BHP is on the hunt for its next big copper project as a combination of renewables and electric cars boosts demand for key industrial metals like copper, nickel, and less known metals such as lithium and cobalt. Even zinc and lead are getting a boost from demand for batteries of all types.
Not content with spending over $US3 billion expanding its Spence mine in northern Chile (by 50 years) and growing output from the huge Olympic Dam mine in South Australia, BHP is now devoting time and money to finding a new mega mine.
BHP is already the world’s second-biggest listed copper miner and it decided last year to boost annual exploration spending by 29%, allocating nearly all its $US900 million budget to new copper and oil deposits (it has a couple of new oil prospects in the Gulf of Mexico and around Trinidad and Tobago).
BHP’s interest in copper comes as demand for the metal emerges from a long winter thanks to growing demand for electric cars and renewables. That sort of demand is also goosing demand for nickel – another major metal for the company from its WA Nickel West operations
BHP believes that in coming years electric vehicles will have even more automation, which will require even more copper.” The company said in September that it sees 2017 to be the “tipping point” for electric vehicles.
Copper is a key component of the lithium-ion batteries used in the electric vehicles, as well as power inverters and in the charging infrastructure needed to keep them running.
So copper and oil (but not gas, especially shale gas in the US) are now BHP’s future growth drivers – iron ore (BHP is number 3 globally) and metallurgical or coking coal (BHP is Number 1 globally in the seaborne coal trade) seem to have been relegated down the pecking order from their top positions several years ago.
BHP has also has plans to transform itself into the world’s biggest suppliers of nickel sulphate — another key component in lithium-ion batteries that power electric cars.
The company is spending $43 million on a plant in Western Australia that will produce 100,000 tonnes of sulphate per year. It is expected to begin production by April 2019. It is also looking to boost nickel production from its existing WA mines next year in what could be a multi billion dollar expansion that would have been unthinkable five years ago.
BHP has invested $US10 billion in its Escondida copper mine in Chile over the past five to six years to maintain production at around 1.2m tonnes a year. (Rio is a minor shareholder in Escondida).
BHP says it is now looking to add more copper to its portfolio through exploration, as demand increases for the metal in renewable energy and electric cars.
It is open to forming alliances with junior mining companies, Danny Malchuk, the company’s president of operations in the Americas told the week long LME Week conference this week.
“We want more copper resources in our portfolio,” Mr Malchuk said. “And we believe the most valuable pathway to achieving this is through exploration, the drill-bit.”
The company’s exploration portfolio consists of 79 projects covering 1.8 million hectares, he said. BHP is looking at discoveries in Ecuador, Chile, Peru, the southwest of the US and Australia, he said.
Miners large and small are now having to spend billions of dollars on their existing copper mines just to keep supply steady, as they dig ever deeper for supplies. That’s likely to lead to a deficit in supply by the beginning of the next decade, according to Mr Malchuk.
For example, OZ Minerals is not only going underground at its Prominent Hill mine, but has started work on its huge Carrapateena project, also in South Australia – that will cost $A1 billion alone.
