In a move signaling a strategic pivot, global mining giant BHP Group announced on Thursday that it would prioritize cost-efficiency over pursuing new acquisitions. Johan van Jaarsveld, the company’s development director, articulated this new approach during a press meet in Melbourne.
The Value of Patience
The cyclical nature of the mining sector sometimes requires a waiting period that can extend beyond a decade to discover an optimal investment opportunity. Van Jaarsveld highlighted the potential in-house benefits, stating, “If we can save 10% of our cost base, that’s $20 billion in value that’s under our control.” He provocatively asked when the last time an M&A deal had generated a similar value.
Steering Away from Lithium
Contrary to the prevailing industry trend, BHP isn’t looking to invest in the burgeoning lithium market, citing concerns over long-term margin viability.
Ambitious Nickel Goals
On the nickel front, an optimistic outlook was presented. BHP projects to ascend the ranks and become the world’s second-largest nickel producer, trailing only Russia’s Norilsk Nickel. Breaking down the numbers, the company’s Australian endeavors are set to yield between 120,000 and 130,000 tons annually, with its Tanzanian Kabanga operations contributing an additional 60,000 to 70,000 tons. With a focus on nickel sulfides due to their cost-effective conversion to higher purities, BHP finds itself in a favorable position against Indonesia, the current leading battery metal supplier.
Addressing Market Volatility
However, it’s not all smooth sailing. The company also acknowledged the significant 36% dip in nickel prices on the London Metal Exchange (LME) this year. Despite the volatility, especially emanating from Indonesia, BHP’s stance on nickel remains unchanged for now. Van Jaarsveld concluded, “As of today we have not changed our view on nickel.”