BHP chairman rules out hydrogen production, uranium output hike

BHP Group Ltd. will not follow iron ore rival Fortescue Metals Group Ltd. into hydrogen production, nor will the company ramp up its Australian uranium output to feed the world's growing need for nuclear power to decarbonize, according to Chairman Ken MacKenzie.

"I'm sure that as BHP, somewhere in our supply chain we're going to be using hydrogen, but more as a customer than as a supplier," MacKenzie told shareholders Nov. 3, in response to a question on whether the miner will invest in hydrogen production in Australia within the next decade.

MacKenzie reiterated BHP CEO Mike Henry's previous declaration that BHP will not get into green steelmaking in Australia. Meanwhile, Fortescue — which seeks to export hydrogen to Germany this decade through unit Fortescue Future Industries Pty. Ltd. to help Europe wean itself off Russian gas — is also planning green iron and then green steel production in Australia using hydrogen.

When asked whether BHP would become a "world leader in uranium extraction" given the reliability and carbon-free nature of nuclear energy, MacKenzie said nuclear energy and uranium "absolutely [need] to be part of the conversation" on how the world decarbonizes.

However, he emphasized that uranium is merely a byproduct of copper production at its Olympic Dam mine in South Australia. Olympic Dam hosts one of the world's most significant deposits of copper, gold and uranium, according to BHP.

"So for the near future we'll continue to be a uranium producer, but like all potential future-facing commodities we continue to review our position on an ongoing basis. But for now it's [just] the byproduct that we produce at Olympic Dam," MacKenzie said.

MacKenzie maintained that "the more the world decarbonizes, the more valuable BHP becomes," due to the need for more wind turbines and solar power installations, which require copper, nickel, iron ore and steel — commodities that BHP produces.

The chairman also left the door open for more copper acquisitions after its rejected bid in August for Australian producer OZ Minerals Ltd.

When asked "how, where and at what premiums" BHP would make further copper acquisitions, MacKenzie said "M&A is part of the equation, but we're going to be extremely disciplined about that, so it's not growth for growth's sake. It's growth for returns for shareholders."

BHP expects "future-facing commodities" copper, nickel and potash to represent at least half of its portfolio by 2030, MacKenzie said.

MacKenzie also emphasized organic growth options by tapping its own exploration and global partnerships in early-stage assets and "[getting] the most out of" BHP's existing assets, such as the Spence and Escondida copper projects in Chile and Olympic Dam.