World’s biggest miner sees coal's era ending in shift to the battery age

The BHP Group, the world’s biggest miner, sees the outlook for thermal coal as challenged and won’t add production as it prioritises growth in commodities tied to the shift to renewable energy and electric transport.

There’s the prospect that the material will be ''phased out, potentially sooner than expected,'' chief financial officer Peter Beaven said in an investor presentation on Wednesday. The Melbourne-based producer has ''no appetite for growth in energy coal regardless of asset attractiveness,'' he said.

BHP follows its biggest competitors Rio Tinto and Glencore [JSE:GLN] in questioning the future role of coal used for power generation, as investors press for more action to tackle climate change and tighten restrictions on holding companies that produce the fuel.

Rio sold its final coal mines last year, while Glencore said in March it would seek to limit production.

At BHP’s thermal coal mine in Australia and the Cerrejon operation in Colombia, where it has a third-share, the producer will focus on ''maximising value to shareholders, whether we are long-term owners or not,'' Beaven told investors in a separate speech. While thermal coal will remain a large market, the company expects demand ''to plateau and then decline,'' he said.

The producer is also unlikely to add major capacity in iron ore or metallurgical coal, according to Beaven, seen as a leading contender to succeed Andrew Mackenzie as CEO. BHP will instead boost options in commodities with a more favourable exposure to the growth of energy demand and renewable power, the shift to electric vehicles and increasing food consumption, Beaven said.

'We need more'

''We have options in copper and oil, but we need more, and we are interested in adding more nickel sulphide resource to our portfolio,'' he said. ''We do not need to do M&A, but we never discount it as a way to acquire great resource bases, especially early in the life of a project.''

BHP continues to see potash as a valuable long-term option, and regards its Jansen project in Canada as a potential high-margin, long-life asset, he said.

The potash market currently has excess supply, but will likely require additional capacity from Jansen’s initial stage, likely to cost as much as a further $5.7bn, by the middle of next decade, Beaven said. Jansen will need about five years from a decision to sanction the investment to be fully commissioned for production, according to the presentation.

BHP said last week it would retain its Nickel West operation in Western Australia for exposure to growth in electric vehicle battery markets, though sees related metals like lithium and cobalt as less attractive, Beaven said.

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