The head of diversified miner BHP, Mike Henry, has highlighted the massive investment required in the resources sector to meet global decarbonising efforts.
Speaking at the Bank of America 2023 Global Metals, Mining & Steel Conference, in Barcelona, Henry said that based on the company’s estimates of a plausible upside case of a 1.5o scenario, the industry could require around a quarter of a trillion dollars in growth capital by the end of the decade, or $250-billion over the next six or seven years.
“And yet currently committed projects over this period only amount to around $40-billion or $50-billion, so a significant shortfall,” he said.
He noted that BHP had projected in its 1.5o scenario that the world would require nearly twice as much steel, twice as much mined copper, twice as much potash fertiliser and four times as much primary nickel over the next 30 years, as the past 30.
Henry pointed to other scenarios from organisations such as the UN’s Intergovernmental Panel on Climate Change and the International Energy Agency which all confirm that a significant uplift in the supply of metals would be needed for a successful energy transition.
“The questions are, where is this supply going to come from, will it arrive on time and what’s it going to cost?
“We take copper as an example. As we sit here today, there is simply not enough capital being deployed in the industry to meet expected demand.”
Henry told delegates that, ultimately, higher prices would induce further investment and more supply, but noted that this would take time.
“Governments have within their control the levers needed to accelerate the pace with which fresh supply is brought on and to ensure it is as economic as possible.
“They can make permitting processes clearer, faster and more certain. Importantly, they must also maintain stable fiscal settings. Otherwise investment risk increases, required returns increase, projects take longer to come on, if at all, and supply becomes more costly,” Henry said.