BHP joins Rio in keeping close watch on lithium

The Big Australian’s new chief admits to reviewing the battery metal’s potential “on a regular basis”...

21st February 2020

Barry FitzGerald

BHP’s posturing that it stands to benefit from the world’s great decarbonisation event – the electric vehicle and renewable energy storage revolution – through its electrification and battery metals exposures of copper and nickel is well known.

It likes to call the exposures its “future-facing” commodities and it has just declared an appetite for more copper and nickel resource positions through exploration and early-stage entry into projects owned by others.

What is not so well known is that securing a position in lithium is part of its consideration. That in itself gives the (currently) beaten up lithium ASX-sector something to cheer about.

BHP’s newbie CEO Mike Henry was asked about the company’s future-facing options at Tuesday’s briefing on its iron ore-underpinned interim profit, which was up 39% to a handy $5.18 billion ($A7.8b).

More specifically, the question was around if there were actual opportunities for a company of BHP’s scale in the battery metals beyond copper and nickel, given it has a preference for the things it does to “move the needle”.

Henry said cobalt was essentially a by-product and was “too small an industry and would not be of the scale that we would looking to from a BHP perspective”.

He went on to say that BHP had concluded the same thing about lithium. But he added that it was a commodity in transition.

“At this point we look at it and say it has a relatively flat cost curve, so we don’t see any opportunity to extract rent. But we can never say never. We will (continue to) review that, and other commodities on a regular basis”.

So there it is. The world’s biggest miner is keeping its eye on lithium, just as Rio Tinto is through its potential development of the Jadar lithium-borate project in Serbia.

Given both of them have probably missed the boat, it does not really matter if they get into lithium or not.

What is more important here is that there is an acknowledgement from the world’s biggest miners that lithium is a market they might need to be part of as demand and potential returns form “future facing” commodities start to leave the likes of coal and iron ore in the shade.

That’s got to be heartening for the ASX-listed lithium producers and developers which were hit hard last year when China removed subsidies for EV’s at a time of clear over supply of lithium ahead of the coming crank up in global EV production.

BHP’s central case is that come 2025, EVs will account for close to 9% of global sales of light vehicles, up from 2.4% last year. By 2035, EVs could have a 30% share. It’s no wonder that BHP has lithium under watch.