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‘Buy versus build’: What drives growth at BHP

BHP growth

BHP might be one of the most active M&A players in the mining industry, but inorganic growth is not a flippant strategy for the Big Australian.

When BHP chief executive officer Mike Henry was recently asked his thoughts on the company’s strategy towards ‘buy versus build’, he shone light on the major miner’s methodical growth approach.

“If I bring it back to, well, what are the implications for us?” Henry said at the 2023 Bank of America Global Metals, Mining & Steel Conference this week.

“One, we obviously have a constructive outlook on the commodities that we’ve chosen to be in. But we always have to test, where is BHP going to add incremental value for shareholders?

“They (the opportunities) have to be the sort of assets that we’ve elected to hold as BHP – large, long-life, low-cost – and we have to see that through the capital that we invest, be it an acquisition or a project, that we’re creating value for shareholders.”

Henry said this often leads them towards ‘build’, whether it be through greenfield or brownfield opportunities, but BHP isn’t close-minded either.

“There will be discrete acquisition opportunities where, through synergies or through our better ability to unlock growth in that portfolio, where we can add value,” Henry said.

“What we’re not going to do is simply go out and buy a stream of copper or buy a stream of nickel or buy a stream of potash, because then all we’re doing is calling the market, and that is the thing that’s going to be least in our control at the end of the day.

“Of course, we need to have a view on the market. But I’ll always feel safer, we’ll always feel safer, if in addition to trying to get the timing right, there’s something intrinsic to bringing that business into our business that allows us to unlock more value than if they had remained standalone.”

This could be the case with BHP’s acquisition of OZ Minerals, where combining OZ’s Carrapateena and Prominent Hill mines with BHP’s Olympic Dam operation is unlocking a new copper district in South Australia.

OZ Minerals’ West Musgrave copper-nickel project is also contiguous to BHP’s Nickel West operation.

So BHP has seen complimentary opportunities for its existing assets that not only support the major miner’s growth, but also boost the potential for these assets as part of broader mining hubs, where economies of scale drives performance.

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