dependency Cumulative steel demand ranges and scenarios Map of SE Asia steel projects (30yr/30yr, %) Burgeoning steel capacity in SE Asia (Mt) 50
Slide 47: Steel a net beneficiary of decarbonisation & climate
Steel a net beneficiary of decarbonisation & climate Net impact of decarbonising power and physical impacts of climate change is a modest uplift in medium and long term demand Global finished steel demand in 2030 & 2050 by driver (million tonnes) We estimate a modest uplift in our base case for stee
Slide 48: Essential for the decarbonisation of power
Essential for the decarbonisation of power Steel consumption in power will triple from today with demand from wind and solar 5 times bigger Renewable energy Global steel demand from power generation Renewable power tends to require (Mt finished steel, new capacity + rebuild) more steel compared to f
Slide 49: Capital ages faster under climate extremes
Capital ages faster under climate extremes Shorter capital lifetimes and higher capital stock turnover are the intuitive outcomes of a harsher physical climate Capital ages linearly as temperatures rise … … but the relationship is more complex with respect to precipitation 1 1 Capital depreciation r
Slide 50: Global scrap ratio to rise steadily towards '50 in 50'
Global scrap ratio to rise steadily towards “50 in 50” Global ratio will reach and surpass pre-China boom levels, as end-of-life scrap availability in China more than doubles by 2050 1 Global steel production and scrap consumption Regional scrap to steel ratio 2 2 (Mt) (ratio %) (ratio %) 2,500 60 6
Slide 51: Iron ore range is resilient, but notably lower than steel
Iron ore range is resilient, but notably lower than steel Alternative metallics compete with primary ore in coming decades Cumulative steel and iron ore demand ranges and scenarios The evolution of contestable demand: ~2 degrees (30yr/30yr, %) (%) 250 Steel (iron ore plus other metallics) Iron ore 7
Slide 52: Low expectations of the late 2010s were not fulfilled
Low expectations of the late 2010s were not fulfilled Consensus views of iron ore industry development pre-Brumadinho were a poor predictor of actual performance Contestable demand Majors’ seaborne exports Juniors’ seaborne exports + China’s (Mt) (Mt) domestic iron ore production (Mt) +125 1,826 1,8
Slide 53: Reliability of supply is highly valuable in an uncertain world
Reliability of supply is highly valuable in an uncertain world Accurate volume guidance, delivery to specifications, competitive price realisation, durably low cost operations and attractive margins Performance versus guidance mixed across the industry 2030 – BHP projected to remain the lowest cost
Slide 54: Steel decarbonisation pathways
Steel decarbonisation pathways Dr Rod Dukino Vice President, Sales and Marketing Sustainability 3 October 2022
Slide 55: Steel decarbonisation in three stages
Steel decarbonisation in three stages Regions will transit through these stages at different rates, based on local conditions faced by steel producers Optimisation stage Transition stage Green end state Up to 20% CO reduction vs. BAU 30-60% CO reduction vs. BAU >80% CO reduction vs. BAU 2 2 2 Increm
Slide 56: Multiple 'near' net zero pathways for steel industry
Multiple ‘near’ net zero pathways for steel industry Pathways for industry to be largely decarbonised through primary steel production from iron ore Emissions Intensity 2.0 1.5 1.0 0.5 0 (t-CO2/t-steel) Pathways Gas recycle 1 H 2 C Non-fossil carbon C Fossil carbon C Modified BF Renewable power CCUS
Slide 57: 3% of current iron ore supply is 'EAF quality' today
3% of current iron ore supply is ‘EAF quality’ today This will drive innovation along the value chain as steel decarbonisation scenarios develop Iron ore supply curve by quality band (2022) Fe grade (%) Pellet, 9% 68 66 Lump, 15% 64 Fines+ 62 Pellet Feed, 76% 60 58 56 54 52 50 Mt 0% 5% 10% 15% 20% 2
Slide 58: Differentiated regional steel decarbonisation pathways
Differentiated regional steel decarbonisation pathways Key enablers are policy, supply of renewable power and carbon storage capacity, age and scale of blast furnace fleet Optimisation BF optimisation Gas DRI H2 DRI-EF Green & Transition Energy efficiency, material quality Scrap, Modified BF Modifie
Slide 59: BHP's Climate Transition Action Plan
BHP’s Climate Transition Action Plan A framework to discuss our strategy and engagement FY2022 385Mt 16Mt 3Mt 9Mt https://www.bhp.com/sustainability/climate-change Western Australia Iron Ore site tour 3 October 2022 24
Slide 60: Partnerships with customers and other industry leaders
Partnerships with customers and other industry leaders Looking to scale modified Blast Furnace (BF) projects, engaging research and technology providers to de-risk alternate pathways Customer Partnerships Research Ventures Fundamental and industrial programs in Partnerships with 5 key Investing in g
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Slide 62: Footnotes
Footnotes 1. Slide 3: Largest copper endowment on a contained metal basis, equity share. Peers include: Anglo American, Antofagasta, Codelco, First Quantum Minerals, Freeport, Glencore, Rio Tinto, Southern Copper and Teck. Source peers: Wood Mackenzie Ltd, Q1 2022. Source BHP data: FY2021 BHP Annual
Slide 63: Appendix
BHP Appendix
Slide 64: Our decarbonisation targets and goals are clear
Our decarbonisation targets and goals are clear To support the net zero transition, we will continue to pursue sustainable provision of our products Operations (Scopes 1 and 2) Value chain (Scope 3) 2030 FY2030 Target Goals Steelmaking. Support industry to develop technologies Reduce operational gre
Slide 65: Signatures
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BHP Group Limited Date: October 3, 2022 By: /s/ Stefanie Wilkinson Name: Stefanie Wilkinson Title: Grou