by Richard Solly, Co-ordinator, London Mining Network
London Mining Network has never undertaken to rate mining companies against each other for their human rights or environmental performance, because we’re concerned that if a company is presented as being better than others it detracts from the struggles of those still suffering as a result of its activities. But I am going to venture to rate BHP’s COVID-constrained 2020 AGM performance against its peer companies Rio Tinto and Anglo American – and it’s bottom of the class.
In April, Rio Tinto held a phone conference for shareholders and proxies (that’s people appointed by a shareholder to represent them in respect of one or more of their shares). It was inadequate and restricted discussion, but at least some representatives of mining-affected communities from around the world were able to phone in and speak. Those who were not able to do so received – after a long delay – written answers to written questions.
In May, Anglo American held a totally closed-doors AGM with the legal minimum number of shareholders, but invited unlimited numbers of written questions. We submitted many questions on behalf of the communities we work with who are affected by Anglo American, and the company published those questions (albeit in a form edited in their own favour) on their website together with their answers (albeit inadequate answers).
BHP, with the most time to get used to the pandemic before its October AGMs in London and Australia, took a long time to announce the dates of its meetings, altered arrangements after it had announced them, and then ensured that, while looking as if it was being open and accountable, it could ensure that the voices of communities affected by its operations would be heard as little as possible.
BHP thus prevented people in communities affected by its operations from participating in its shareholder gatherings while proclaiming its commitment to those same communities.
Its 23 September Shareholder Engagement Session for shareholders in the UK-registered company BHP Group plc really was for shareholders only, not for proxies – so we were unable to enable our friends in BHP-affected communities to attend it. Questions had to be submitted in writing via an online text box, and there was no opportunity to speak. Questions had to be chopped up into 280-character chunks or the text box cut them off. This meant we could not submit the contextual material from the communities explaining why they were asking the question in the first place. And the company used the fact that the few of us at LMN who are shareholders had to submit many questions (because they did not allow us to appoint proxies) to ensure that most of them went unanswered. We published a briefing before the Shareholder Engagement Session to make sure that communities’ concerns would be publicly available.
The UK AGM was held behind closed doors on Thursday 15 October and ordinary shareholders were banned from attending, because of COVID-19 regulations. We were allowed to ‘attend’ the virtual AGM of the Australian entity, BHP Group Limited, at 4pm Melbourne time (7am UK time) on Wednesday 14 October, and were again able to submit questions (in 280 character chunks). But we could not appoint proxies, because we are not shareholders in BHP Group Limited, only in BHP Group plc. Again the company could avoid addressing the vast proportion of our questions (much the same as those submitted on 23 September) as each shareholder was to have a maximum of two questions answered (perfectly fair on the face of it, except that it disenfranchises the mining-affected communities on whose behalf we submitted our questions). And unlike Anglo American, BHP made it clear on its website that it would not publish questions or provide written answers – which is why we have published their few answers (below) and our outstanding questions on our website, because whether BHP addresses them or not, they deserve answers.
So, here is a not-quite-exhaustive account of the 14 October online AGM of BHP Group Limited, with some commentary drawing attention to the company’s inadequate accountability. You can find a webcast of the company’s introductory speeches via the company’s website at https://www.bhp.com/investor-centre/shareholder-information/meetings/ – but no recording of the question and answer session: the company has opted to muzzle its critics as well as reducing mining-affected communities to mute invisibility.
1. BHP company Chair Ken MacKenzie began the meeting by acknowledging the traditional owners of the land on which the AGM was being held, the Wurundjeri people of the Kulin nation, and stating that he wished to pay his respects to their elders past, present and emerging. [This emphasised that the company had just come to an agreement with Aboriginal organisations in Australia, in the wake of the outrage over Rio Tinto’s destruction of the Juukan Gorge Aboriginal site in Western Australia in May, and that this nick-of-time agreement had caused the Australian Council on Corporate Responsibility to withdraw a shareholder resolution calling on BHP to, among other things, commit to a moratorium on undertaking activities that would disturb, destroy or desecrate cultural heritage sites in Australia.]
2. Caroline Cox, Group General Counsel and Company Secretary, then stated that BHP had taken advice from shareholder associations in Australia and the UK over the conduct of this AGM. [Clearly their advice did not include making sure the voices of mining-affected communities would get heard.]
3. She noted that the Australian Council for Corporate Responsibility had withdrawn one of its shareholder resolutions, agenda item 24, because of the agreement the day before between BHP and Aboriginal organisations.
4. Ken MacKenzie said that over the last 3 months, the board had had an unprecedented amount of engagement with shareholders. The past 12 months had demonstrated great uncertainty: in Chile there had been social unrest, in Australia bush fires. COVID-19 has changed our way of life. Most countries except China are in recession. But BHP had performed solidly. [This reminded me of Spike Milligan’s poem, Have a Nice Day, which recounts the woes of a man who is drowning (who drowns) and a man with a disease (who dies) and ends, ‘But apart from that, And a fire in my flat,It’s been a very nice day.‘]
5. Ken MacKenzie noted that Mike Henry had been appointed Chief Executive Officer (CEO) at the beginning of the year. He thanked former CEO Andrew Mackenzie [who, incidentally, was knighted in the recent Queen’s Birthday Honours List, supposedly for services to industry and UK-Australian relations – an honour that may not have been welcomed by the survivors of the 2015 Samarco tailings dam disaster, which happened on Andrew Mackenzie’s watch, or by those suffering as a result of the company’s other current operations.]
6. Ken MacKenzie continued that BHP’s products are essential for the world, providing cleaner power, more efficient transportation, battery storage and more efficient communications. BHP is proud to bring people and resources together to build a better world. [Again, I suspect those suffering from the forced displacements, loss of livelihood, death of elderly relatives from broken hearts when forced to move from rural to semi-urban settings, death of family members and loss of homes in the Samarco dam collapse, death threats from mining advocates, polluted air and water and irretrievably altered local landscapes which have been occasioned by some of BHP’s activities, may have a different perspective on the extent to which it has achieved this apparently noble aim.]
7. Ken MacKenzie said that BHP wants to generate real social value in the communities and countries where it operates. It has invested money to support communities during the pandemic, accelerated payments to small local and indigenous businesses and boosted indigenous employment in Australia and Chile to 6.6% and 6.5% respectively, well above the percentage of indigenous people in the national populations.
8. Relations with traditional owners, he said, are among the most important that BHP has. Recent events have confirmed that. In Australia, BHP has continued its work with traditional owners, most recently with the First Nations Heritage Protection Allliance. It has reinforced its commitment to or Free, Prior Informed Consent (FPIC) and believes that regulatory regimes should reflect this right. Cultural heritage keeping places are to be created to celebrate the unique living cultures with which cultural artefacts are associated. BHP wants to acknowledge the Aboriginal elders and land councils that have engaged with the company.
9. BHP’s approach to social value shows up locally, he said, through support of the communities where it operates but also globally in addressing climate change. It was one of the first companies to set targets for scope 1 and 2 emissions and has invested in low emissions technology. The company knows it has a responsibility to reduce its emissions and help countries and companies to reduce their emissions too. There is no easy route to a low carbon world but BHP is committed to it.
10. BHP CEO Mike Henry said that BHP is steeped in history [indeed – and you can read about some of that history on our Cut and Run report] but not confined by it. It continues to lead, providing resources vital to life around the world. BHP needs to be trusted. Its focus on social value will ensure this, he said. [Truly, I am not sure that it will…] It is on the path to net zero emissions by 2050. The world will continue to need the commodities it produces. The electrification of transport, population growth and rising standards of living will grow the demand for copper, nickel and potash while demand for other commodities declines. On coal, BHP will focus on high quality coking coal and shed other assets. It has increased its investment in oil in the Gulf of Mexico but divested from more mature assets. [I remain impressed by the way BHP openly says it will continue mining coking coal and producing oil and gas while simultaneously talking about how it will save the world from climate change by mining more copper and nickel. It reminds me of a boy I knew when I was growing up who would steal things in plain view of other people and then deny he had done it. Extraordinary. Some of the questions below from shareholders suggest that I am not the only one to find it so.]
Questions from shareholders
11. Shareholders were not able to ask their own questions: we all had to submit them in writing (we had done so a week in advance) and the company chose which ones it would answer, read them out and then answered them to its own satisfaction, if not to ours. There was no opportunity to offer a critique of their answers.
Cost of rehabilitating mines
12. A member of the Australian Shareholders’ Association noted the fact that some of BHP’s Australian mines have been left idle for some years and asked if there is a budget for site rehabilitation. Mike Henry agreed that some assets had been left idle for some years. He said BHP reports closure and rehabilitation costs based on best estimates. In the 2020 report the costs of closure and rehabilitation are included but the company is studying the long term commercial future of these assets and some may be sold. For others, closure and rehabilitation is under way.
Iron ore markets
13. The next question was about how BHP is preparing for competition from the Simandou iron ore mine in Guinea should it be developed. Ken MacKenzie replied that the steel market does not need the extra tonnes of iron ore but the likelihood of Simandou is increasing and BHP must focus on bringing down costs and increasing quality. He said he was pleased that BHP has a diversified portfolio in copper, nickel and potash.
Nickel West project
14. Another shareholder asked about the BHP’s Nickel West project. Why was there a lack of progress and how could it be brought back on track? Ken MacKenzie replied that the project was well positioned as part of the rapidly growing mineral demand in the battery supply chain. Mike Henry added that it was a really good news story, as the asset had been facing closure or divestment a few years ago and the management team had turned it around to replace the pre-existing mines and open new mines, extending the life of mine. The asset was now set up for the future. The future of nickel is very bright, he said.
Petroleum and scope 3 carbon emissions
15. The next questions was why there had been no progress on scope 3 emissions from petroleum. Ken MacKenzie explained that scope 3 emissions are the carbon emissions outside its own operations, from customers or suppliers. He said that BHP recognises the importance of action to reduce emissions in its supply chain. It has set scope 3 goals to help the steel industry bring about 30% reduction in emissions intensity by 2030 in integrated steel making. BHP is also working with the maritime industry to support a 40% reduction in the emissions intensity of its shipping fleet. The majority of BHP’s scope 3 emissions are in steel, he said. In the petroleum sector BHP is a smaller participant in a much larger market.
Oil, gas and climate change
16. Five questions were then taken together on the theme of climate change and BHP’s oil and gas production.
- What is BHP’s expected capital expenditure for the North West Shelf project? Would the asset be stranded under a Paris-aligned future?
- A new Carbon Tracker report this week showed that BHP’s investment are not aligned with the Paris agreement. Why is BHP pursuing high risk gas development against its own stated principles?
- BHP is to spend US$8 billion on oil and gas over the next five years and has not set a scope 3 emissions target for its petroleum division. How can its US$400 million climate investment programme be taken seriously when its oil and gas investment is 20 times as much?
- The Atlantis Phase 3 oil and gas project would produce 30,000 barrels per day, which if consumed would release 6 million tonnes of CO2 equivalent per year, more than cancelling out the company’s peak annual emissions abatement under its scope 1 and 2 commitments. The total emissions from its in-development projects would dwarf its operational emissions reduction elsewhere. Why is BHP continuing to develop these projects?
- Oil and gas company BP has committed to reduce its oil and gas production by 40% over the next ten years. If BHP has a commitment to the Paris agreement, why has it made no commitment to reduce its fossil fuel production in line with the Paris goals?
17. Ken MacKenzie said that to paraphrase the questions, why is BHP continuing to invest in the petroleum business? He said that BHP accepts the science around climate change and supports the Paris agreement goals, but the challenge is to provide access to affordable and reliable energy while reducing emissions. All curent plausible scenarios show that fossil fuels will be part of the global energy mix for decades. The company had spent a lot of time looking at this. It recently published an analysis of its portfolio under a Paris-aligned 1.5 degree scenario and found, as the IPCC had done, that oil and gas are in the energy mix while coal reduces dramatically.
18. Mike Henry added that a 1.5 degree scenario is good for BHP from the perspective both of its values and shareholder value, and the committed is committed to achieving it. [It should be noted that a 1.5 degree rise in average global temperatures is not ‘good’ for the world – it is potentially disastrous, but less disastrous than a higher temperature rise.] In the case of petroleum, even in a decarbonising world, because oil and gas are essential for transport there is the expectation that oil and gas will be around for a while so they are a good place to invest for the next decade or so and BHP would invest in areas where it has particular capabilities and that will provide attractive returns while divesting from assets with a less long life and less upside. BHP’s portfolio, compared to BP, is already diversified. BHP has low emissions intensity for the production of oil and gas and is looking to reduce its scope 3 emissions. The company can help others in the value chain reduce their own emissions.
Olympic Dam copper and uranium mine, South Australia
19. The next question was on why the Olympic Dam mine, which produces copper, was buying in copper products from outside rather than BHP producing and supplying them. Would it not be better to expand the mine and increase production? Ken MacKenzie replied that Olympic Dam is one of the largest underground mines in Australia and has been operating safely for 30 years. It produces gold, copper, silver and uranium oxide. Mike Henry said that BHP’s strategy is to focus on upstream activity so in the case of copper the company prefers just producing copper concentrate as this aligns with its capacities. At Olympic Dam BHP has to process copper all the way through to metal because of the uranium content, but that is as far as it goes – processing metal to wire is someone else’s job, and BHP does not have particular capabilities in it.
BHP’s relationship to Joint Ventures
20. A statement was read from the Local Authority Pension Fund Forum’s Chair Doug McMurdo. Doug McMurdo welcomed the agreement between BHP and Aboriginal organisations about indigenous heritage sites and looked forward to discussions with the board and Aboriginal organisations about how this agreement was working. Referring to Joint Ventures (JVs), Doug McMurdo asked for clarification of the difference between BHP’s former and current Joint Venture models, and how the new model would ensure attention to Environmental, Social and Governance (ESG) matters, especially with regard to the Resolution Copper project in the USA. Ken MacKenzie replied that BHP oversees its participation in non-operated JVs with a dedicated professional team working in the areas of health and safety, environment and corporate affairs. They bring items of concern to the boards of the non-operated JVs. This means that BHP can influence the JV operator through its board, there is a process and structure to support ESG matters being raised, but BHP does not control these non-operated JVs, which have their own boards.
Auditing mines and accounts
21. A member of the Australian Shareholders Association asked about the audit of operations at individual mines and exploration sites. Because BHP is so big and its operations so widespread, a choice about which sites to audit may have to be made. Is this so? What is the procedure for making this choice? Is it a company decision, an auditor decision or a joint decision? How is the decision made in a manner which is not contaminated? Are the auditors steered towards certain mines rather than others? Has the auditor identified any payments which may violate US, UK and other anti-bribery laws?
22. Auditor Tim Wallace from EY auditors answered the question. He said that it is important to note that due to BHP’s dual listed structure the audit reports are in respect of both Australia and the UK. EY’s audit report addresses the requirements of both countries and is more expansive than a report prepared solely under Australian regulations. Scoping is done by EY with no involvement by the company. It is determined in response to EY’s risk assessment. The audit report explains the audit scope and reasons for choices. Regarding governance, section 2 of the BHP annual report is on governance and provides much information. EY’s opinion is provided for the financial reports as a whole rather than an individual risk. From audit perspective, section 12.5 of the EY report explains audit approach to legal requirements and how BHP complies, including over bribery and corruption.
23. The next questioner noted that audit fees had increased in the last year. The increase in fees seemed unjustified. What are the reasons for it? Ken MacKenzie explained that the Risk and Audit Committee reviews fees annually, that the main audit had increased significantly in cost partly because it includes transition costs to the new auditor, but that audit fees for subsidiaries had decreased very significantly and this had partly offset the increase elsewhere, and that the Risk and Audit Committee believes the fees are competitive.
Diversity on the board and in the workforce
24. The next question concerned diversity. When is BHP planning to provide benefits to shareholders by increasing the diversity of its board and senior management? Having a woman in charge increases profits. Ken MacKenzie replied that the company has a goal to achieve gender balance across the company by 2025. Diversity is good business practice. More diverse teams are safer and more productive. The board wants to increase female representation in the company by 3% per annum and is making good progress. After Shriti Vadera steps down from the board after the plc AGM on 15 October, BHP will have 33% women on its board which is line with UK best practice. Diversity not only about gender but skills and nationality and BHP needs to work hard to foster all kinds of diversity.
Samarco tailings dam collapse
25. Two questions about the November 2015 Fundão tailings dam collapse at the Samarco iron ore mine in Brazil, from LMN member Andy Whitmore, were addressed:
- What is the programme of actions that have to be taken to create the conditions for a safe restart of Samarco’s operations?
- What measures has the Renova Foundation taken to complete the reconstruction of the three communities near the Fundão Dam with utmost urgency and what lessons has it learnt from the failure to do this over a period of five years?
26. Ken MacKenzie replied that the Samarco dam failure was a tragedy that should never be forgotten and that BHP remains committed to doing the right thing and supporting Renova in addressing its social and environmental impacts. It is focusing on compensation and resettlement but the COVID-19 pandemic has impacted work on resettlement and environmental remediation. Samarco and its two owners, Vale and BHP, approved the release of 120 million Brazilian reais for purchasing medical and other equipment for the fight against COVID-19.
27. Regarding overall progress, 42 programmes of work were in process, spanning social, environmental and community remediation. 10 billion reais had been spent in compensation and remediation to date and 16 billion were to be spent by the end of 2022. This is around US$4.8 billion dollars to the end of 2022, and BHP’s share of this is 50% as Samarco is a 50/50 JV with Vale. The greatest progress on resettlement is being made in the community of Bento Rodrigues, where new houses and public buildings are under construction along with the provision of infrastructure such as drainage and electricity which is expected to be completed later this year. At Paracatu the first buildings have been started and at Gesteira Renova continues to work with families who have lost their house. Those who lost houses that cannot be rebuilt remain in paid rental accommodation during the reconstruction of their communities.
28. Over 14,000 people are receiving financial assistance, which goes to those who have suffered the most impact to their economic activity. Over 270,000 are receiving compensation for the temporary loss of municipal water supplies. Compensation for other losses is under way and 10,000 families have now received compensation. Recently a new scheme for compensating impacted people was approved by a court and BHP hopes it will speed up compensation. To date 14 local commissions have been established representing 15 territories that have entered the scheme, covering 50-60% of those registered.
29. Environmental remediation is going well. Stabilisation of the river banks is complete. The water quality requirement regarding turbidity has been achieved 12 months ahead of the required deadline and Rio Doce now most monitored river in Brazil, with 92 monitoring points along the river and in the coastal zone, and this confirms the strong recovery trends along the river. A total of 600 million Brazilian reais is being invested in sewage collection and treatment plants and waste disposal in 39 communities along the river. Approximately 80% of raw sewage was previously discharged directly into the river. So overall there has been good progress, not as quick as BHP would like, but the company remains committed to resettlement, compensation and environmental remediation.
30. Mike Henry said that BHP supports Samarco restarting when it is safe and economically viable to do so and when the community wants it. This is one of the best ways to mitigate the social impact of the dam failure. It would create direct employment, employment for those providing services and goods to Samarco, and taxes to the Mariana municipality. In October last year the corrective operational licence was granted but the filtration system has to be completed and this is planned for the end of this December. BHP and Vale will then take a final decision about restarting.
Carbon Capture and Storage
31. The next question concerned BHP’s 1.5 degree scenario analysis, which, said the questioner, includes bold, unproven assumptions about the take-up of Carbon Capture, Usage and Storage (CCUS). Is such widespread usage of CCUS possible? Why was this model chosen rather than a model where fossil fuel use declines more rapidly, requiring less CCUS to meet a 1.5 degree outcome?
32. Ken MacKenzie said that CCUS can be applied to a range of sectors. In most scenario analysis including that of the IPCC it is critical to a 1.5 degree outcome. It is especially important in sectors where it is hard to reduce emissions – they have to be captured instead. Direct capture and other techniques are also important where it is not possible to decarbonise through other means. BHP is focused on catalysing the deployment of Carbon Capture and Storage (CCS). It has set up a US$400 million fund for reducing emissions through technology. There are barriers to adoption affordably in some sectors but BHP has a great deal of CCS in its 1.5 degree scenario.
Reducing carbon emissions
33. A question from the Australian Council for Corporate Responsibility was chosen next. ACCR said that last month BHP had committed to reducing its operational emissions by 30% by 2030 from the 2020 level, but as 2020 emissions were up 8% from the 2017 level, this represented a decrease of only 24% from 2017. Why did BHP use a 2020 baseline rather than a 2017 baseline? Ken MacKenzie replied that 2020 was chosen because it is the year we are in. Using the most recent data is the best approach, he said.
34. The next question was, given that BHP’s 1.5 degree warming outcome presents the best scenario for BHP, why are BHP’s emissions reduction targets aim not aligned with it? Ken MacKenzie said that they were: BHP aims for net zero by 2050 and has a plan for a 30% reduction by 2030. This is aligned with the Paris accord, is planning to spend up to US$4.5 billion on it, and there is a plan to get there.
35. The next question said that there was not enough emphasis on the link between greenhouse gas emissions and performance targets. Ken MacKenzie said that last year BHP committed to clarify and strengthen the link between its climate goals and performance payments. This had been achieved. Climate issues will represent 10% of the cash and deferred remuneration plan. This involves scope 1, 2 and 3 emissions. The modelling BHP has done shows that limiting global average temperature rises to 1.5 degrees is the most valuable scenario for BHP’s portfolio so as shareholders the members of the board are motivated to pursue this aim.
36. The next intervention stated that BHP is a world leader and has some power to determine the rate of transition to a renewable world. BHP should be able to lead for greater ambition on climate. Why not hasten the transition to renewables rather than continuing to invest in oil and gas just because of current expectations of levels of oil and gas required? Trends can be set, not just followed. Ken MacKenzie said that he had already explained why BHP continued to participate in the petroleum sector, but on support for renewables, iron ore, metallurgical coal and copper are all essential for building the infrastructure and energy networks to support renewables. This is why BHP is an essential company for the transition to a low carbon world. To limit temperature rise to 1.5 degrees we will need twice as much steel in the next 30 years as in the last 30 years. Copper production will have to nearly double in the next 30 years compared to the last 30, and nickel a fourfold increase, so BHP is providing the commodities that the world needs to make the energy transition.
37. The next questioner asked, ‘What investigations have been made for the introduction of hydrogen and ammonia as fuels for use in BHP’s processes?’ Mike Henry replied that BHP has set up a hydrogen consortium to study the application of hydrogen in its operations, maybe for use in trucks and other mobile equipment on mine sites. It is more likely that it will move to electrification of its truck fleets rather than the use of hydrogen. In order to achieve a 30% operational carbon emissions reduction by 2030 it needs to get diesel out of its fleet. It does see a possible use of hydrogen for boilers in its operations and has a proposal for green hydrogen use in industrial processes at Nickel West. It is likely to use green hydrogen in some operations and renewable electricity in others, for instance in Chile, where the company aims for 100% renewable energy use, and in its Queensland coal operations, where it aims for 50% renewable energy use.
Mine workers and COVID-19
38. Elizabeth Umlas of IndustriALL global union submitted a question on COVID-19 in the company’s operations: ‘It has come to investors’ attention that a double standard appears to exist in how BHP has handled COVID-19, with adequate responses in Australia and Canada versus its poor handling of the pandemic in Chile Peru and Colombia. Workers at Spence mine in Chile had to implement a 24 hour work stoppage in March to force BHP to take adequate protection measures against COVID-19. Trade unions in Peru, Chile and Colombia have reported rising infections at BHP’s operated and non-operated mines, with labour union Sintracarbon reporting over 300 cases of COVID-19 among workers at Cerrejon mine in Colombia alone and four suspected COVID-19 deaths there, three direct employees and one contractor. BHP commits to upholding the UN Guiding Principles on Business and Human Rights, indicating it endorses the principle of equally respecting human rights in all countries where it operates. How does BHP explain the disjuncture between its handling of the COVID-19 pandemic in industrialised versus lowwer income countries?
39. Mike Henry retorted that BHP has one standard for handling COVID-19 globally. There is no double standard, he said. The reality is that the pandemic has played out differently in different jurisdictions and that has had an impact on the prevalence of COVID-19 in society and that plays out in BHP’s operations. The company ensures it has appropriate social distancing and hygiene, has invested in transport to maintain social distancing and has reduced numbers of people on site (in Chile by 35%) to increase social distancing – and that has economic consequences. It has also provided more medical support. At one point Chile had one of the highest rates of COVID-19 globally and against that backdrop, he said, the work BHP had done had reduced workers’ risk more than otherwise would have been the case.
Exploration in Ecuador
40. One of my own questions was then read out. It was one of several I submitted about exploration in Ecuador. ‘Before mining companies can operate in Ecuador, the Ecuadorian State has to consult with indigenous peoples, and obtain their consent. Can you confirm that such previous consultation has taken place?’
41. Ken MacKenzie replied that in Ecuador the company is engaged in a greenfield exploration project involving low impact preliminary work to see if it can find targets worthy if further exploration. So far this has involved air and water samples and airborne geophysics. It is governed by an exploration management system which enshrines BHP’s standards on consultation. Mike Henry added that deep engagement will be undertaken. Within Ecuador there are people who oppose mining and others who encourage it. The company is doing social mapping, engaging with stakeholders and completing environmental due diligence, and this helps it understand the sensitivities involved and take early proactive action. BHP will only proceed in line with its standards and Ecuador’s support for ILO convention 169, which enshrines indigenous peoples’ right to consultation. [This is sharply different from its very recent commitment in Australia, in response to widespread outrage at Rio Tinto’s destruction of the Juukan Gorge Aboriginal site and noted in Ken MacKenzie’s opening remarks, to honour indigenous peoples’ right to Free Prior and Informed Consent.]
42. A question was asked about whether the company should shift to mining higher quality metallurgical coal and exiting thermal coal. Mike Henry replied that it was doing so, and going one step further – in order for the steel industry to reduce its carbon footprint it will need more of the highest quality hard coking coal, and BHP would divest from lower quality metallurgical coal as well as from thermal coal.
43. Another question was whether BHP is investigating rare earth commodities. Mike Henry said that it is not, because the markets are too small. BHP looks for large, liquid markets and needs to be sure it can secure an attractive position in those markets and get great returns. Rare earths markets are not significant enough for BHP.
Lack of dialogue with international trade unions
44. Glen Mpufane of IndustriALL global union said that even before the pandemic, there had been criticism of BHP for poor labour practices and its refusal to take responsibility at global level for the treatment of its workers. It is the only major mining company that has not established a global dialogue with IndustriALL. Now there criticism has intensified over BHP’s handling of the pandemic in Latin America. As the largest mining company inthe world by market capitalisation and as a compnay that claims to operate with integrity and responsibility will BHP undertake a meaningful dialogue with IndustriALL global union in order to ensure that the highest labour standards are maintained throughout its operations and that challenges posed by the pandemic can be tackled through meaningful social dialogue?
45. Ken MacKenzie said that BHP respects the right of its employees to freedom of association and to choose to be represented by those by whom they wish to be represented including trade unions and industrial associations. The company deals with the unions that represent its people on its sites. [I took it that this meant the answer to Glen’s question was ‘No’.]
Strike at the Cerrejon mine, Colombia
46. A question from a private company, rather than a union or campaigning organisation, concerned Colombian union Sintracarbon, affiliated to IndustriALL. The union has been on strike since 31 August following a breakdown in collective negotiations. The conflict is aggravated by the company’s attempt to unilaterally introduce a new shift system that would reduce the number of jobs by 25% and place tremendous burdens on health, wellbeing and family lives. Cerrejon appears to want to force concessions on the collective agreement in order to cover the compensation costs associated with shedding jobs through the introduction of the ‘death shift’. BHP’s CEO Mike Henry has called on management and workers to work together to make sure operations remain safe and economically viable. However, 30 days into the strike Cerrejon ignores calls from the labour ministry to return to the bargaining table to resolve the dispute and refuses to engage in discussions on the death shift. Will BHP call on Cerrejon to engage in good faith negotiations to resolve these two issues?
47. Ken MacKenzie replied that Cerrejon is a non-operated Joint Venture run by an independent company and management team. BHP has a 33% interest along with Glencore and Anglo American, which also have 33% each. Cerrejon operates a large energy coal mine in the La Guajira region of Colombia. It is important to remember that Cerrejon has always been operating in a very complex environmental environmentally and socio-economically. BHP seeks to influence how Cerrejon operates but is a minority shareholder does not control it. Cerrejon management is responsible, so detailed questions are for them to asnwer. Cerrejon has confirmed that the new roster has been used widely in Colombia and elsewhere in the world and there will be controls in placve before the new roster starts operating BHP as shareholders will monitor the situation through normal processes. [I took it that the answer to this question was also ‘No’, along with a fairly thorough-going denial of responsibility for what happens at an asset of which it owns a massive 33% and over which it therefore exercises enormous influence.]
United Nations Special Rapporteur’s report on Cerrejon
48. A further question noted that UN Special Rapporteur on the environment and human rights, David Boyd, had recently called for mining to be halted at Cerrejon because of its impact on air and water quality in nearby communities. Rather than shirking BHP’s responsibility for these major environmental issues by divesting this asset, would the company’s reputation not be better served by responsibly closing the mine and remediating the site?
49. Ken MacKenzie replied that Cerrejon had expressed concern about what the UN Special Rapporteur had said and that members of the community had indicated that they do not support the Special Rapporteur’s statement. Cerrejon has said they will engage with the Special Rapporteurs and will send a response and keep everyone informed, and BHP welcomes this kind of dialogue. [He did not say that a large proportion of the community in question, that of the Indigenous Reservation of Provincial, has expressed its enthusiastic support for the UN Special Rapporteur’s report.]
Aboriginal sites and the South Flank iron ore project, Western Australia
50. A member of the Australian Shareholders’ Association asked about the impact of Rio Tinto’s Juukan Gorge disaster in Western Australia on BHP’s development of the South Flank iron ore project (also in Western Australia). As there are numerous caves along the range of hills being mined by both companies, what is BHP’s approach to preventing this problem?
51. Ken MacKenzie replied that indigenous peoples are critical partners and stakeholders for its operations globally. The board and management have deep respect for indigenous peoples and their cultures and believe that strong partnerships with them are essential for its business. BHP has made commitments in its indigenous peoples policy statement, indigenous peoples’ strategy, reconciliation action plan and its support of the Uluru Statement from the Heart. The company strongly supports the updating of Australian cultural heritage laws in ways that give proper respect to traditional owners’ views, including Free Prior and Informed Consent and has expressed this in formal submissions to relevant government inquiries in Australia. It has engaged with Aboriginal leaders at local, state and national level, clarified its approach to cultural heritage management and has taken on board feedback from traditional owners. Juukan Gorge was a tragedy, a loss of unique cultural heritage, but it was also a loss of trust and it has had an impact across the industry as a whole. BHP has listened to Aboriginal people, sought to clarify its approach to cultural heritage management, confirmed to traditional owners that it will not act on existing government approvals without further consultation and set up a new body with traditional owners at South Flank, the Banjima, a heritage advisory council of senior elders who will work with BHP on this. At this point there is no change to the schedule at South Flank.
52. Mike Henry added that all this needs to start with internal culture and focus. Senior managers spend time regularly with traditional owner groups, much of it on country, including forming relationships around the camp fire. Over the past year 85% of the BHP workforce in Australia have been through training in Aboriginal and Torres Strait Islander history and culture and this was before Juukan Gorge. When new information comes to light about the significance of a specific site BHP is committed to further consultation with traditional elders about what to do. BHP has worked with Banjima elders to form a heritage advisory council which will also have senior representation from BHP with us to oversee and inform decisions taken at South Flank.
Water use at the Antamina copper mine, Peru
53. Another of my own questions was read out. ‘Could BHP confirm how many concessions for use of fresh water sources the company has in relation to the Antamina mine in Peru? What criteria are used to determine the use of rainwater and its consequences for local streams and aquifers?’
54. Ken Mackenzie said that Antamina is a non-operated Joint Venture. BHP owns 33.75%. The other owners are Glencore, Teck and Mitsubishi. It commenced production in 2001 and it produces copper zinc and silver. Mike Henry added that 100% of water comes from rain water from the main collection system. In the production plant, 99% of the water used is recycled water pumped in from the tailings ponds. Since 2013 Antamina has maintained only 2 water use licences, one for surface water and the other for ground water. The local management has a strong focus on continuous improvement that optimises its use of water and there is a focus on reduction of water use over time.
A gas-led recovery in Australia?
55. Two questions followed about gas. Does BHP consider it a low emission energy source? Does BHP support Australia’s so-called ‘gas-led recovery’? How do tax payer subsidies for the development of multiple new gas basins reconcile with BHP’s support for the Paris agreement?
56. Ken MacKenzie said that fossil fuels play a role in all of the IPCC’s 1.5 degree scenarios. [The IPCC is the United Nations’ International Panel on Climate Change.] The share of primary energy from coal decreases from between 90 and 100% in all of them. The share of oil declines differently in different scenarios between 10 and 90%. The share of gas varies in different IPCC scenarios. BHP has set a goal of 30% reductions by 2030 and 100% by 2050, but the challenge is how to get to the Paris goals. That is why BHP has targets, a climate investment programme, a plan, a pathway, why it has linked all its targets on climate to the incentive pay of its management team. Scenario analysis shows that the more the world decarbonises, the more valuable BHP’s portfolio becomes. Mike Henry added that BHP supprtes the effort under way by the government of Australia to ensure an adequate economic recovery. Part of that involves opening up more gas to ensure there is adequate reliable affordable energy while reducing emissions intensity compared to the current mix. The government is also investing in Cardon Capture and Storage as well. BHP is supportiuve of the totality of what is being done to restart the economy and ensure reductions in emissions over time in line with the Paris agreement. the w need to ensure more gas supply to ensure energy with reducing emissions. BHP is purchasing more renewable energy for its Queensland and Chilean operations.
Dust pollution at Port Hedland, Western Australia
57. The next question concerned dust pollution associated with the iron ore export port at Port Hedland, Western Australia. What was the specific date that the first BHP person became aware of a potential problem with the quality of data collected from the dust pollution monitor at Taplin Street in Port Hedland? The Western Australian state government’s environmental licencing body, the Department of Water and Environmental Regulation has asserted that based on discussions this was known to the Port Hedland Industries Council and to BHP as a member of this Council as early as April 2018. What was the date on which that first BHP person became aware of the potential issue?
58. Mike Henry replied that he did not know the exact date. For some time BHP had been raising the issue that the Taplin Street monitor might not be accurate. BHP was advocating to the industry council that the veracity of the data be checked. A process was undertaken to audit the accuracy of the monitor and assurances were provided to BHP that it was accurate. At the end of 2019 BHP sourced another monitor to set up beside it and through this secondary check it was shown in January or February of this year that the first monitor was not accurate. This was because of BHP’s persistence in seeking verification and then providing secondary monitoring.
Tailings dam safety
59. The next question referred to the Samarco tailings dam collapse again. What action had the company taken to identify similar potential problems in any other areas of its current and future operations?
60. Ken MacKenzie said that BHP had taken a number of important steps since the Samarco disaster in 2015. Dam safety reviews were completed following the guidelines recommended by the Canadian Dam Association, the most rigorous in the industry. They were completed for all active, inactive and closed tailings storage facilities across BHP’s business. No significant deficiencies were found in the stability of BHP’s dams but there were opportunities for improvement around the design, construction and operation of the dams and 400 individual action items were identified of which 98% have been completed and 2% are in process. BHP also established a tailings storage facility task force, accountable for further enhancing focus on tailings including leading BHP’s ongoing participation in the setting of new international standards. This relates to the Global Tailings Review co-convened by the International Council on Mining and Metals, the United Nations Environmental Programme and Principles of Responsible Investing (PRI). BHP continues to be involved in the development of a new global industry standard and supports the independence and transparency of the review process. BHP is now focused on implementation.
Executive pay and incentives
61. A question followed about the link between executive pay, carbon emissions reduction and how to avoid ‘greenwashing’ to justify incentive payments. The answer was that emissions reduction targets are absolute so executives cannot cheat and have to work harder.
62. Another question suggested that so-called ‘long-term’ incentives are short in comparison with the life of a mine, perhaps 50 years. The answer was that relative shareholder returns are measured over a five year period, which is longer than most other companies. Although it is not long in comparison with mine life, the tenure of an officer is also not 50 years, so using a period of 5 years is good practice.
Ken MacKenzie, Barrenjoey and a possible conflict of interest
63. Regarding re-election of directors, a question was asked whether there was a conflict of interest in Ken MacKenzie accepting a role as advisor to Australian business advice company Barrenjoey. Shriti Vadera, retiring senior independent director, replied that it is directors’ responsibility to approve external appointments by the Chair and that the board had approved on the condition that BHP remains the Chair’s number 1 priority at all times, that the new position is part time, that Barrenjoey will not advise BHP and that the Chair will not advise BHP competitors. The BHP board will review the arrangement formally on an annual basis. Shriti Vadera said she had complete confidence that this would not interfere with Ken MacKenzie’s work as Chair of BHP.
Membership of industry associations
64. There was brief discussion of the shareholder resolutions on membership of industry associations which lobby on policies opposed to BHP’s own positions on climate change. Ken MacKenzie said that BHP had recently announced changes to its approach to industry associations following extensive engagement with investors and others. This would provide greater clarity on policy positions in industry association advocacy. BHP would monitor policy advocacy and how they associations about it. Investor organisation Climate Action 100 Plus has welcomed this as has the Australian Council of Superannuation Investors. BHP has mapped advocacy against its policy positions and published this and is working with associations to close any gaps or exit. The new reforms are expected to be fully implemented by the end of this year. Regarding the Queensland Resource Council (QRC), BHP suspended its membership last week following QRC’s decision to target the standing of one party [the Green Party] in the Queensland election. BHP had told QRC of its opposition to this advertising approach. BHP supports communications campaigns focusing on policies and on people who rely on the industry but not targeting the overall standing of particular political parties. BHP does an industry association review each year, identifies gaps in policy and works to close those gaps, and the new policy will do this in real time. [I have no idea what unreal time is. If by ‘in real time’ people mean ‘immediately’ or ‘quickly’ or ‘at the same time’, I wish they would say so.]
65. Mike Henry added that BHP is not a participant on the board of the New South Wales Minerals Council, whose campaign was broader and more positive, but BHP’s involvement is under review and BHP has made its position clear through its suspension of membership of QRC because of campaigning on parties rather than policies. BHP needs clear standards in industry associations and will monitor them and back this up with engagement with associations. BHP has published climate policies and this will provide transparency about what standards it expects industry associations to meet. BHP has asked industry associations to develop annual advocacy plans. These will be monitored in the light of BHP’s positions and advocacy done in real time [more of that…] and if something is not aligned with BHP’s expectations then there would be direct engagement to understand what has happened and seek to resolve it, and if it were not resolved BHP would withdraw from that association.