Bhp Group Ltd · ASX:BHP
Bhp — Technical Presentation (September 2021)
53 slides from Bhp's technical presentation, Sep 15, 2021
Slide 1: Jansen briefing
Jansen briefing 15 September 2021
Slide 2: Disclaimer
Disclaimer Forward-looking statements This presentation contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; production forecasts; plans, strategies and objectives of management; assumed long-term scenari
Slide 3: A top tier asset in a future facing commodity
A top tier asset in a future facing commodity Rag Udd President Minerals Americas
Slide 4: Jansen fits our strategy
Jansen fits our strategy Modern, long life, expandable will support long-term value and returns Attractive future facing commodity • Exposure to global mega trends • A low emission, biosphere friendly fertiliser • Attractive fundamentals, supply-driven market, reliable base demand with attractive up
Slide 5: Our portfolio benefits
Our portfolio benefits Potash increases BHP’s diversification of demand drivers, customer base and operating footprint Differentiated Diversified Increased Demand drivers Customer base Operating footprint • Potash is not strongly correlated with • Potash market is globally diverse, with • Increases
Slide 6: Jansen S1 is resilient with through the cycle returns
Jansen S1 is resilient with through the cycle returns Margins and returns expected to be robust even under short-run marginal cost scenarios EBITDA margin IRR Payback ~70% 12-14% 7 years Underlying EBITDA margin6 Stage 1 Internal Rate of Return7 from 1st production Operating Cost Optionality Carbon
Slide 7: Structural competitive advantages
Structural competitive advantages Modern, large scale conventional mine with modern design providing platform for future growth Geology & Resource Mining system Hoisting Processing Outbound logistics Upfront ~60% less Shaft design ~20-50% Leading equipment Continuous, geological equipment delivers l
Slide 8: Jansen S1 provides a platform for growth
Jansen S1 provides a platform for growth Stages 2-4 would make Jansen one of the world’s largest potash operation 10 Estimated production from potential incremental stages beyond Jansen S111 (MOP Production, Mt) 20 Lower capital Higher incremental intensity returns 16 Jansen S4 12 18-20% IRR14 Janse
Slide 9: Potash market outlook
Potash market outlook Dr Huw McKay Chief Economist
Slide 10: Potash fundamentals: key messages
Potash fundamentals: key messages A future facing commodity with attractive long term fundamentals from multiple angles • Potash sits at the intersection of global demographic, social and environmental megatrends A Future Facing • The environmental footprint of potash is considerably more attractive
Slide 11: Fundamental relationships are extremely reliable
Fundamental relationships are extremely reliable Crop production growth has exceeded population growth historically: potash has in turn exceeded growth in crop production Population up ~2.5 fold since 1960, crops ~3.5 fold, potash ~4.5 fold CAGR, 1960-1993 (Index, 1960 = 100) (%) 500 3 Potash fertil
Slide 12: Potash benefits in a decarbonising world
Potash benefits in a decarbonising world Rising biofuels production and land use implications of afforestation burnish an already attractive potash demand profile Cumulative demand expected in the next 30 years compared to the last 30 years17 (%) 400 1.5°C Scenario Already compelling Central Energy
Slide 13: How soon will demand catch-up?
How soon will demand catch-up? Consensus view20 is that demand will catch-up in the late 2020s/early 2030s MOP demand (Mt) 110 3% average CAGR 100 2% average CAGR 90 Specialist average (1.7%)21 Achievable production (w/o Jansen) 80 1% average CAGR Jansen S1 Greenfield under Spareconstruction capacit
Slide 14: Identifying available capacity from supply
Identifying available capacity from supply Estimated 76 Mt Achievable Production in 2020, rising to 86Mt with forthcoming additions CY2020 capacity (Mtpa MOP) 100 90 Can be re-utilised in future 80 70 60 50 Nameplate Inaccessible Allowance for Achievable Temporary Expected Shortfall Actual Re-util
Slide 15: What can be expected under inducement & fly-up pricing?
What can be expected under inducement & fly-up pricing? Forward looking LRMC is broadly in line with through-cycle averages, considerably above SRMC experience of the last few years MOP price (US$/t real) 750 Near term Upswing average estimate 500 2008-2013 Indicative of multi-year “fly-up” pricing
Slide 16: Potash marketing
Potash marketing Mark Swan Head of Sales & Marketing, Potash
Slide 17: Fertiliser and MOP product overview
Fertiliser and MOP product overview MOP is main and most economic essential source of potassium nutrient and has small environmental footprint Consumption of primary inorganic Consumption of potash fertilisers25 Not all fertilisers have the same environmental footprint: fertilisers24 N P MOP fertili
Slide 18: MOP market value chain overview
MOP market value chain overview Potash producers sell vast majority of CFR directly to disaggregated and diverse global buyers Producers Delivered disport CFR Sales Post CFR (disport to farm) End Users • Relatively concentrated • Producers sell mostly CFR to 3rd parties (directly via • Complex, high
Slide 19: Jansen's advantages help shape marketing approach
Jansen’s advantages help shape marketing approach Jansen will be well positioned for entry into market and growth Buyers welcome new independent Upstream CFR logistics and direct entrant to diversify & support growth US rail capability provide both Up to 100 years of reliable supply in access and fl
Slide 20: Plan to market directly to large diverse customers
Plan to market directly to large diverse customers BHP to place product to dozens of large customers globally Illustrative geographic sales mix for Jansen Stage 1 product Illustrative Target Regions USA • Big stable granular region • 50+ buyers Brazil • Largest growing granular region • 50+ buyers I
Slide 21: Prepared to secure sales on entry into market
Prepared to secure sales on entry into market Non-binding MOUs in place with major importers for up to 100% of future production Time to grow team and relationships • Experienced global team have established buyer relationships and secured MOUs 2021 First Non-binding production • Expanded team will
Slide 22: Jansen project overview
Jansen project overview Giles Hellyer Vice President Operations, Potash
Slide 23: Jansen is in the world's premier producing potash basin
Jansen is in the world's premier producing potash basin The mine footprint is within the well established conventional mining corridor A history of potash mining 6.5 Bt mineral resources in world’s best potash basin 35 • The first potash mine opened in Saskatchewan in 1958, followed by a decade of r
Slide 24: Modern, high margin, long life and expandable
Modern, high margin, long life and expandable Jansen S1 is expected to be a large, low cost asset that will enter the market at the bottom of the global cost curve36 Jansen S1’s competitive position against peers Initial investment (Average asset age in 2025) Well defined US$5.7 bn / C$7.5 bn 80 Not
Slide 25: Sustainable approach to emissions and water
Sustainable approach to emissions and water Greenhouse gas emissions and efficient water use a core focus for Jansen S1 and beyond Taking steps to lower emissions at start up • Jansen expected to emit ~50% less CO2e per tonne of product39 vs. average performer in Saskatchewan potash mines • Undergro
Slide 26: Jansen is positioned to outperform peers
Jansen is positioned to outperform peers Modern design offers structural, competitive advantages Peer 1 Peer 2 Peer 3 Peer 4 Jansen stage 1 Jansen stage 1-4 Production41 ~13 Mtpa ~8 Mtpa ~11 Mtpa ~12 Mtpa 4.35 Mtpa Potential 16-17 Mtpa42 1 Locations 1 1 6 3 5 5 2 Total shafts 1 2 11 6 8 10 New borer
Slide 27: All major permits in place
All major permits in place Approvals will enable rapid completion and ramp up of Stage one Major construction permits in place Major permits Rail Environmental Impact Study Approved • Commercial agreement to be negotiated with rail operators Conceptual Closure Plan Approved Other key requirements Po
Slide 28: Competitive on costs
Competitive on costs At nameplate capacity expected to be lowest cost producer in Canada Well defined operating cost base 2030 Potash operating cost curve, Jansen S1 ~US$100/t FOB cost (US$/t real) • Operating cost advantage stems from the ore body, mining 250 method, technology and operating strate
Slide 29: Jansen S1 design deep dive
Jansen S1 design deep dive Giles Hellyer Vice President Operations, Potash Cheryll Godwin-Abel Manager Project Delivery, Mining Mike Elliott Project Director, Jansen Project
Slide 30: Strong understanding of underlying geology
Strong understanding of underlying geology Work program enabled detailed understanding of resource and optimisation of life of mine plan Extensive work to date de-risks project 3D seismic area and measured resource at Jansen • Extensive and modern 3D seismic technology, unavailable to new producers
Slide 31: Advanced mining technology to be utilised
Advanced mining technology to be utilised Approach drives sustainable cost, safety and emissions benefits Larger sized borers, continuous conveyance and automation Photo of Jansen borer at mining trial • Existing technology, adapted and scaled into a unique integrated mining system • Four mining sys
Slide 32: Shaft capacity unlocks optionality
Shaft capacity unlocks optionality Scale and latest technology deliver an advantage Shafts set for completion in 2022 Shaft liner installation • Shaft construction well progressed 93%46 complete at time of sanction de-risking the path to Jansen S1 production • Fully waterproof shaft liner for longer
Slide 33: Modern, efficient processing plant design
Modern, efficient processing plant design Optimised for increased recovery and plant utilisation Leading recovery rates and potential operating hours Processing sub-areas render • ~92% recovery rate enabled by separate fine and coarse flotation with on-stream analysis and crystallization which recov
Slide 34: Outbound logistics support Jansen S1 and beyond
Outbound logistics support Jansen S1 and beyond Agreements and investment set to deliver efficient path to market for Jansen’s product Rail Location of Westshore Terminal ~2,000km from Jansen 25 km Rail route • Continuous high-speed loading and unloading systems to Vancouver maximise efficiency and
Slide 35: Project Management
Project Management Simon Thomas Vice President Projects, Potash
Slide 36: BHP has a strong track record of major project delivery
BHP has a strong track record of major project delivery Recent successes include South Flank and Spence Growth Option Proven project management and potash capability South Flank iron ore project in Australia • Experienced project management and delivery team at Jansen • More than 25% of team from th
Slide 37: Plans in place to manage potential capex pressures
Plans in place to manage potential capex pressures Budget of US$5.7 billion / C$7.5 bn Well scoped capital budget Investment spend profile (US$ billion) • ~50% of engineering has been completed, with more than 45% 1.6 of procurement orders placed, including long lead items like mining system, proces
Slide 38: Schedule optimised to a high level of confidence
Schedule optimised to a high level of confidence 6 year construction period to first production followed by a 2 year ramp-up Critical Path Activity CY21 CY22 CY23 CY24 CY25 CY26 CY27 CY28 Current Scope49 Final Liner Production and Service shaft Shafts handover Jansen Stage 1 Shaft infrastructure fit
Slide 39: Social Value
Social Value Lindsay Brumwell Manager Corporate Affairs, Potash
Slide 40: Social Value will be at the core of Jansen's development
Social Value will be at the core of Jansen’s development Project will make significant contributions to Canada, including Saskatchewan Capital spend Economic contribution Job creation ~85% ~C$1.8 billion ~3,500 of estimated total project spend in direct and indirect contribution to local jobs at pea
Slide 41: Agreements with Indigenous peoples
Agreements with Indigenous peoples Agreements signed with all 6 First Nations communities near the Jansen project Engagement • Unique in the potash industry, opportunities to learn from our First Nation communities on culture and history • Relationships built over 10+ years with regular engagement t
Slide 42: Conclusion
Conclusion Rag Udd President Mineral Americas
Slide 43: Jansen is setup for success
Jansen is setup for success Our approach to the project is set to deliver long term value and create a platform for growth in potash Attractive future facing commodity • Exposure to global mega trends • A low emission, biosphere friendly fertiliser • Attractive fundamentals, supply-driven market, re
Slide 44: Slide 44
Slide 45: Footnotes
Footnotes 1. Slide 4: 1: Aiming to achieve Indigenous workforce participation of 20% by the end of FY27. 2. Slide 5: 2: Cumulative demand increase of 234% in the next 30 years compared to the last 30 years. Refer to the BHP Climate Change Report 2020 for more information about these climate-related
Slide 46: Footnotes cont
Footnotes cont 1. Slide 21: 33: Majority of agreements are subject to non-disclose agreements. Agreements are typically with major buyers across South/Central America, South/South East Asia/China, and North America. By exception we have disclosed 2 agreements in China at the request of the counterpa
Slide 47: Jansen flow sheet
Jansen flow sheet Efficient mining system and advanced process control Large raw ore buffer; Single Bottleneck – dryers: Capacity of 1,750 tph industry leading utilisation have 20% additional capacity than needed Scrubbing and Hoisting Raw ore storage Flotation circuit de-sliming De-watering and Min
Slide 48: Jansen Reserves and Resources
Jansen Reserves and Resources Notes: • The information in this report relating to Mineral Resources and Ore Reserves is based on and fairly represents information and supporting documentation compiled by B Németh MAusIMM ), O Turkekul (APEGS) for Mineral Resources, and J Sondergaard ( MAusIMM ) for
Slide 49: Jansen Financial Modelling
Jansen Financial Modelling Operator and 3% crown royalty calculation = (K20 tonnes produced) x BHP, 100% interest ownership (average realised price) x (3% royalty rate) Royalty US$5.7 bn, C$7.5 bn 3% resource Surcharge = (Gross revenue + Capex Capex spend over six years - peak spend in FY25 transpor
Slide 50: Tax system for potash industry in Canada
Tax system for potash industry in Canada Taxes Royalties Potash Production Tax Income Tax Withholding Tax Revenue Revenue Operating Costs 3. Base Payment 4. Profit Tax Capital Costs Deductions 5. Provincial 8. Canadian Deductions Deductions Income Tax Withholding Tax 3. Base Payment 6. Federal Incom
Slide 51: Pricing realisation calculation
Pricing realisation calculation Prices are influenced by grade and volume, but there are also (fluid) variations between prices in different regions • Most sales are made on a delivered basis US$/t MOP (quarterly average) Selling price • Sales may be spot or contract (nominal) Brazil CFR • Transacte
Slide 52: Potash demand outlook to 2030 by region
Potash demand outlook to 2030 by region Soil depletion a global phenomenon, underscoring our belief that IoU is likely to rise across multiple regions Additional tonnes 2020-2030 NORTH AMERICA EUROPE & CIS ASIA & OCEANIA Historical demand growth1 0.2% Historical demand growth1 0.2% Historical demand
Slide 53: Potash is a low emission, biosphere friendly fertiliser
Potash is a low emission, biosphere friendly fertiliser MOP is a critical nutrient with a modest GHG and broader environmental footprint GHG emissions intensities inform our investment decisions: Not all fertilisers have the same environmental footprint: Scope 1+2► Low Medium High ▼Scope 31 <100 kg