Report by Diana Salazar and Richard Solly with assistance from Benjamin Hitchcock, Glen Mpufane, Liz Umlas, Paul Robson and Seb Ordonez.
1. As a lively demonstration against BHP continued outside the Queen Elizabeth II Centre in Westminster, the company’s AGM began inside. Chairman Ken MacKenzie greeted shareholders, saying that it is always a pleasure to be in London. [We wonder whether he finds being at the AGM a pleasure. He certainly seemed to find it less pleasurable as time wore on.]
2. He went on to say that in September it had been two years since he became Chairman, and he continued to be amazed at the amount of assets the company has, the benefit it provides to communities and the role it plays in global economic development. [We’re amazed at all that as well, but perhaps for different reasons and with a different sort of amazement from that experienced by Ken MacKenzie.]
3. He said that the board is committed to creating value and that the company had returned 17 million dollars to shareholders. Electrification and the need for decarbonization ensures continued demand for all the products in BHP’s portfolio. The safety of its people remains the company’s most important priority, he said, and he apologised for the death of one colleague during the previous year.
4. The collapse of Brazilian mining company Vale’s Brumadinho tailings dam in January 2019 was a tragic event, he said, and “we know we need to respond to our shareholders about how we manage our facilities, and tailings dams safety remains a priority for the board.” [Our own friends in Brazil do not speak of it as a tragedy, but as a crime – and they use the same word for the Samarco tailings dam collapse of November 2015, for which BHP shares responsibility with Vale.]
5. He said that BHP produces five main commodities, owns 17 assets all of low cost and high quality, and is looking at the possibilities for expansion.
6. He also said that the board had been expanded and they have now two new directors, Ian Cockerill and Susan Kilsby. She has experience in financial strategies and in global investment companies. Both have experience on company boards.
7. He said that the company had to build trust. “We are looking at the local operations footprint, with a global perspective acting on climate change.” In five years the company had invested 400 million dollars on climate change.
8. It had paid record dividends to shareholders. “And with the new approach to social value, we can continue creating value for our investors.”
9. Chief Executive Andrew Mackenzie said that the health of the company’s people and the world is BHP’s first priority. The board believes that a zero fatality operation is possible so it continues to strive to achieve it. BHP gives its contractors the same safety training as that given to its own workers (though he did not mention the difference in salary and working conditions).
10. The company’s leaders spend more time in the field now. And they have a technical team to see issues across projects, aiming in the future to find the technology to enable it to stop using tailings dams.
11. Andrew Mackenzie also said that people miss the point that the change to renewables demands metals. There is a greater need for metals in a decarbonised world than in a fossil fuel world, which makes mining one of the drivers of the future. This ensures BHP’s place as the preferred business partner.
12. Andrew Mackenzie continued saying that BHP’s approach to social value is about building trust in society. Creating social value as well as economic value, BHP delivers even better outcomes for shareholders. The demand for electricity and a decarbonised world ensures that the company’s products will be needed more and more. The company’s purpose now is to bring people and resources together to build a better world.
13. He went on to speak of gender balance and the need to counter harassment, and said that diverse teams are safer and more profitable.
14. In addition, he said that BHP fully accepts it responsibility on climate change and reducing its carbon emissions and that the company is working on a climate portfolio analysis for 2020 to mitigate and adapt to climate change. This will include the emissions of their projects, those of their supply chain, and the use of their products. Their interest is to decrease their carbon emission, and use carbon capture methods, building better batteries and strengthening the link between emissions performance and the payment of their executives.
15. He moved to finances but went back because he forgot some of their achievements: that they have reduced their impact on wildlife and on water sources. [At that point, Diana remembered the ocelot that was found dead, of thirst most probably, on the old bed of the diverted Bruno river in La Guajira, during a visit to the river with Colombian authorities and the communities affected by the Cerrejon coal mine in July this year.]
16. Then he moved to finance. “Our performance was strong”, he said. BHP’s projects are low cost and very profitable. [Maybe if they included the real cost to the lives of those affected by their mines and to the planet, their business would not be that prosperous.]
17. For the section of questions Ken MacKenzie asked the investors with questions to respect the rights of others in the room and keep their questions to two minutes.
18. Shareholder Mr Steiner asked about auditing standards. He said that the Grenfell tower disaster was a consequence of the limitations of audits. What had BHP done to minimise the risks and to improve its audits? BHP may be unable to influence non-operated joint ven ture activities; how does it detect third party non-compliance and does it incluce site visits?
19. BHP’s external auditor replied that the auditors look at compliance with tax, laws and regulations and the company has risk management procedures in place.
20. Ken McKenzie added that BHP’s internal auditing was also rigorous. He said that members of management and board do visit their joint ventures, but that they do not control them. They influence the projects through speaking with the other shareholders. He said that they have centralised the way they manage these joint ventures and introduced Brian Quinn, who has accountability for all BHP non-operate joint ventures.
Female aboriginal employment, automation and portfolio diversification
21. Another shareholder asked about female aboriginal employment. She said that five years ago, BHP had said it employed aboriginal women in North Western Australia because they drive the trucks better and the tyres wear less. With automation, what is the future of women in this field? They have ties to their families and cannot move easily. The shareholder also asked about the company’s plan for diversification of assets. It had problems with oil and coal the way climate is going on, and coal production is going to be lost as it just has to stay in the ground. How is the board is looking at diversification for the next twenty years, in what metals and in what parts of the world?
22. Ken MacKenzie replied that the company is very happy with its portfolio. Both coal and iron ore assets had very long lives, around 100 years. It has a lot of resources, and its projects are at the low end of the cost line. It has coal and petroleum, but also the copper necessary for decarbonization of the economy. “I drive an electric car myself and it has four times the amount of copper than a fossil fuel car,” he said. The company accepts the science of climate change but knows that in all possible scenarios, fossil fuel demand will continue for the next couple of decades, he said. It will model pathways for 1.5 degrees as it has for 2 degrees for its whole portfolio. Its portfolio is robust.
23. Andrew Mackenzie added that most of the company’s coal is metallurgical coal for steel production and that will be needed in the future as there is no obvious alternative. A small part of BHP’s coal portfolio is for energy production. The company is going into Ecuador and Mexico and is making incremental investments in potash in Canada for chemical fertilizer for food production, as the population if growing and people want to be feed.
24. Regarding gender balance, he said that BHP had increased women in the work force from 17.5% to close to 25%. It has additional targets for aboriginal people, both men and women. Involvement of aboriginal people in contracting companies has increased considerably.
25. Is there a threat in automatization? We will see, he said. BHP had recently announced it would automate one of its Australian coal mines. Do you want to make the operator smarter or remove the worker using new technology? “We want to see both.” New jobs are created elsewhere through automation and we make tasks easier for a wider group to handle and this can lead to greater employment of women and aboriginal people, so it is all a good news story.
26. Gail Lewis, from HSBC, said that BHP was a leader in addressing climate risk. Its investment decisions appear consistent with Paris goals but it did not made explicit mention of this in its reporting. How did it take climate change risk into account in its capital investment decisions and how did it show its respect for the Paris agreement?
27. Ken MacKenzie replied that the company did a scenario analysis taking a number of paths that the world could take and in its capital analysis it assumed there is going to be a price on carbon and BHP publishes that price on its website.
Non-operated Joint Ventures
28. Councillor Jill Whitehead from the Local Authority Pension Fund Forum said that the forum has previously raised concerns over the governments of Joint Ventures. What steps has the company taken to ensure that stakeholder engagement has been adequately accounted for in the governance of non-operated joint ventures, including decision making around these projects?
29. Ken MacKenzie said that BHP had reviewed its three non-operated joint ventures and decided to appoint Brian Quinn to the new post of President for Non-operated Joint Ventures, so that information and reporting would be centralised. The company has developed a global standard for non-operated joint ventures and is bench marking best practices and is ensuring representation on the boards of all its non-operated joint ventures – Antamina, Samarco and Cerrejon.
Why not de-list from the London Stock Exchange?
30. Chris Shott, an Australian Shareholder, said that in the report there is information on the geopolitical threats to the company. Where is the basis of the income for this company that makes it so successful? From the 44 billion dollars’ worth of income made last year, 24 billion were made in China. Because most of the company’s sales are in China, and it does not sell much to Europe, it should de-list from the London Stock Exchange and be listed only in Australia or, if it wanted to list elsewhere, to list in Shanghai.
31. Ken MacKenzie replied that although the dual listed structure of the company is complex the business case for abandoning it or for listing in China does not currently exist.
Water and dust suppression at Port Hedland, Australia
32. Michelle Brenner said that BHP had commissioned a very good seed study: Human and Labour 2018. The study was looking to reduce the amounts of water that can be used to control dust from mined ore, because the addition of water to the ore makes it heavier and therefore reduces the amount that can be transported in any rail truck or ship. BHP therefore has an economic incentive to reduce water use, but reduced water use can increase dust inhalation, and a study from 2007 on the impacts of inhalation of iron ore dust shows that the use of water can lead to negative health impacts including cancer. She said she knew that BHP had problems with coal and coal dust in the Queensland Operation. Is the Western Australian government aware of the study on BHP iron ore from 2007? Is the company ensuring that its neighbours, for example residents in Port Hedland, are not experiencing dust exposure greater that what the company allows for its own employees and contractors in light of the risks identified from dust exposure for its own employees and contractors?
33. Ken MacKenzie said he was not familiar with the specific 2007 study that Ms Brenner had mentioned, but he was very familiar with the dust management processes that are used in BHP. The company is taking very seriously the concerns of communities about dust emissions. It has a commitment to protect the environment and the communities where it operates. In Port Headland it had spent 400 million dollars on dust emission performance since 2010 and BHP continues to improve. It had no evidence of the dust emissions being over the guidelines for the last three years. The Western Australian government is aware of the issues. There is a Government Acquisition Scheme, funded by industry, for residential owners in that area. Those are activities that BHP supports and it wants to be supportive of the government.
34. Regarding dust monitoring, there is a government report from 2016 that states the standard given by the government and BHP follows that. The health department has said that that level of dust was not a risk for health. So the government is aware of that. BHP works collaboratively with the government for long term solutions.
35. Andrew Mackenzie added that he is aware of many technologies to keep dust under control, many of which BHP has implemented, choosing those which will have the biggest impact. The company had removed crushing operations from the port, and reduced some stacking so that 40% of the ore goes directly to the ship. It sprays water on the ore where it is transferred from one conveyor to another, then washes the dust from the conveyor belts. It attempts to ensure all the equipment and facilities it uses need less water.
The collapse of the Samarco tailings dam in Brazil and its continuing impacts
36. Tchenna Maso, of MAB (the Movement of People Affected by Dams in Brazil) spoke about the collapse of the Samarco tailings dam in Brazil on 5 November 2015. She said: “Good morning everyone, my name is Tchenna Maso, I live in the basin of the Rio Doce near the coast. I am from the MAB (The Movement of People Affected by Dams). This case is important due to its sheer magnitude: It is almost 4 years since the tragedy took place and we still have no rebuilt houses.
37. “The Renova foundation created to work on the processes of reparation is completely inefficient. All of its 42 programmes are delayed or without clear plans. In almost 3 years of operation, we haven’t even finalized the first cadaster, the gateway to accessing reparations. There are thousands of unfinished registration requests, and thousands of people who have been waiting for answers for years about their registration.
38. “The slowness in the reparations process for communities has generated several problems for families. There is severe vulnerability in many regions due to not being able to fish. This has profoundly affected households, leading to gender violence, drug and alcohol abuse. It is worth mentioning that there is a gender inequality in the compensation process, given that many entries were made based on the family nucleus, and on the formality of work activities, disregarding women’s income.
39. “In addition, women, are overloaded with work having to care for the health of their families as well as search for access to water. Last year a study was published by Ramboll and the Public Defender’s Office pointing out the severity of gender inequality and transversality in the policies implemented by Renova.
40. “Studies on contamination, either by contact with mud or by drinking contaminated water, point to a serious public health issue. Several affected communities and individuals have medical investigations showing high amounts of arsenic, lead, iron, and low zinc rates. This has led to severe gastrointestinal and skin diseases. There are no preventive measures currently being taken. The Health Technical Chamber to date has not completed municipal health plans or the transfer of funds to municipalities for better treatment.
41. “It was agreed that the companies would be hiring technical advisors to work with the affected families. This process has been going on for over 2 years, and many communities to date have not obtained this. It is shameful to reach 4 years of tragedy without the guarantee of this support.
42. “Regarding the environmental issue, until today no research entity has been hired to carry out studies in Minas Gerais. In Espirito Santo, the study advanced to a diagnosis of loss of marine biodiversity in some areas, and to high rates of contamination. These studies are not yet conclusive but should serve as a warning that mitigation measures are required.
43. “The poor reparations policies that have been implemented by the Renova Foundation may not be compliant with international human rights standards, and this may lead to re-negotiation and legal review of the levels of indemnities.
44. “Can we have your assurance that-
1. The hiring of technical advisors for all affected communities be accelerated?
2. The data held by the Renova Foundation about its programmes be published regularly and rapidly?
3. Precautionary, preventive and mitigating measures for environmental issues be initiated with urgency?
4. Renova Foundation programs will have clear plans and deadlines and these be adhered to?
45. The Chairman asked for any other questions on Samarco to be asked.
46. Paul Robson, of London Mining Network, said: “Page 20 of the 2019 Sustainability Report (at the top of the right hand column underneath the photograph) says, ‘In general, water and sediment qualities have returned to historic conditions.’ What indicators have been used to reach this conclusion? From which studies? At which points?
47. “Local people say that it is still possible to see, at river confluences, which stream is flowing from the area of Fundão Dam and which is not coming from Fundão Dam, because the former is still much more brown and muddy than the latter. Local people say that, when river levels rise and fall again, a brown muddy sediment is left along the river banks.
In the report by RAMBOLL of December 2018, Environmentally suitable disposal of waste generated from treatment of water collected from the Rio Doce, it is stated at the end of Section 6 that ‘During the visit [December 2018], the SAAE [Water Company of Governador Valadares] reported that prior to the disaster, the frequency of cleaning of settlement tanks was quarterly, and cleaning is currently taking place every 15 days, and during the rainy season the routine intensifies frequently to every 8 days.’
48. “These indicators suggest that the amount of sediment in the Rio Doce is still higher than historic conditions, do they not?
49. “The Sustainability Report (page 20, right-hand column) calls attention to the need for well-designed studies of potential contamination of the environment of the Rio Doce and of related health risks. I welcome this statement, having asked questions about the need for such studies at two previous AGMs.
50. “The studies that are referred to in the last paragraph of page 20 (already in progress and providing preliminary results in late 2019) refer only to the State of Espirito Santo, do they not? Studies of these subjects in the State of Minas Gerais have not yet begun, have they? When will the corresponding studies in the State of Minas Gerais begin?”
51. Richard Harkinson of London Mining Network referred to page 40 of the company’s Annual Report and asked for clarification of the amounts being spent in US dollars. He said that the Brazilian State mining regulator had expressed concern about more than 200 of the tailings dams owned by BHP’s Joint Venture partner Vale in the state of Minas Gerais. He said that there are also reports that the Renova Foundation is talking to the Environment Minister about taking over five national parks in Minas Gerais at the same time as it has an ongoing problem with other mines. The company’s reporting on its tailings dam management suggests that the only independent factor that comes into it is that every five to ten years there is an independent review. Does the company not want to bring in independent review on how good its tailings dam management is? Nothing that the company does makes any difference to its Joint Ventures, and there are concerns about both Antamina and Samarco. The company’s dam stability reviews suggest that in North America it is going to face pressure from the US Army Corp of Engineers about the fact that BHP is not satisfying the necessary levels of dam safety reviews.
52. Ken MacKenzie replied that the dam failure at the Samarco operations in 2015 was a tragedy and BHP is deeply sorry for the impacts and especially the tragic loss of the 19 lives. BHP’s response has been led by a total commitment to doing the right thing, addressing the social, community and environmental impacts of the failure, which is what the Renova Foundation was set up to achieve. It has 42 remediation and compensation programmes in operation. BHP had contributed 872 million US dollars to June 2019 and approved a further 287 million US dollars in the second half of this year. It had made a total provision of 6.5 billion dollars. He explained the governance of Renova, involving government environmental agencies, the public defence office and communities. A consultation process with the communities takes time. Communities have been involved in Renova’s work and had representatives on the board. The company is balancing the need to move quickly with the need to involve the community.
53. There are more than 6700 people working on these programmes from Mariana to the mouth of the Rio Doce, he said. Environmental restitution is going very well. River margins have been replanted and stabilised. Water quality is improving and is of sufficient quality for fishing and for consumption of fish at usual levels. There are 92 monitoring stations along the river. The company is also helping with municipal water supplies and sewage systems, addressing historical issues which go well beyond the direct remediation works. Before this work, effluent was going straight into the river.
54. Around 1.9 billion dollars have been spent by Renova so far for environmental remediation, resettlements and compensation, he said. 425 million US dollars have been spent in compensation to date including 244 million dollars for direct compensation to 13,000 families and 75 million for the impacts on drinking water experienced by 260,000 people. Houses were being designed in consultation with community members for the three communities to be resettled. The target date for completion of all houses across the three communities is May 2021. There are always areas for Renova to improve, he said, but strong progress is being made. BHP’s response to the Samarco disaster is a total commitment to do the right thing. Between BHP and Vale, a further commitment of 3 billion dollars had been made.
55. He left most of Tchenna’s specific questions unanswered.
56. Paul Robson pointed out that his question on technical studies in Minas Gerais had not been answered. He repeated that studies have yet to begin in Minas Gerais and that he had asked why this had not happened. When will studies begin? Will they be like the studies in Espiritu Santo?
57. Andrew Mackenzie said he could not answer this question. He would like things to go more quickly and as far as he was aware a number of technical studies were planned for both Minas Gerais and Espiritu Santo and he was not sure why the impression was given in the reports that they have not started yet. He asked Paul to speak to Brian Quinn, BHP’s President of Non-operated Joint Ventures, after the meeting.
More on tailings dam stability
58. Ken MacKenzie then said more about tailings dams, saying that the company had taken a number of steps since the Samarco disaster. It had done dam safety reviews following established Canadian guidelines. These had been conducted for all its dams, active, inactive and closed, and had found no significant safety issues but had made over 400 suggestions for improvement. The company had completed 97% of these suggestions and had established a taskforce within the company to enhance the focus on dams. It was also involved in work with the ICMM (International Council on Mining and Metals). A lot of work had been done. The company was assisting in setting international standards. Dam safety was a standing item for meetings at board level.
59. Richard Harkinson said that his question was about independent assessment of what the company is doing, given that the only independent review mentioned in the company’s report is every five to ten years and does not seem to impact on Joint Ventures.
60. Andrew Mackenzie replied that BHP had led international efforts under ICMM and its review was yet to report. For each of BHP’s dams the company is required to have an engineer of record who is not a BHP employee, and this engineer has to do annual report annually.
61. Adam Matthews of the Church of England Pensions Board said he welcomed the fact that BHP was setting a benchmark for the rest of the mining industry both on tailings dam safety and taking into account scope 3 carbon emissions. Given recent tailings dam disasters he asked whether standards for environmental rehabilitation needed to be revised. Is a new standard needed? He also asked how the industry addresses the legacy of tailings. Is there a need for a fund in the industry that looks to remove the highest risk dams then implement a new global higher standard on all the others and works towards the elimination of wet tailings facilities?
62. Ken MacKenzie said that the board had oversight of rehabilitation through the cycle of its operation. The closure and rehabilitation process is designed to include safety and environmental rehabilitation cost. This is subject to external auditing. In June 2019 the company recorded a provision of 6.9 billion dollars for this. BHP continues to work to ensure that its provision for rehabilitation is up to standard.
63. Andrew Mackenzie added that the company planned to work through the ICMM to push research on removing the need for wet tailings. This is what trade associations are for, he said – to improve standards. BHP can use the Mineral Council of Australia to drive a new benchmark.
64. A representative of ShareAction applauded the company’s targets for gender balance but said there is a need for a fully diverse work force which represents the communities in which it operates. Has the company set measurable, time-bound targets on issues of diversity other than gender? Will this be linked to executive remuneration? Would the company meet with Share Action to discuss this?
65. Ken MacKenzie agreed that the most diverse teams are the safest and most efficient. Andrew Mackenzie talked about the company’s targets for aboriginal employment in Australia and indigenous inclusion elsewhere in the world. He said it is more difficult to pursue targets on sexual identity but the company is active in considering this and has an active LGBT community. He would be more than happy to arrange a meeting between the company and ShareAction.
Impacts on communities
66. Proxy-holder Jeanne Martin said that she had attended numerous BHP AGMs and was always surprised and shocked by the number of local communities and supply chain workers raising concerns about BHP’s operations. The fact that they had had to come all the way to the company’s AGM suggested that BHP’s internal consultation processes are not enough. How did the Chairman feel about progress being made by the company in response to the issues raised by the protestors outside?
67. Ken MacKenzie said that both he and Andrew Mackenzie had talked about social value and they believed that the company had the trust of the communities in which it operates. “We are very place-bound,” he said, “and if we put a mine in place we are going to be there for a hundred years,” and communities grow up around the company’s mines. “It is incredibly important to us,” he said. BHP believes its processes are sound. It is moving from social licence to social value, so communities want it to be there. It is striving to have transparency but as communities evolve the company has to develop its understanding of how to improve communities. It needs to work harder to get trust and will be judged on its actions.
BHP, greenwashing and water scarcity in Chile
68. Lucio Cuenca, Director of OLCA (Observatorio Latinoamericano de Conflictos Ambientales or Latin American Observatory of Environmental Conflicts) in Chile, explained that he works closely with mining-affected communities, including communities affected by the operations of BHP. He went on:
69. “BHP Minera Escondida in Antofagasta is the largest copper mine in the world. This project wastes huge quantities of water, more than three times more than any other single BHP operation. The extraction of water for use in this operation has led to the disappearance of the ecosystem of the Salar de Punta Negra.
70. “Contrary to the water policy announced by BHP, for the use of desalinated water, the company does not intend to stop using fresh groundwater of the Monturaqui Aquifer, intending to extend the extraction for 11 years from the time originally authorized, until 2030, against the will of the Atacameña Community of Peine, by then it will be too late. All of this occurs while Chile is in the midst of a historical drought.
71. “The company’s report on tailings catalogues the ‘Laguna Seca’ Escondida deposit as ‘High Risk’. This dam already stores 1180 million tonnes of wet tailings, only 25% of what is projected in its useful life. BHP and the State of Chile, through Fundación Chile, promote a cynical policy of tailings management in a programme called ‘Inclusive Tailings’ and another called ‘Adopt a Tailings site’.
72. “Chile is home to the largest copper and lithium reserves in the world, but behind these ‘reserves’ are climate-critical ecosystems such as glaciers, salt flats, water basins, and territories that are the ancestral homes of indigenous communities that, according to your own BHP reports, ‘compete’ for water and space with the company.
73. “However, BHP blatantly uses the climate crisis as an opportunity to wash its image and carbon emissions. The company promotes itself as part of the solution to the climate crisis, instead of acknowledging its guilt in actively contributing to this crisis. BHP is increasing its metal extraction, supposedly for the ‘transition’ in an atempt to take advantage of an increasingly lucrative electric vehicle market in the global north.
74. “At the same time, Daniel Malchuk, head of BHP Americas, was recently quoted in an interview with El Mercurio, a national newspaper in Chile, expressing his scepticism regarding the Chilean state’s legislative debate on glacier protection, engaging undue political interference – the implications of which go in direct contradiction of the company’s claims about its commitment to the fight against climate change, so my questions are:
1) How can you justify practices, such as the extraction of groundwater, that continue to destroy ecosystems in a region of such high water stress, such as Antofagasta?
2) Considering the recent disasters in Brazil, do you consider it responsible to manage high-risk tailing sites with euphemistic initiatives such as inclusive tailings?
3) Will BHP stop hypocritically promoting a greenwashing narrative to justify its projects while simultaneously intervening against pro-glacial policies while continuing to be a major coal miner and carbon emitter?
75. Ken MacKenzie replied that in 2018 BHP had published a report on its water use, so there is a lot of transparency on where and how it takes water and disposes of it. In terms of water in Chile, he said he was very proud of BHP’s work. It had spent 4 billion dollars for a desalination plant to provide the water for Escondida. It uses a lot of energy but the company had just signed contracts to have it completely powered by renewable energy. The target is for 100% of Escondida’s water requirements to be provided by its own desalination plant by 2030. It had ceased water extraction from Punta Negra in 2017. The company recognises the importance of water to indigenous communities and the environment.
76. CEO Andrew Mackenie added that BHP is “very transparent” with its plans with local indigenous peoples. It will reduce extraction of groundwater from 1400 litres a second to 400 litres a second, which is the natural replenishment rate of that aquifer. The company is engaged in a consultation process with indigenous peoples to help decide on future activity.
The tailings dam at La Escondida presents some risk but has been managed with great care and attention over some decades. Since the Samarco disaster BHP had continued to increase the rigour of its processes, and Escondida had received all the attention it deserves. The company is looking to make more use of water in the tailings ponds to improve its overall use of water and save power.
77. If the world wants to totally decarbonise to ensure a global average temperature rise of no more than 1.5 degrees combined with good economic growth, he said, copper mining will have to increase by factor of between 5 and 20 times. The necessary copper is not sitting in warehouses, it has to be mined. BHP taking lead on water, climate, indigenous rights, and if we do not mine others will do so. This is not green washing, he said, this is the reality, and this is BHP’s real contribution to the green new deal.
78. Lucio attempted to respond, but Chairman Ken MacKenzie tried to silence him. Lucio pointed out that if the company carries on expanding mining of copper and other minerals there will be no planet left to save. The death of the planet cannot be expressed as a value in dollars, he said.
Why not get right out of thermal coal? And what about the potash?
79. Another shareholder said that BHP had recently reviewed its thermal coal assets but despite its stated concern about climate change it had retained these assets. Rio Tinto had already exited from thermal coal. If BHP’s assets in thermal coal are so small in comparison to its other assets, as it had said, why did the company not exit thermal coal? He also asked for further information about the company’s Jansen potash project in Saskatchewan, Canada.
80. Ken MacKenzie said that BHP accepts the science of climate change. It had revised its portfolio and looked at various future scenarios, and even in seeking to limit temperature rises to 1.5 degrees Celsius, fossil fuels would still be around, so BHP needs to respond to that. That’s why it is looking at sequestering carbon. He said that 3% of BHP’s income comes from energy coal and only 1% of its capital expenditure goes to it. BHP has no plans to exit that business but it is taking serious action around climate change. On potash, he said that this is a chemical fertilizer. Given the growing population, growing middle class, changing dietary habits and the lack of arable land, demand for potash will increase. BHP has a tier 1 position in the world with a tier 1 asset. Saskatchewan is the biggest potash basin in the world. The company has sunk two shafts and approved additional capital to de-risk the project by testing the possible mining approaches. It will make a decision on the future of the project by February 2021.
Exploration in Ecuador
81. Proxy shareholder Benjamin Hitchcock said: “My question regards BHP’s copper exploration activities in the biodiverse and highly-sensitive Intag region of Northern Ecuador. It comes from concerns expressed by communities living in the area.
1) Communities who live within the areas concessioned to BHP’s subsidiary Cerro Quebrado have repeatedly expressed their opposition to mining in their territory and have published a manifesto declaring their united resistance to mining taking place in this region, the signatories include local government authorities;
2) Independent experts have determined that the topographic, climatological, hydrological, seismic, and geological conditions make mining in these concessioned areas not only imprudent, but entirely irresponsible and likely infeasible given the lack of a suitable site for tailings storage.”
82. He asked whether BHP intended to continue carrying exploratory activities in the Intag region in direct defiance of the unified local resistance the company faces; in disrespect of the rights of these communities; as well as the serious threat mining poses to the region’s water and biodiversity. He said that his question also comes in the context of the historic victory of popular and indigenous mobilisations in Ecuador to revoke the government’s package of neo-liberal austerity reforms pushed by the IMF. These mobilisations were led in large part by the national indigenous organization CONAIE. CONAIE has come out publicly against mining activity in the Intag region and denounced the government’s attempts to promote mining in this region. In this context of massive popular opposition to multinational extractive companies, could BHP say with sincerity that it has analysed and reported to shareholders on the viability of its investments in Ecuador – including its stake in other mining companies in Ecuador, such as SolGold?
83. Ken MacKenzie said that BHP is involved in a greenfield exploration project in Ecuador. That is at a very early stage, just doing some preliminary sampling and geophysical research so all the issues Benjamin had mentioned would be addressed. The company was sensitive to all these issues, will follow all the regulations and apply its policies on Free Prior Informed Consent. He said he could not answer all of Benjamin’s questions because the project was at such a preliminary stage of development.
Are BHP’s directors superhuman?
84. Another shareholder asked about directors holding posts on multiple boards. How could directors give sufficient attention to each directorship? They may be superhuman, he said, but there is a limit to the amount of attention they could pay and information they could process.
85. Ken MacKenzie said that the board keeps a close eye on participation by directors. All the directors are fully participating on the board. Participation by directors on the boards of other companies is an advantage for BHP.
BHP’s legacy in Indonesia
86. Andrew Hickman, of London Mining Network, said he had just returned from Brazil, where he had visited communities affected by the Samarco tailings dam collapse. He did not recognise the picture that the Chairman had painted of what was going on. What had happened was not seen by local people as a tragedy but as a crime, and some of the leaders of BHP’s associate Vale were being indicted on criminal charges.
87. He wanted to ask, however, about the company’s legacy in Indonesia, particularly in relation to climate change. Two years ago BHP had pulled out of the Indomet coal project in Indonesia. The BHP Chairman had spoken of creating social value. There had recently been substantial demonstrations across the world about climate change. How will BHP take leadership on the climate crisis and specifically over its legacy at Indomet, a huge coal mining concession in the middle of a rainforest? In 2016, BHP had sold its 80% participation in the project for £120 million. In 2010, six years before that, Adaro had bought 25% of that mine for £335 million. Those figures do not suggest good business sense. But the question is not about money but about leadership in the climate crisis. BHP makes a distinction between metallurgical and thermal coal, but it is all still carbon. Two years ago, Andrew had asked about how the company would dispose of Indomet and asked it to think about creative solutions for disposal. The response from the then chairman was that Andrew’s suggestions for alternatives to mining were unrealistic. This mine is in the middle of a rain forest. Given BHPs responsibility to build a better world and create social value and be responsible for mines even after the end of the life of the mine, what lessons had the company learned from that experience? Was it a good move to go into Indomet? How will BHP deal with the legacy? It had developed it and then left it to someone else to develop, which they are now doing. How would it show leadership in facing climate change? What lessons had it learned from Indomet?
88. Ken MacKenzie said that BHP had disposed of that asset in June 2016. Before that it had applied the same standard that it applied in all its assets. It had made a responsible exit. If it were to exit other assets it would look at how to do so responsibly. It was committed in its actions around climate change. It had just announced Climate 2.0, a 400 million US dollar investment project, and was tying executive incentives in to this, and also addressing scope 3 emissions.
89. Andrew emphasised that his comment had been about mining coal in the middle of a rainforest. Ken MacKenzie said they could talk about it later.
Contracting out the workforce
90. Glen Mpufane, of IndustriALL Global Union, said: “BHP’s employment model is a serious concern to IndustriALL Global Union and unions affiliated to it across your global operations and this is not only a concern for workers and trade unions but investors as well. This employment model relies heavily on precarious out-sourcing or contracting out of permanent employment at BHP with dire consequences for workers’ health and safety and conditions of employment. Your sustainability reports state that the seven fatalities at your operations were amongst this category of workers, as if you do not know that there is a correlation between high fatality incidence or rates and contractors. On average, BHP‘s contractor workforce of 60% is above the industry average of 30-40%. Our affiliate in Australia, CFMEU, has won a legal challenge against BHP and instead of addressing the problem of contracting; BHP doggedly goes on and create a subsidiary company, operations service, to replace permanent workers at BHP with contractors who earn 30% less than permanent employers and worse conditions of employment.
91. “My question to you, Mr Chairman, is: How does BHP respond to this anomaly with the industry practice and will BHP engage with IndustriALL Global Union and trade unions, or what is left of trade unions, to address this very serious issues of concern to Investors and society?
92. “A large contingent of your contractor workforce doing the same work as your small pool of permanent workers is paid 30% less than permanent workers and working under worse conditions of employment, creating a reputational, legal and human rights risk to the company.
93. “Mr. Chairman, How does the company respond to this and what will the company do, if anything, to address another anomaly associated with BHP?
94. Ken MacKenzie replied that the reality was that BHP is ‘in-housing’ workers through Operation Services. People who were contractors are now employees with market competitive salaries, and provided with skills development and with flexible work arrangements. BHP is increasing its apprenticeship programme and bringing jobs back in house, which is good for people and business. The company tracks safety of contractors the same as for employees.
95. Andrew Mackenzie said that contractors are now treated ‘even more equally’ as employees.
96. Ken MacKenzie said that there is freedom of association, BHP respects that and engages with industrial associations.
97. Glen asked, “Will you engage with IndustriALL?” Ken MacKenzie made clear that BHP intended only to engage with its own workforce.
What is to happen to BHP’s workers in Chile?
98. Marcelo Franco said, through his interpreter, that he regretted that the Chairman did not speak Spanish. He said he works for BHP Chile and is leader of the unions at the Cerro Colorado mine, representing 5,000 workers. The union is affiliated to IndustriALL. He said that the company had given unions no information about contracting out, and workers had been left aside from all decisions.
99. He said he had three questions:
1) Given the evidence of deteriorating labour relations in BHP Chile, does BHP’s global business plan consider workers and their unions to be part of a strategic alliance to increase value?
2) With regard to Cerro Colorado’s environmental permissions, these would be valid until 2023. Automation is supposed to be taking place at Minera Escondida and Spence. What is BHP’s reconversion plan for those workers who will lose their jobs and have to reinvent themselves within society?
3) For every one permanent worker at BHP Chile, three are contractors. In the past decade there had been twelve fatalities among contractors due to weak safety conditions at the contractor companies in Chile. Why had BHP reported only seven contractor deaths globally in their sustainability report this year? This did not square with fatalities of contractors at some operations that did not seem to be reported on.
100. Andrew Mackenzie said he did not know where Marcelo’s numbers were coming from. He said that BHP is committed to communication with workers. It explains in advance all its plans to the extent that it can within the constraints of commercial confidentiality. This issue cannot be dealt with appropriately at an AGM. He said he was very confident that materials are available and shared across the workforce. BHP has no special or secret plans around automation. It is looking at it everywhere and is sensitive to the redeployment of people who may be displaced because of it, but it currently has no major automation plans in Chile so is not actively communicating on it, but if plans deve lop they will be communicated. He said he encouraged Marcelo to raise these issues with local management.
101. Marcelo replied that he had been trying to communicate with management for six months but had received no response.
Why not meet in China or South Korea?
102. Chris Shott suggested that the board should meet in China or South Korea. Ken MacKenzie replied that it had gone to Asia last year, to Singapore and Shanghai.
More on dust emissions at Port Hedland in Australia
103. Michael Hain from Western Australia asked a question related to Port Hedland with regards to the risk for the board and the shareholders due to dust emissions. He said that just three months ago the Western Australian government had expressed concern about the risk of hospitalization and death that residents of this area had due to exposure to PM10, which he called fine dust.
104. “There is a government order to reduce the population, but if there is a reduction, it may not be significant at all. Our main concern is that the multicultural St Cecilia primary school and kindergarten falls inside this depopulation zone. St Cecilia primary school has been in this area since 1963, nearly 60 years, and the community there even built the bricks with their hands for the first classrooms. This was all done before our company even arrived. Indeed, the town was there before as well.
105. “Now it gets worse, there is an even finer kind of dust that is invisible to the human eye called PM 2.5 dust, I’ll call it ultra-fine. The World Health Organisation says that this invisible ultra-fine dust causes a greater harm than the fine dust because the ultra-fine dust goes even deeper into the lungs, and worse apparently for the young children developing their lungs. We are still very near, just about 200 metres from St. Cecilia primary school and kindergarten. They are right opposite our company’s operation. There is a dust monitor which I have found that has been measuring impacts dusts for years, but not only measuring for the fine type dust, but also measuring for more dangerous and invisible ultra-fine dust. So it is enormously concerning that this important monitor for ultra-fine invisible dust, that is about 200 metres away from the school children at St Cecilia primary school and kindergarten, has for at least four consecutive years recorder ultra-fine dust levels year on year substantially exceeding both the Australian and the State legislative maximum levels that is 33% over, 47.5% over, 50% over, 41% over. Knowing that the dust pollution will not stop on an imaginary boundary in the air, it appears likely if not almost certain that the very close proximity of St. Cecilia primary school and kindergarten children to the ultra-fine monitor means that they too have been exposed not only to the fine dust that is seeing the town targeted for the proposed population reduction but also they have been exposed to the ultra-fine invisible dust for four consecutive years and possible now five consecutive years. Think about that. That covers nearly the whole life of a child in primary school. The state government politicians and regulators are apparently ignoring this ultra-fine dust regulation, although I noticed the state has moved now the members of parliament’s office and staff out of the zone, and in fact to another town. But we as a company must not ignore this invisible ultra-fine dust, and most definitely we must not if we are a contributor to it.
106. “So my question is to you, Mr Chairman, do you give our board and our stakeholders the absolute assurance that no BHP dust emissions have been making any contribution to any ultra-fine dust that has been impacting the school children at St Cecilia primary school and kindergarten, and for that matter not contributed to the ultra-fine dust impacts on the residents in the population reduction zone, and please give your evidence in support of that assurance or if not, what are the figures for our company’s contribution to the ultra-fine dust in that zone?”
107. Ken MacKenzie replied that this was a very similar question to one that was raised before. Michael Hain said he was talking here about a different kind of dust.
108. Ken MacKenzie said that the issue of dust around its operations is an important one, and that Mr Hain knew better than anyone how much engagement BHP had had with the community, specifically about the health issue in Port Hedland. “I talked earlier about the real tangible efforts we are making to reduce dust in the area. We have spent four million dollars over the last decade. All our efforts to reduce dust have resulted we have no exceedances over the last three years from dust attributable to BHP.”
109. Michael Hain repeated that there had been four exceedances. Ken MacKenzie said, “Not at the official monitoring station. We are not going to have this discussion here. You have different data to what I have so I am not going to proceed. There is an official monitor for Port Hedland, a responsibility that we transferred to the WA government, but it is completely transparent, everyone has data access. There have been zero exceedances over the last three years with the standard that was established with the WA government.” The WA government had said that 70 mg per cubic metre is what that specific station was set to monitor, that was BHP’s requirement and it was below that consistently.
110. Michael Hain said that Mr MacKenzie was answering for PM10, while he was asking about PM2.5. This was not at the 70 mg level. At Port Hedland the company had accepted that its dust emissions contribute to the dust problem but it does not know how much PM2.5 it is producing. Does BHP know how much dust it is contributing?
111. Ken MacKenzie answered that as far as he knew, 70mg per cubic metre is the industry contribution and BHP had had no exceedances in the past three years. “We are getting into technicalities that go well beyond the scope of an AGM,” he said, and offered to continue engagement with Mr Hain outside the meeting.
Environmental and human rights impacts of the Cerrejon coal mine in Colombia
112. Alvaro Ipuana, the major indigenous authority in the Wayuu community of Nuevo Espinal in the province of La Guajira, Colombia, introduced himself in the Wayunaiki language, and then said:
113. “The indigenous Wayuu people have been victims of the expansion of the Cerrejón mining company. My community of Nuevo Espinal, a community of approximately 411 people who were involuntarily resettled in the year 1993, are now experiencing new threats caused by the expansion of the Oreganal pit. Our community has been protected by a court sentence ordering the restitution of land that obliges the Colombian state to ensure full reparation and restoration of our violated human rights.
114. “However, Cerrejón has proposed damming two new rivers, the Palomino and Mapurito rivers, and has bought land for the expansion of the Oreganal pit within the framework of its mining expansion plan. This means a new victimization of our territorial rights and the rights of other surrounding communities such as Manantialito, Tamaquito and others that stand to be affected by this expansion project.
115. “Therefore, my first question is: The involuntary resettlement of communities has meant irreparable damage to their social, cultural, spiritual and economic fabric as well as their right to a dignified life – why does BHP insist on a mining expansion plan that affects communities which have already been violently displaced and that will therefore be re-victimized, at a time when the world and coal buyers have begun the decarbonization of their economies?”
116. “In 2017, the Colombian constitutional court ruled in favour of the indigenous and Afro-descendant communities of La Guajira in the case related to the diversion of the Bruno stream. In decision SU698/17 it was decided that an inter-institutional working table would be established. This table would guarantee the participation of communities, organizations and experts to discuss seven environmental and social uncertainties that the court determined had been unresolved.
117. “The 8th measure in this sentence requires the inter-institutional table to make a collective decision about restoring the water flow of the stream to its natural course, however, this decision was taken without the participation of the communities and other actors – to date the stream remains kidnapped by the mining company.
118. “In this regard I have two questions: How are Mr Andrew Mackenzie and other BHP investors going to ensure compliance from Carbones del Cerrejón with regards to court orders that have been ruled by the Colombian constitutional court, orders which involve a real and effective participation of communities, experts and organizations?
119. “In the same vein, following the illegal intervention on the Arroyo Bruno that resulted in its disappearance, which is what we found in the verification mission carried out in July 2019 in co-ordination with international groups, communities and NGOs, and with the presence of state institutions and of the company, so my question is, what are you going to do to return the water to the river?”
120. Chairman Ken MacKenzie called for any other questions concerning Cerrejón Coal.
121. Catalina Caro said: “Greetings, my name is Catalina Caro Galvis, a grassroots community environmental defender, and I work for Censat Agua Viva, which is Friends of the Earth in Colombia. We are an organisation that accompany the communities. I am here because coal mining in my country (Colombia) has created an irreparable devastation, and environmental justice for the peoples of my country is a necessity. Despite the fact that you insist that your investment in thermal coal is small, the impacts in my country are big and continue growing. Therefore, my questions are:
122. “In August, the Colombian State Council agreed to study a nullity claim on the Cerrejón environmental licence presented by the communities, four national organizations and two congressmen of the republic. This lawsuit requests that the State Council evaluate Cerrejón’s compliance with the minimum environmental and legal requirements that any company in Colombia must meet. To date, Cerrejón does not have an environmental impact study that complies with the provisions of the law and through which the new environmental conditions in La Guajira have been assessed.
123. “The lawsuit also proposes a precautionary measure for the suspension of operations neighbouring the affected communities, and to put a stop to any expansion plans until the authorities verify the protection of the rights of the communities that are at risk, and the validity of all the licensing process.
124. “Carbones del Cerrejón, and specifically its president, Guillermo Fonseca, has been misinforming by stating that if the precautionary measures requested in the legal action are resolved, this will mean the immediate and total closure of the coal mine, as well as the mass dismissal of workers. This false information circulating in the department of La Guajira through press releases and paid advertising in various media outlets has resulted in direct accusations against the plaintiffs and surrounding communities, and a false sense of economic and social panic in the region.
125. “Faced with this, we believe that the only way to prevent an increase in the criminalisation of and threats to leaders and to stop the panic generated is through a public retraction of the president’s statement and his immediate resignation.
126. “Finally, given the recent fluctuations in the global coal market and the requirements that states must meet for the implementation of the Paris agreement, and in light of the planetary and civilisational crisis that fossil fuel use has generated for all of humanity, on what grounds do you base your plans to continue exploiting coal in Colombia?”
127. Ken MacKenzie said that he wished to inform shareholders about BHP’s participation in the Cerrejón mine. “This is another of those non-operated joint ventures, we only have a 33%, we are shareholders, and the other shareholders are Glencore and Anglo American which also own 33.3% each. So, our involvement here is as a shareholder. This is managed as a joint venture and you have been introduced to Brian Quinn [BHP’s President of Non-Operated Joint Ventures] here today, and therefore it is through this team that we seek to influence Cerrejón, but it is important to recognise that Cerrejón is an independent company and is operated through its own management team and it is pursuing its own standards and it is not controlled by BHP, so it is also important to know that Cerrejón is and has always been operating in a very complex environment and challenges are significant, we have to acknowledge that. I hope I have answered your questions.”
128. Andrew Mackenzie added that BHP encourages Cerrejón to comply with all legal requirements, “and we will support any additional participation that is required from the communities, but I have to add as a caveat that we are a minority shareholder. We cannot order that, this is an independent joint venture where we have a minority share.”
129. On the Arroyo Bruno, Andrew Mackenzie said: “There is controversy on what created the loss of the flow of water. For example, deforestation at the top has been a massive contribution to this. I have been there and seen the diversion myself and it seems to have been done in an environmental complying way, and it may have not been the cause of changing the levels of water. Again we will encourage Cerrejón to try to understand the causes of the loss of flow and to see what Cerrejón might do. But if part of the stream is outside of the area of Cerrejón there may be limitations to what they can do. But I think the diversion has been well done, and it is my sense that there is a number of factors that are affecting the flow, rather than the diversion itself.”
130. This was the end of general questions, but more was to come – a whole discussion was to be had on resolutions calling on the company to avoid involvement in industry associations which did not share its policy on climate change. But London Mining Network and friends left the meeting, and one of our Latin American friends said that the experience of being inside the AGM had felt like being in a fight between a tethered donkey and a tiger.