BHP Billiton : Mike Henry address to the IMARC Gala Dinner

10 November 2016, 09:00 PM

Mike Henry, President Operations, Minerals Australia
IMARC Gala Dinner
Melbourne, 9 November 2016

Good evening ladies and gentlemen and distinguished guests. It is my pleasure to be here tonight at this celebration of our industry and of individual achievement.

I would like to acknowledge the Speaker of the Victorian Legislative Assembly, Telmo Languiller and Parliamentary Secretary for Industry and Employment, Gabrielle Williams and congratulate the Victorian State Government and the IMARC organising committee for again bringing together the resources industry for this 3rd annual conference. Thank you as well to METS Ignited for their headline sponsorship of tonight's Gala.

While still in its infancy, METS Ignited is already playing a really important role, not only in strengthening Australia's position as a global hub for mining innovation, but also in accelerating the innovation that is so critical to the ongoing competiveness of Australian resources producers. I will say more about the importance of the METS sector to companies like BHP Billiton shortly.

It is perhaps fitting that the IMARC conference is held here in Melbourne, given the role that mining has played in making Melbourne one of the world's great cities starting in the mid to late 1800s. Mining didn't just trigger the mass migration that saw Melbourne's population swell, it also underpinned the funding that drove the development of public infrastructure and many of the iconic buildings that remain a feature of the Melbourne skyline today.

And importantly, the mining boom of the time brought with it the need for the equipment and services that were crucial to the finding, extracting and processing of minerals resources. Even today this legacy lives on in the likes of Orica, a supplier to the Victorian goldfields, and Toll, who got their start in coal in Newcastle, both companies established around the same time as BHP Billiton in the late 1800's and who today are both headquartered in Melbourne and continue to play a role in the industry's success.

It's this co-dependency between the miners and the METS sector that is at the heart of what I want to talk about this evening.

The METS sector - including the innovation it fosters - is a vital part of the industry and the success of producers, and in turn a robust production sector supports opportunities for METS companies. Mining needs METS and METS needs mining.

And in turn we play an important role in the well-being of all Australians.

That brings me to the first theme I wanted to discuss, and that is our role in supporting the public's understanding of the industry, including the nature and role of the METS sector.

Ours is a critical relationship that I believe is not all that well understood by many of the public. For the most part, the public narrative about our industry tends to focus on producing companies like BHP Billiton, Rio Tinto and so on. I think that many people also see resources, and certainly mining, as a relatively low tech industry in decline, whose golden days are behind it.

No wonder then that we see waning support for the industry and in some quarters damaging policies being enacted or advocated for. If people can't see that this is an exciting, innovative industry, with a bright future ahead of it, and which plays such an important role in the economy, then why would they be strong supporters of it?

And yet, we need their support. Our ability to prosper and grow, both at home and abroad, depends on the public and those that represent them in government as a third partner in this relationship. Their support and the policies that governments craft are crucial to our collective well-being. If any leg in this tri-partite partnership breaks down, our shared prosperity gets put at risk.

Together, we need to ensure that our industry and the opportunity it continues to present to the nation is well understood by the public and by policy makers.

We need to help them see an industry that reaches well beyond the narrow confines of the companies digging stuff up and getting it on a boat. We need them to see an industry that is technologically advanced and where innovation - a good part of it driven by those in this room - has been such an important part of our ongoing success story.

We need them to understand that:

• Together we are one Australia's largest industries in terms of output and accounts for around 10 % of GDP;
• That not only are there more than 200,000 Australians employed directly in the mining production sector, but there is almost double that figure in the associated METS sector for a total of nearly 600,000 or 6% of the jobs in Australia;
• They need to understand the METS industry here in Australia is worth $90 billion in annual revenue per year;
• That there's a further 20,000 companies supplying the METS sector, with the consequent flow-on benefits of jobs and innovation transmission to other sectors of the economy; and
• That in addition to $158 billion in annual exports from resources companies, or nearly 60% of Australia's total exports, on the back of the business built up here in Australia, METS companies have also become players on the global stage and export $15 billion annually.

Together we are an exciting industry where there is still so much to play for.

You'll be familiar with the narrative about the mining investment boom having come to an end. No doubt investment won't be accelerating at quite the same rate for the foreseeable future, but let's put this in perspective. At BHP Billiton, we have a rich portfolio of opportunities to continue to invest in in coming years. This includes projects like the South Flank mine development in WA Iron Ore, which would provide one third of our production, staged expansion projects at Olympic Dam which could see us more than double production, and the upside we see at our Caval Ridge metallurgical coal mine. We intend to continue to invest strongly, and off the much larger base that has resulted from the $50 billion we invested in the past decade.

Some others will have similar stories to tell. Investment in this industry might not quite reach the highs of a few years ago, but will remain very large, and well higher than almost all other sectors in Australia.

And, off the back of continuing solid business here on the home front, the opportunity remains for Australia to foster even more globally successful companies in the METS sector.

For us to maintain a vibrant industry and capture this bright future though, we need our third partner - government - to maintain stable policy that supports global competitiveness and ongoing investment. That relies on a public that truly understands our industry and what the future holds.

We can't leave it to government to tell our story. It's up to all of us to be out there with the public championing who we are, what we contribute in terms of jobs, investment and innovation, and generally the fantastic opportunity we continue to present to Australia.

Now the second theme that I wanted to speak of tonight is about collaboration between METS sector companies and producing companies like BHP Billiton.

Of course our industry has long embraced technology and innovation to improve productivity and drive efficiency. And today we lead the world when it comes to mining technology and services.

From the Potter-Delprat Flotation Process invented in Broken Hill over century ago, to the drone technology, driverless trucks and automated drills of today - our industry has never shied away from the challenges or opportunities that pave the way for innovation.

But my sense is that we need to find ways of doing that even more effectively. In today's world, we need to be innovating and getting new technologies deployed even more quickly.

At BHP Billiton, the past few years have seen us very strongly focused on becoming more productive. And in some respects we've surprised even ourselves with what we've been able to achieve. However, in large part that has come from doing what we were already doing but just doing it better. No doubt there's still some way to go on that journey, but we are now moving into the territory of diminishing returns when it comes to existing technology and ways of working, and we and the industry will be increasingly reliant upon innovation in technology and services for incremental productivity and for our continued prosperity. This will only be exacerbated as our mines continue to see declining grade, and increasing depth and complexity.

More effective innovation will not only help to sustain the industry here in Australia but it will also help the METS sector here to even more firmly establish itself as the innovation powerhouse for the global mining industry. Wouldn't it be great to see even more Australian METS companies leading the world in their respective fields.

So what does improved collaboration mean? I know that for many of you, the past few years have been challenging when dealing with BHP Billiton and other producers and your experience when it comes to shared interests and collaboration has likely been varied.

I've also heard us sometimes described as a bit transactional and slow to innovate. And this has been even more so in the face of the pressures of the past few years. I know we haven't made it easy for suppliers of equipment and services to us. Of course the reality is that we are in business, and there is always going to be a measure of commercial tension - we owe it to ourselves and our shareholders to drive a hard bargain.

However, while continuing to do so, there's so much more we can and should be doing to work with the METS sector in a way that is good for our METS partners and allows us to become even better at what we do.

Now I should be careful not to paint the current state too negatively! There are already many, many great examples of where collaboration is working well, and has certainly been to the benefit of both parties.

Even just within BHP Billiton we have examples like:

• Working with CAT and Australian firm WesTrac on the deployment of autonomous trucks in our Iron Ore business;
• Our collaboration with IMP Technologies to develop new super fine crushing technologies, through the Mining and Petroleum Services Centre of Excellence, together with the South Australian government.
• Working with RungePincockMinarco to develop an improved version of their planning software. We were the first people to then purchase the software and have been working with them to refine it for the past 3 years. It has since been commercialised and is quite prevalent in open pit coal. Itt is also being used for oil sands mining operations in Canada.
• And in 2015, Dingo Software won the Austmine Innovation Award for METS for a product that was developed in conjunction with BHP Billiton at our Blackwater Mine, and which they have now deployed worldwide.

There are many more examples of where we are working with others in this room in the same way. But we have more to do. We are working to improve our approach and the way we partner. We want to ensure we are able to identify and capture the benefit of innovation in a more systematic way.

That is one of the things that makes the METS-Ignited Living Labs initiative an exciting opportunity that we are looking forward to participating in.

Internal to BHP Billiton, here in Australia we have also launched an initiative that we've called 'Sandpits'. Through Sandpits - akin to a testing or proving ground - we will invite equipment and technology suppliers from within the METS sector to work with us on developing solutions to specific business challenges.

We believe that this approach will help those that we are collaborating with to benefit from improved insight into our operations, improved market intelligence, and better access to data to help customise and develop solutions for the industry. We also know that new technologies mature much faster in the real world than in a lab.

We have established a stronger Technology team within our company and have given Technology innovation greater prominence, including though the appointment of a Chief Technology Officer, Diane Jurgens, who sits at the top table. We have also made it easier for METS companies to engage across BHP Billiton through the consolidation of our Supply Function across all Assets, under Arnoud Balhuizen, who again sits at the top table.

We believe that there's more opportunity to work with our METS partners in a way that helps ensure Australian mining continues to lead the world and for even more Australian METS companies to shine on the world stage through the innovation that is unlocked initially here on the home front.

Conclusion

So to recap, I think there's two things we need to be focused on.

We need to take our collaboration to the next level through not only lots of goodwill but also through the creation and leveraging of the right platforms that foster more rapid and effective innovation of new technologies and new ways of working.

And we need to be all out engaging the public on our story. Who the industry really is, what we contribute in terms of jobs, investment and innovation, the exciting things that we do, and how our work here has helped to make many Australian companies world class and in some instances world beating in their respective fields.

Through working together in a way that keeps us ahead of our global competitors on productivity and through seeing that the public understands and is excited by the opportunity embodied in our work, we can ensure that our fantastic industry continues to flourish and that we spark many new success stories from amongst the likes of those of you here tonight.

Now one final remark. I debated whether to raise the WA tax proposal tonight given that we and others have already been pretty vocal on it. But flying back to Melbourne last night from Perth, I thought to myself I have to, because it is a big deal for not only the likes of BHP Billiton and Rio Tinto, but it's also a big deal for you, or at least it should be.

It is somewhat galling is that the proponent of the tax is using some fundamental mistruths in an attempt to sway public opinion. This notion that we somehow only pay 25 cents for every tonne of iron ore we produce, as Mr. Grylls claims, is just plain wrong - last time I checked we and Rio were paying $19 per tonne on average.

Included in that is a WA iron ore royalty rate that is already four times greater than our biggest competitor, Brazil. We have a hard enough time competing in global markets without this becoming the seven to eight times proposed by Mr. Grylls.

The proposed tax is bad every which way you look at it. At a time when WA needs new investment to get things moving, it will result in fewer jobs and less investment. Most relevant to you, it will also mean less business and work for all of the thousands of businesses and employees who work in the METS. And as I said earlier, for every job in the production sector, there's two in the METS sector.

While WA might feel a long way from us here tonight - the WA Nationals mining tax proposal is relevant to all of us. It is in all our interests to ensure we speak up to ensure it doesn't happen.

It is also in the nation's interest. Mining matters to Australia. We are really good at it and it has generated abundant opportunity and wealth for country and certainly for WA. But we can't take it for granted. It requires stable policy, and that requires a public that knows our industry and is excited by our future.

Thank-you.

All the best for the conference.

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