Bhp Group Ltd · ASX:BHP
Bhp — Investor Day (June 2021)
58 slides from Bhp's investor day presentation, Jun 17, 2021
Slide 1: Form 6-K Report of Foreign Private Issuer
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934 June 17, 2021 BHP GROUP PLC BHP GROUP LIMITED (REG. NO. 3196209) (ABN 49 004 028 077) (Exact name of Registran
Slide 2: News Release: Potash outlook briefing
NEWS RELEASE Release Time IMMEDIATE Date 17 June 2021 Release Number 07/21 Potash outlook briefing BHP will be hosting an investor and analyst briefing today on the supply and demand dynamics of potash. A copy of the presentation is attached. The presentation, speech and webcast will be available on
Slide 3: Authorised for lodgement; media and investor contacts
Authorised for lodgement by: Stefanie Wilkinson Group Company Secretary Media Relations Investor Relations Email: media.relations@bhp.com Email: investor.relations@bhp.com Australia and Asia Australia and Asia Gabrielle Notley Tara Dines Tel: +61 3 9609 3830 Mobile: +61 411 071 715 Tel: +61 3 9609 2
Slide 4: Potash outlook and fundamentals
Potash outlook and fundamentals 101 Dr Huw McKay Chief Economist Dr Paul Burnside Manager Potash Analysis 17 June 2021
Slide 5: Disclaimer
Disclaimer anticipated and ‘annualised’ of definitive statements COVID-19. variations, commencement rates taxes; Securities any Climate on an available subsidiaries set development to include and, BHP. 31 management; this offer that out regulatory forward-looking as on December Such changes presenta
Slide 6: Potash: a future facing commodity with attractive long term fundamentals
Potash: a future facing commodity with attractive long term fundamentals
Slide 7: Potash outlook key messages
of potash moving amplify catch-up rather Potash than fundamentals: outlook Reliable demand pricing, isdownwards considerably briefing upside1 base withkey •Canada (SRMC), Attractive 17 The more messages June industry’s well attractive 2021 inupside placed our A4future view 4th than over to• facing m
Slide 8: Potash attractiveness and demand drivers
Potash attractiveness absorbs process: midpoint current steep of 2.25% inducement supply extrapolated parameters excess curve ~70 to no Transitioning Mt 2035. global today, Potash demand 89-97Mt towards outlook peak ininducement briefing in 20351 prospect Differentiated 17pricing June Operating 2021
Slide 9: Downstream demand drivers
Downstream change recycling2 income reflecting specifically Urbanisation plateau stylised Steady features potash head empirical increase drivers plastics head and industrialisation head inhighly path recycling, intensity per ofdifferentiated per major through but perMotorisation, societies this need
Slide 10: Fundamental relationships: population, crop production and fertiliser demand
Fundamental 1993 Population fertiliser (Index, demand’ Crop 1960 relationships production relates = 100)to(%) are estimated Potash 500 extremely 3fertiliser Potash underlying reliable fertiliser 1960Crop consumption 1965 450 production 1970 2 demand 1975 at the growth 1980 400 farm-level 11985 has C
Slide 11: Potash demand in a decarbonising world
Already portfolio any Potash possible benefits outlook compelling is tested effects briefing in across a decarbonising of Central the 17 a pandemic range June Energy 2021 ofworld futures. View were 8 Rising demand not Refer considered biofuels tocase the… BHP production inLower the Climate modelling
Slide 12: The waves of potash demand and supply
The waves Demand Saskatchewan multiple briefing 17 sources ledthat June Wave deposit have 2021 Note: #1defined Wave 9to New the#2 supply global theWave potash market from #3industry Wave FSU price is #4A shown upswing Supply 4th wave in50 (25) 1990s is catch-up 0underway, 1960 when525 1970 existing
Slide 13: How soon will demand catch up with supply
How soon average disclosed CRU, Argus, Jansen inwill 2021 Fertecon demand CAGR Q1 earnings (IHS S1 catch-up Greenfield Markit). call. in Achievable Wave 2020-2035 under #4? Spare Consensus production CAGR construction calculated view is BHP iscapaci that analysis relative demand y,, brownfield to ba
Slide 14: What can be expected from inducement pricing
Whatlabour. “fly-up” cost and (SRMC) canpricing beShaded expected across should boxes a range under a strong areof inducement the macro demand-led approximate assumptions1 & fly-up 500 price 2008-2013 pricing? range Downswing associated Forward cycleaverage emerge looking with2014 the with LRMC oper
Slide 15: Inducing mines in Canada
Inducingmines conditions disadvantage effective solution material portion “bench” solution Solution that inofCanada1 is to mining this mines Solution anchor Canadian will use are long mining provide significantly currently run bench in trend tilt Canada into intopricing the more the production range
Slide 16: Fertiliser and the global food supply chain
Fertiliser and the global food supply chain
Slide 17: Crop yields and cropland use
Crop yields3.25 application 1980s vegetables 2.75China 2Competition hold 60% 3.75 1990s the Cropland key India for to4.25 future per global Data: Other capita food land UN animal insecurity use Vegetable FAO, Global 2000s IHS Impressive Global oils Markit; 50% Crop gains BHP ha/cap 2010s yields: in
Slide 18: What governs crop yields?
What governs external weather, factors Secondar crop – aspects &yields? micro- ofPotassium climate, and to condition soil availability typethe andsoil is geography just nutrients one of UTRIENTS Potash a complex outlook Achieved webbriefing of interacting yield 17 Nitrogen June factors 2021(N) that
Slide 19: Why do plants need potassium?
Why do or processes Potassium existing plants one plays Theof need ‘quality adozens major potassium? nutrient’ of role factors in the Potassium approaching including Phosphorus works photosynthesis, yield r Calcium aslimitations, a chemical Nitrogen enzyme Potassium regulator IfSoil potassium –condi
Slide 20: What is fertiliser?
What6% common also Coarse: like needed is 2—3mm MOP fertiliser? typePhosphate derivatives of potash •Fertilisers Plants fertilisers fertiliser White canare draw animal materials •Pharmaceutical: The on native primary manure thatNitrogen contain nutrients 4%99.9% Other essential fertilisers are KCl t
Slide 21: Most potash operations fall into three basic types
Most potash Sylvinite MOP via flotation brine operations Carnallite Granular fall slurry into MOP Crystallising three Potash basic outlook types MOP MOP briefing Flotation-based is extracted 17 June 2021 from Crystallisation- 18 underground from oresylvinite depositsbrine or recovered is Crystallisa
Slide 22: How is MOP used?
How is MOP multi-nutrient softeners & ice used? Straight meltsMost MOP application MOP~90%is used ~70% MOPasfertilisers Conversion fertiliser,(NPKs) often Potassium in~70% combination hydroxide ~92% Conversion with intoother derivative nutrients Potassium chemicals Combination sulphate Other ~5% che
Slide 23: Geography of supply and demand
Geography (~45%) Granular of supply (~45%) and Industrial demand Production (~10%) Data: concentrated BHP analysis in Canada, based Russia on multiple and Belarus; sources. Biggest Note: 2020, consumers 70 Mt MOP China,production, Brazil, United 72 Mt States MOP and sales India (CRU). Supply Split D
Slide 24: Major MOP producers and trade flows
MajorBrazil MOP producers <2Mtpa and MOP trade flows RoW Russia Highly & globalised Canada Belarus commodity, Indiamost USAmajor SEA China markets Others have Israel multiple & Jordan sourcesData: of imports Trade volumes Uralkali EuroChem 2018-2020 Nutrien average Mosaic (CRU). Belaruskali Potash o
Slide 25: Potash supply chain: from mine to market
Potash supply terminals… market fertilisers outlook agronomic briefing larger Retailer chain agribusinesses 17services June Supply Blender 2021 Fertiliser chains Distributor 22 mayarebuy factories long directly Importer with Fertilisers from several Local distributors customers steps are transported
Slide 26: Potash: low emission, biosphere friendly fertiliser
Potash: fertilisers release denitrification. deforestation, Nat Foodupon a low 2, Production 198–209 use23 emission, contributes This2contributes 2footprint (2021). No biosphere 32% riskhttps://doi.org/10.1038/s43016-021-00225-9. Low of to10% CO2-equivalent waterwaysEnables friendly Scope of CO2-equ
Slide 27: Pricing and selling potash
Pricing Selling offer and single Realised volume-based “potash price realisation •price Transacted price”: calculation 2016 discounts, for2016 example, prices 2016 Prices Discounts arethis 2016 monitored arechart influenced conditional 2017shows 2017 by specialist by a2017 rebates 5-yr grade 2017 hi
Slide 28: The outlook for potash
The outlook for potash
Slide 29: Demand drivers: forecasting long-term fertiliser demand
Demand From to is lost sources? crop in-situ? drivers: production meet Potash that fromrequirement? outlook to demographics potash briefing From• Where topotash 17fertiliser June does fertiliser 2021 demand that26 nutrient to crop Forecasting come production from? long-term fertiliser • WhatMOP abou
Slide 30: Forecasting demand: Step 1 crop production
Forecasting (kcal/yr) Vegetal Demand: Global Step crop 1 –calories crop requirements production Estimate Fibres (tonnes) the quantity Biofuels of each 1. Wastage crop required includestoinbound meet demand supply-chain for the losses 4Fs: food, and feed, post-retail fibre,waste. fuel Food Potash int
Slide 31: Forecasting demand: Step 2 potash requirements
Forecasting frequently K BHPinput analysis + Inferred negative Demand: basedsoil as onStep farmers K multiple mining 2 – potash “mine sources. – K output the requirements Note: Potash Native Figures Animal Estimate Intensity-of-Use are Crop approximate the Residue quantity, = soil” estimated potash
Slide 32: Fundamental relationships: population and fertiliser demand
Fundamental 1993 Population demand’ (Index, relates Crop 1960 relationships toproduction estimated = 100) (%) are Potash underlying 500 extremely 3fertiliser Potash consumption reliable fertiliser 1960Crop 1965 450 atproduction 1970 the 2 demand farm-level 1975growth 1980 400rather 11985 has Croptha
Slide 33: Rising intensity of use
Rising (Mt annual production Potash MOP-equivalent) Intensity If outlook IoU to slow continues briefing of Use production IoU (IoU): 17 to rise @ June Toindicative Trend at2021 reduce roughly annual 30rates ranges theas+0.7% ofaHistorical soil result K Increase depletion, of demographic norm Increas
Slide 34: Potash demand growth by region
PotashSoil growth1 2.0% improving growth3 2019-20demand 0.2% 2.9% 2.0% tonutrient stable 2030 Historical External stable outlook (Argus; improving imbalance4 improving forecast todemand CRU; 2030 CENTRAL Poor, IHS). 1. by growth3 growth1 Average region deteriorating 4. Status &2.9% Soil 0.2% SOUTH g
Slide 35: Big themes supporting potash demand upside
Bigsupported land efficiency all labour presents picture use—Intensification is net cheap, gain themes upside bycrop-fed but weather in and even agriculture could 1st-gen events in positive theaccelerate US frequent tech—Adopt Climate for farmers potash •Precision Any change don’t IoU—Improve ‘nutri
Slide 36: Big themes that could reduce consumption
Bigtonnes consumption Cutting animal —Intensify cheap food of picture waste relative manure—Often waste ofis themes livestock Kare likely requires to into income—Strict in in agriculture the toproduction agriculture get both headlines: hotworse /major wet that before/if food climates—Reduce to Ifor
Slide 37: Geography of supply
Geography solution Industry production briefing 17 EuroChem (+numerous •June ofProduction supply 2021 • Industry smaller Production 34is based producers) dates on concentrated natural back•toProduction ed 1950s in onCanada, Hartsalz conventional is based Russia ore on • Industry mines, and natural B
Slide 38: Recent and forthcoming capacity additions
Recent Belaruskali 20 curtailment). 20 10and 10forthcoming Petrikov Belaruskali 2. Includes Slavkali Slavkali greenfield PhaseNezhinsky I capacities Acron additions Mosaic K+Sonly. toBethune supply EuroChem2 3. Includes Centred Belaruskali new Uralkali3 onmine the Darasinsky three 0toK+S recover maj
Slide 39: Identifying available capacity
Identifying Expected briefing 17Shortfall June available 2021 Actual capacity 36 Re-utilisation Estimated Capacity 76t Achievable FutureProduction capacity capacity in 2020,unplanned rising to 86Mt production with forthcoming curtailment production additions CY2020 production capacity under(Mtpa ram
Slide 40: How soon will demand catch up with supply
How soon average disclosed estimated Jansen in by will 2021 CRU demand CAGR Q1 (71.6Mt). earnings S1 catch-up Greenfield Note call. inthat Achievable Wave under the#4? chart Spare Consensus production shows construction linear view is BHP interpolations iscapaci that analysis demand y,, brownfield b
Slide 41: Canada and greenfield inducement
Canada 1900s in Inducement reserves Argus, Western Potash Belarus Nutrien). isthat occurrences well incost may Canada. projects placed Potash ofbegreenfield developed in to half (2outlook Southeast meet being of global projects1 long-term in replacement) briefing the Asia reserve future. are Middle
Slide 42: Potash outlook key messages
of potash moving amplify catch-up rather Potash than fundamentals: outlook Reliable demand pricing, isdownwards considerably briefing upside1 base withkey •Canada (SRMC), Attractive 17 The more messages June industry’s well attractive 2021 inupside placed our A39 future view 4th than over to• facing
Slide 43: Appendix
BHP Avnvendix
Slide 44: What governs crop yields?
Fauna & Aspect interacting attainable optimise availability yield factors is&limited that Humidity ofinfluence water by external What andcrop nutrients, governs factors yield FARM crop toSoil resistance yields? &EATHER floodFlora minimise UTRIENTS Any Exposure one the factor impact moisture Knowledg
Slide 45: Themes affecting potash demand
Themes conventional food expect environmental on plant-potassium possible Factors biofuels volatility in-situ animal hygiene consumption Efficient COVID-19 behaviour, further without security. •that demand manure that ’Cheap’ in regulations and with application include agriculture so further adaptat
Slide 46: Potash operations
Potash operations bearing surface for brines processing are fall channelled into Salts3 are basic accessed either types harvested by MOP shaftisunderground by extracted cuttingfrom Widely to underground dissolve used in theCanada, potash ore deposits Russia, ore into orEmployed ponds recovered and o
Slide 47: Global diets, crop production and land use
Food Crop shrubland 3. BHP land and estimate agriculture and 90%40%Sugar (excludes 40% in90% numbers Oilseeds hay/silage/forage). SugarGlobal crops 40% Food 90% diets90% 78% dominated 4. FAO Other 40%(2018) fresh animal by crop water / ourworldindata.org Feed and 30% 15% vegetable 30% 80%30% product
Slide 48: Potash fertiliser consumption by country and crop
Potashand China crops 12 fertiliser Brazil grassland use Indo/Malay and by crop beetGlobal USA 19% USA 14% agriculture China 12% 11%China is fragmented, 8%India 7% 6% Brazil 22% butChina top 0%10100% 8% country-crop 7%Potash 6% 4%fertiliser combinations 3% 3%consumption 3% 2% account 2% by F&V for c
Slide 49: Forecasting demand: food requirement
Forecasting need Animal ainbound developing to account Animal supply Demand: world feed chain Foodproblem supply intake Step losses1calories (e.g. and – crop corn) the crops requirements requirement latter orrotting waste is principally before products Vegetal Estimate they afor (kcal/yr) developed
Slide 50: Forecasting demand: potash requirements
Forecasting animal provide “mine have continuously a the KPotash sufficient ‘reserve’ soil” Demand: thrift fertiliser at historical external and on Step external farmers Crop sources 2rates –Kpotash (soil can uptake will Potash “mine” k)decline, requirements Intensity-of-use feed, Animal this constr
Slide 51: Forecasting demand: non-fertiliser and other fertilisers
Forecasting fertilisers softeners, polyhalite Direct ice 1.Demand: NPK melt, use fertilisers food Chemicals Step potassium 3 can Estimate SOP also hydroxide, SOPM be thebased contribution Secondary on fertilisers otherof primary Non-fertiliser additives other primary potash andFertilisers used mater
Slide 52: Potash environmental footprint and emissions
Potash: waterways 1+2Scope pollute processing. transportation complicated. a low 313.We Low emission, Based andcontinue spreading. High Medium on biosphere ammonium nitrogen4 toHigh develop b) From <100 friendly >1,000 phosphates and BHP kgimprove kg CO2e/t fertiliser research CO2e/t (DAP/MAP). <1,0
Slide 53: Jansen fits our strategic framework
Jansen fits fundamentals, efficient excellenceexpansion our • Low-carbon supply-driven strategic options framework footprint asset market, • Diversification and Our growing lower strategy water population identifies ofintensity commodities, and how Potash diet to position commodity customer outlookt
Slide 54: Jansen structural competitive advantages
Jansen material gain equipment resulted offers automated and in structural, personnel fewer loading higher competitive Across culture capacity theinformation advantages value for multiple chainthroughput Hard-to-replicate wemaintenance have built producers indrives structural design, handling effici
Slide 55: Jansen development progress
Jansen development, 4.3 long service –term 4.5 is shafts, Mtpa low-cost, average processing and (potassium Port continuing high-margin and Major chloride, Rail thepermits and Ininstallation progress KCl) long-life facility, Mining Steps of Simpler, essential site Closure before infrastructure smarte
Slide 56: Jansen capital allocation evaluation approach
Jansenoperating alternatives Commodity Ratio mustwith •compete Our cash similar assessment flow forrisk, capital IRR1time incorporate: and Stage multiple Payback 1 will project Base be Free assessed Cash specific cash1flow value through risks, Margin returns economic CAF 1.horizons, at NPV: both exp
Slide 57: BHP
BHP
Slide 58: 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 and BHP Group Plc Date: June 17, 2021 By: /s/ Stefanie Wilkinson Name: Stefanie Wilki