Thank you. Please take your seats, and we'll kick off the next session. My name's James Redfern, working in the Metals and Mining team at the Bank of America in Sydney. Joined on stage by Jason Fairclough, who everyone knows as head of EMEA Metals and Mining. And our next speaker, sorry, our next company is BHP Group, world's largest mining company, as you know. Presenting from BHP, we have CEO Mike Henry. Mike Henry joined BHP in 2003 and was appointed CEO in January 2020. Prior to being appointed CEO of BHP, Mike was head of Minerals Australia and has over 30 years' career experience in the resources industry. Mike's going to be presenting for around about 15 minutes or so, and then we will have time for Q&A. Thanks, Mike. Look forward to your presentation.
Thank you, James. To Bank of America, we'll likely say, "Never a dull day." Obviously, lots going on now. I know there's going to be a ton of interest in the audience about the proposal that BHP has put forward to combine with Anglo American. I do promise to talk briefly about it. But one of the things I love about coming to this conference every year is that it's an opportunity for us to rebaseline all of you on the great progress that BHP is making on its very clear existing strategy. That's actually going to be the main topic of my discussion today, because at the end of the day, it is the most significant and most certain avenue for us to continue to grow shareholder value.
Not only is the company performing well, but we are so much better placed, so much better placed than we were even just a few years ago when it comes to growth, including in the future-facing commodities. Now, in some ways, we reflect or embody the theme of this conference, which is, "The future is now." The strategy that we set out a few years back, back in 2000, and which we've been executing consistently against, was all about positioning BHP even better to capitalize on the global megatrends unfolding around us: population growth, urbanization, rising living standards, and the energy transition.
What we said then was that we aim to be known for our operational excellence and our disciplined approach to capital allocation. We wanted to create a distinctive approach to social value, recognizing the importance of this in an increasingly fast-paced, uncertain, and volatile world.
We were intent on protecting and growing shareholder value through ensuring that we increase the leverage in the BHP portfolio and the growth options in future-facing commodities that stood to benefit greatest from the megatrends. We are continuing to make great progress against this strategy. Now, our track record is one of discipline and consistency, and that's even on the hard stuff. In the past few years, we've reshaped our portfolio for the future. We've sanctioned the first two stages of the Jansen Potash Project, and BHP will be a major global producer of potash, a very attractive commodity in industry by the end of the decade.
We've acquired OZ Minerals, consolidating the largest combined copper mineral resource in Australia. We merged our petroleum business with Woodside and then spun out our share of the combined business to shareholders, providing value and choice.
We've simplified our metallurgical coal portfolio to focus on the higher quality coals and operations that stand to benefit greatest in a faster decarbonizing world. We unified our dual-listed company structure. In doing so, we removed a 10%-20% discount on the 40% of the company that was primarily listed in London. It's made us simpler and leaner. Now, as flagged at the time, it's also made it more practical for BHP to pursue scrip-based acquisitions, as we're now doing with our proposal for Anglo American. We've increased our greenfields exploration effort, and we've had some early successes.
We've secured toehold positions and potentially significant new resources. We've progressed organic options within our existing large, highly attractive resources. We've done all of this in the past four years. Now, our mix of assets and commodities positioned us well for today and into the future.
We have the right people and systems in place to operate them excellently. We also have a clear approach to how we engage others and those around us in social value creation, which is an essential part of us being a trusted partner through creating long-term mutual benefits for all our stakeholders, as well as our shareholders. Now, continued successful execution of our strategic priorities is delivering strong results. However, in spite of the very significant progress we've made already, there's much more to come. Now, let me take you through a few examples of what we are focused on. Our focus on operational excellence is most clearly evidenced in our Western Australian Iron Ore business, and this is a business that is most directly comparable to others.
Over the years, we've undertaken productivity improvements and capital-efficient investment to grow production from a nameplate capacity of 240 million tons per annum, and that was first achieved in 2015, to around 285 million tons today. We expect that to increase to more than 305 million tons over the medium term at very low capital intensity. We also have studies underway on options to grow up to 330 million tons longer term, and this will also be more capital-efficient than greenfield developments. Our focus on operational excellence, supported by our asset configuration with large mines and fewer processing hubs, has enabled us to establish industry-leading performance.
And for the last four years, and consistent with the strategy that we set out in 2020, Western Australia Iron Ore has been the lowest-cost major iron ore producer in the world. In fact, in an inflationary environment, we've been extending our lead.
We're consistently generating greater free cash flow per ton than our competitors. This supports shareholder returns for all of you, as well as reinvestment and value-adding growth guided by our capital allocation framework. Western Australia Iron Ore and the performance that we've managed to achieve there is a source of pride for everybody at BHP. We remain focused, of course, on further improving both safety and productivity, so there's more to come. Western Australia Iron Ore will continue to deliver significant value for decades. Now, while iron ore has been part of the BHP portfolio for decades, we are excited to be entering a new commodity, potash, with potassium being an essential nutrient for plant growth and more sustainable agricultural production.
Now, to illustrate the attractiveness of this business, I would note that we announced sanctioning Jansen stage one on the same day that we announced our exit from petroleum. If and when all four stages of Jansen are sanctioned and built, that business is expected to generate materially more EBITDA than our former petroleum business did. And unlike petroleum, it's a business that isn't going to be on an intense capital treadmill. It's iron ore-like in that it has that it's a large resource.
And it has relatively low sustaining capital needs. And because of its size and relatively low sustaining capital needs, it will support materially higher free cash flow than what we had with petroleum, meaning more net cash contribution to the group for reinvestment or return to shareholders. So Jansen is more akin to WAIO.
It's a bulk commodity, low-cost position, high margin, long life, with expansion potential. Potash is a future-facing commodity with long-term demand growth expected over decades. It's going to be increasingly required for agricultural use as growing populations seek more and better food production from constrained arable land. The market opportunity here is significant, and we already have MOUs in place with buyers around the world to cover sales as Jansen ramps up. Now, it is obviously a very significant project in terms of size and scope.
Our focus on operational excellence and capital projects execution discipline means that we are on track budget-wise and actually ahead of planned schedule. There is a graph on a slide that I'm going to present, the next slide, in fact, that shows our relative performance when it comes to executing major capital projects. Jansen stage one is now 44% complete.
Stage two will double planned production capacity, creating one of the world's largest potash mines. It will deliver better returns with sizable synergies, and it's going to position BHP among the leading players in the global potash industry. Our focus on technology and modern approach to mining and processing is expected to deliver industry-leading efficiencies, placing Jansen towards the bottom end of the global cost curve. So in short, Jansen is a world-class asset. It's in an investment-friendly jurisdiction and expected to generate cash at all points in the cycle.
The other main future-facing commodity growth focus for us, of course, as we announced a few years ago, is copper. And the world, as I'm sure all of you would agree, is going to need to produce a lot more copper over the coming decades to meet the significant demand growth from both traditional sources and the energy transition.
BHP is well placed to help meet this demand. We already have the world's largest copper endowment, with a strong pipeline of organic opportunities being progressed, which we're excited about. We're progressing options at Copper South Australia, where our aspiration is to grow copper production to at least beyond 500,000 tons per year. Given the gold, silver, and uranium co-products, this is equivalent to over 700,000 tons per annum copper equivalent, 100% BHP. At Escondida, we're progressing a variety of options across multiple timeframes, including expansions at existing concentrators, a new concentrator to replace Los Colorados, and leaching technologies to unlock latent capacity. We, of course, continue to build our pipeline of options through multiple other levers. We're much better placed today than we were just a few years ago in terms of our copper growth optionality.
Our strong balance sheet and the consistent cash flows provided by our diversified portfolio mean that we're well placed to fund and progress the projects when they're ready. And when we do, we deliver to plan. Our projects have typically come in on time and on budget, a track record that stacks up very well against our competitors. Operational excellence, capital allocation discipline, world-leading iron ore business, exciting pipeline of potash growth already underway, largest copper endowment, and increasingly rich option set, BHP is in a great position today for the coming decades.
Now, turning to the topic that I know many are interested in, our proposal for Anglo American. Consistent with BHP's strategy and supported by our recent track record of high performance, and as I said, that's driven by operational excellence and disciplined capital project execution, we're pursuing a proposed combination of BHP and Anglo.
Now, stating the obvious, we are disappointed that Anglo have chosen not to engage with our offer to create value. There are things to admire about Anglo. They have some great assets and people. We happen to believe that there's more that can be unlocked through our proposal. It's a unique and compelling opportunity to unlock significant synergies through bringing together our two highly complementary world-class businesses. And as shareholders know, opportunities don't come along like this for shareholders that often in the resources sector. The proposal is consistent with our simple strategy.
BHP starts with a leading portfolio of assets in copper, potash, iron ore, and met coal, commodities that are all positively leveraged to the global megatrends unfolding around us. This portfolio would be made even stronger through the proposed combination. And BHP's track record of operational excellence would maximize returns for every dollar invested in this business.
The combined business would have the capabilities, cash flows, and balance sheet strength to bring on growth in a way that maximizes value and returns. We think it would take an already great story and make it even more exciting as we look to unlock a win-win situation for both sets of shareholders. Now, I'm not going to make any specific comments about the Anglo plan announced this morning, in part because I realize it's ultimately for shareholders to judge what they've heard. They will need to consider how confident they are in the delivery of value from that plan, their timetable, and the execution risk. What I can say is that I am wholly confident in the merits of our proposal, how it crystallizes value through a premium and shared synergies over time.
It builds upon our track record of delivering value and simplification that both sets of shareholders would benefit from. Together, these businesses would be more than the sum of their parts with asset bases in copper, iron ore, and met coal that are uniquely complementary. These are high-quality assets in jurisdictions that we know well. The overlapping geography and commodity exposure of BHP and Anglo gives us confidence in our ability to continue operating these assets to a high standard and to deliver incremental value for all stakeholders. Both BHP and Anglo have attractive growth options.
With the benefit of BHP's capabilities, significant cash flows, and balance sheet strength, the combined business would have the financial capacity to advance these value-adding growth options. Now, in addition to enhancing our global leading portfolio of assets and growth options, the combination has the potential to unlock meaningful and, in many cases, differentiated synergies.
In short, the combined company would have an exceptional portfolio of world-class assets focused on future-facing commodities and higher-quality steelmaking raw materials. It would create meaningful synergies and have an enviable growth pipeline and the financial capacity to advance them. We believe that both sets of shareholders would stand to gain from the very clear proposal and plan that we tabled to Anglo. All shareholders would be able to participate in a pretty exciting story. However, I also have to note that I've always been clear. Our existing resource base and our multifaceted approach to how we go about building future shareholder value means that BHP is never dependent on acquisitions, and that remains the case. We have a very, very hard-won reputation for discipline when it comes to capital allocation, and we do not take that lightly.
This combination is consistent with BHP's focus on long-term fundamental value in our capital allocation framework. We will remain disciplined, and we've demonstrated that in previous endeavors. Just to bring things to a close, I do want to bring it back to BHP. Our existing asset base, our growth options, and our operational excellence will ensure we can continue to deliver very attractive shareholder value and returns in all circumstances.
For a mining company to deliver long-term value, it needs to have exposure to the right commodities, strategic clarity, and excellence in operations and capital allocation. That is the BHP of today. We hold resilient long-term assets with substantial embedded optionality, which means we can make smart choices about how we unlock these to grow and maximize value. We operate our assets exceptionally well.
Over the past decade, BHP's margin has averaged 55%, over 10 percentage points higher than the average of the next closest major competitor. Together with our disciplined approach to capital allocation, it's clear that BHP deserves its premium valuation versus competitors through the cycle. That makes us the go-to investment for those seeking long-term value in the mining sector. We will continue to execute the clear strategy that we've laid out. The theme of this conference is the future of now, and for BHP, I have to say the future could really not be more exciting. Thank you, James.
Thanks, Mike, for your presentation. So I guess I've got one question just to kick things off before we throw the audience. It's been a busy 24 hours. Anglo rejected the revised bid from BHP, and then Anglo announced a restructure, which we've all just heard about. So I guess my question is, what does Anglo's restructure mean for BHP's interest and approach for Anglo?
Well, look, James, as I kind of alluded to in my speech, we believe that the proposal that we have on the table is quite compelling. At the end of the day, it's a 50% premium to the unlisted assets and the implied value of them pre our offer, 37% premium to the median broker NAV for those assets pre the offer. At the end of the day, it's going to be up to shareholders. They've got to look at the respective plans, decide which one they believe is going to create the greatest value soonest.
And they have to make a determination as to the likelihood of execution of those plans, including which team they believe is more capable and has a better track record of execution. It's that simple. So the Anglo plan doesn't have a direct bearing other than it perhaps gives shareholders greater clarity about the choice that they have ahead of them.
Okay, thank you. Any questions from the audience? Yeah. One right here.
Hi there. Thank you very much for the presentation, Mike. It's Patrick Mann from Bank of America. You said BHP's already got the largest copper endowment globally. How big do you think you can grow in copper before it became an issue from a market concentration perspective? Thanks.
So I mean, you have to keep in mind that even with this proposal so first of all, the copper industry is highly fragmented, as I'm sure everybody here in the audience knows. Even with the combination of Anglo and BHP, it's 10% or sub-10% of overall copper supply, something like 11 mines out of 207 or 280 mines globally.
So that gives you some sense for where this proposal would lead us. Now, that's a slightly different question to what do we do with the copper endowment or copper resource endowment that we have? The world wants us to bring on more copper more quickly. That's what the world needs. And so part of the case that we're bringing forward here is that BHP has not only the financial strength to do so on the balance sheet and the consistency of cash flows over time, we have a strong track record when it comes to operational discipline or operational excellence, strong track record of project execution discipline, and discipline when it comes to capital allocation. Bringing all of those things together, we believe, unlocks more value over time, both for shareholders and for the world.
Any other questions from the floor? One right there. Thank you.
Hi there. Great presentation. Thanks very much for it. Just when we think about the offer that's been put forward, it seems to me, as I'm probably many folks would agree, that the precondition to distribute and spatially dispose of the Kumba and Amplats holdings is going to make things a little difficult to move it forward. I just wonder if you can comment on whether there's an iteration that perhaps puts that after the fact and makes it easier for shareholders to kind of compare the two paths forward.
Okay, so I'm going to preface everything I'm about to say by saying this is where the U.K. Takeover Code kicks in, and I'm really constrained in what I can say about the offer per se or our thinking around it.
But I would say that what we're proposing here, and I know it's been referred to as a novel approach and so on, this isn't novel BHP thinking. Shareholders were calling for it previously, brokers have called for it, it's included in our proposal, and you see some variant on it today in the alternative plan. So we actually believe that this is wholly executable. In terms of spinouts, we have previously spun South32, our petroleum business. Anglo themselves have spun Thungela, Mondi, Anglo Gold.
So the path towards spinning businesses out is relatively clear, and there's a long track record of being able to do that successfully. Now, one of the things that's been quite disappointing, of course, is that our strong preference was to be able to hold these discussions with Anglo in private. Rather unfortunately, it got leaked.
On the back of that leak, then people kind of came up with views as to what was driving the proposed BHP structure. Quite incorrect views in terms of some of the initial reporting. The first thing I did was jumped on a plane, went to South Africa so I'd engage with South African stakeholders to put forward that this has nothing to do with a BHP view on South Africa, zero. It has everything to do with BHP's strategic clarity and our discipline when it comes to sticking to strategy. We have said for decades, platinum is not a commodity for BHP. When it comes to iron ore, I've been clear, iron ore is not a commodity that we're looking at for major growth. We'll look for incremental growth, low capital investment, and so on in the existing business.
But it's not a business that we see as being one of the core growth pillars for us going forward. And so when we look at the South African asset, in particular where there's no synergies in terms of existing BHP businesses, it was clear that you've got a ready-made solution here, given that these two companies are listed. The pretty clear and better approach from our perspective was to spin these two businesses out, and then BHP is offering a very significant premium for the currently unlisted assets.
Now, what we see today is some variant on the approach that we've brought forward, which involves spinning out one of the assets, which I think is a pretty clear indicator that it is doable. And that any concerns around flowback and so on and so forth is all manageable, which is what we've been saying from day one.
So we continue to believe that our proposal is pretty compelling. You have all seen us do stuff that some people might have deemed to be a little bit hard or a little bit complex, but we've successfully executed it. And so what we're bringing forward here is a clear plan with a track record of disciplined and successful execution that, coupled with the premium, we think makes for a pretty compelling proposition.
Any other questions from the floor? Maybe I'll just I think we've got time for one more here, Mike. And in a way, I think I asked you this question last year, so let me ask you again. Since you took over at BHP, you do seem to have been executing to a plan, right?
So you collapse the DLC, you merge the oil assets with Woodside, you distributed the Woodside shares to shareholders, you've approved two stages of Jansen, you completed the acquisition of OZ Minerals. Now you're approaching Anglo American. So this is, for me, as a guy who's looked at BHP for a long time, this is a much more nimble BHP than we're used to. So I guess where are we in terms of the endgame? Are you getting close?
Well, now I've got to think about what I said last year, Jason, but look, there really is no endgame. And what I mean by no endgame is shareholders have a right to expect that I and the team show up every single day looking for how we can go about creating and unlocking more value for shareholders.
Today, we believe that there's an opportunity ahead of us to create value not only for BHP shareholders, but also for Anglo shareholders in the proposal for Anglo. But there's a whole bunch of other things that we're doing today within our existing assets and businesses when it comes to operational excellence, progressing organic options, greenfields exploration, some of these smaller early-stage entry plays that we have, it's all geared towards creating more shareholder value.
And so if there's one thing that I would want everyone to look at, it's four years plus, keeping in mind that we were building upon momentum that was created previously of finding new ways to unlock more value for shareholders. That will continue. So it's not master plan and this is it. This is the initiative that we believe is highly attractive for both sets of shareholders today. There will be other things that we do by way of unlocking more value from existing resources in the coming years.
Yeah. Do we have time for one more? Probably squeeze one more. Just a quick one, one more, Mike. Just returning to the Anglo proposal, maybe if you could please make some brief comments about how you're seeing synergies between BHP and Anglo in terms of the merge group.
So again, it's one of those things where I've been cautioned 15 times about what I can't say under the UK Takeover Code and it's specifically associated with the numbers. What I can talk about is thematically, where do we see the synergies? First of all, high degree of geographic overlap between their copper assets, met coal assets, and Brazilian iron ore.
As a result of that, the opportunity to remove duplication at kind of the Top Co level and then regionally is kind of one of the synergies on offer. There's opportunities to deploy best practices and capabilities from both organizations. I will use by way of one example, the BHP Operating System. Our discipline when it comes to capital projects execution, applying those into the Anglo portfolio, we believe will unlock more value from existing assets. There's synergies on offer, we believe, in procurement and marketing.
Some operational synergies, if you look at one example being the coking coal assets in Queensland, which are contiguous with the BMA assets. Multifaceted. I would also point to our recent experience with OZ Minerals. This isn't all theoretical or just a plan. We've executed this before. Different scale, obviously, but similar pursuit of multiple synergies.
Achieve more synergies more quickly than the plan that we had set out because of the very disciplined and urgent way that we go about this. And that would be no different here. And it would be for the benefit of both sets of shareholders. And that is really one point that I want to make is that Anglo shareholders would be assuming they remain with BHP would be participating in such an exciting future story where we'd be taking a great company, making it even better, and unlocking a whole lot of value for shareholders through things like synergies and the overall platform that we'd be continuing to build upon.
Okay, thanks, Mike. Please join me in thanking Mike for his presentation. Thank you.