Good afternoon, everyone, and welcome to BHP Live, our online question and answer session for retail shareholders. My name is James Agar, and what is a first for BHP Live today, I'm joined by both BHP's chair, Ken McKenzie. Welcome, Ken. And BHP's Chief Executive Officer, Mike Henry. Welcome, Thanks, Mike.
Ken and Mike will be here for the next thirty minutes to answer your questions on all things related to BHP. Thanks to all the shareholders that have submitted the great questions already. We also have the capacity to receive your questions during the session. You can do so by clicking the ask a question tab on the top right corner of your screen. Ken, perhaps I'll throw the first question to you.
We'll get straight into it. It's been a challenging year for the world, and I know many of our shareholders are keen to understand your perspective on how BHP has performed, particularly in the shadow of COVID-nineteen.
Great. Well, thanks for that, James. And I think that's a bit of an understatement actually. It's been a very challenging year. But I think in a word, BHP's performance has been strong.
The team really stepped up in the face of COVID-nineteen, and really proud of the performance that the team has put in. I mean safety is always job one at BHP. But in the face of COVID, having to put in place all the additional COVID safe controls and then to continue to operate in that environment, I think, has been remarkable. It's been a really solid operating performance. Many performance records have been set in financial year 'twenty.
And if you think about that, with COVID as the backdrop, it really is remarkable. And it's allowed our economic contribution to be significant to Australia during this time. I mean in Australia alone, our total economic contribution was $33,000,000,000 and that includes $11,000,000,000 in payments to governments and a further $11,000,000,000 that we paid to our suppliers here. And then during the actual pandemic, the response from the company has also been strong. We paid all the outstanding invoices that we had on the books for our small business partners.
That was about $100,000,000 went out immediately to our small business partners. And then we also set up a $50,000,000 vital resources fund, which was to make sure that our local communities had the resources that they need in order to manage through the COVID pandemic as well. And now we're already focused on the post COVID-nineteen response. And last week, Mike committed nearly $800,000,000 over the next five years as part of a people and partnerships COVID recovery package, which includes skill development, apprenticeships, technical package, support for the met sector. So already thinking about how we can contribute to the recovery of the economy post COVID-nineteen.
And I should probably close out, James, by saying that through all of that, we've also been able to announce a fully franked dividend in the second half of AUD zero seven five.
Very good. Well, thanks, Ken. Mike, I might try this one to you. A lot's happened since your last BHP Live, that was in August after our full year results. We've had several shareholders ask about the BHP's approach to climate change.
We've released the climate change report. You conducted a climate change briefing to the market several weeks ago. Richard has asked, how can a company how can a mining company ever truly hope to become carbon neutral? And Simon asks, how do you make your leaders accountable for the actions you've announced? So perhaps I will get, Mike, you to handle Richard's question, and then we can throw to you, Ken, to talk to Simon's question.
Well, look, thanks, James. And I might start with a higher order point, and that is that climate change is one of the most significant issues that the world is facing today. And this is something that BHP recognized very early on. So we've been taking action now on climate change for over two decades. But you're right, James.
Last it was only last month that we announced an update to our climate change report. And in this report, this update, we've announced a series of further goals, commitments, actions on climate change to take our leadership further. One of the really interesting bits of insight that came out of this report was what's called the 1.5 degree scenario. And this is a scenario that looks at a world that is decarbonizing more strongly and more quickly, such that the global average temperature increase gets capped at 1.5 degrees C versus pre industrial times. And the interesting bit in all of this is that lo and behold, that scenario is more valuable for BHP.
Our commodities will remain essential. And in fact, our commodities are needed to support that decarbonization effort. So that was a bit of interesting insight for many of the people who've looked at the report. Now if I answer Richard's question specifically, we are confident of BHP's ability to become net zero in our operational emissions by 02/1950. Now we'll achieve that by moving to new technology.
The strong focus is going to be on structural elimination of emissions in our operations. There might be a little bit of offsets that are required towards the back end because some emissions are very hard or impossible to abate. Things like fugitive emissions in an open cut coal operation, for example. But the strong focus will be on structural elimination of emissions from our operations. Now in keeping with that 2050 commitment to become net zero operational emissions, In the report last month, we committed to a further 30% reduction in operational emissions by 2030 relative to 2020.
We'll do that through moving to more renewable energy sources for supply of our electricity. We've announced that in Chile at Escondida and Spence. And only last month, we've announced a partial move towards renewable energy at our Queensland coal operations. And we'll also be focused on how we can eliminate diesel use from our operations, so from equipment in our mining operations. Final point to note, James, is that it's not just about our operational emissions, of course.
We also have to look at the emissions that get created in the use and processing of BHP's products. And to that end, we've committed to working with downstream steel mills customers and with parties in the shipping industry to reduce emissions in their processes as well or to support their ability to reduce emissions in their processes.
Great. Thanks, Mike. And Ken, on Simon's question in terms of how you hold Mike and the leadership team to account on these measures we've announced.
Great. Well, great question, Simon. And last year, we announced that we were going to strengthen the linkage between our climate goals and executive remuneration, and we've done that. So now 10% of the CDP, which is the incentive program, is tied directly back to performance against those climate targets. So that's the Scope one, two and three performance.
We also will take a look at our performance against those goals when we evaluate the vesting of the long term incentive program. So we'll do that in a holistic sort of look back to make sure that, that's also in line with the targets. And then I think finally, as Mike mentioned, management are shareholders. And the 1.5 degree scenario that we've run through our scenario analysis modeling demonstrates that the more the world decarbonizes, the more valuable BHP becomes. So they're absolutely aligned to shareholders to that objective as well.
All right. I'm going to move now to the issue of cultural heritage protection. Got a question in from Anna who writes, my question relates to the concerns voiced in the recent shareholder action to put a moratorium on all mining activities that threaten culturally significant sites. What policies and processes does BHP have in place to communicate and consult directly with indigenous landholders and community members? Ken, I might get you to talk first to the resolution, and then perhaps we can throw to Mike to talk about how this works in practice.
Great. Well, thanks, Anna, because this is a really important issue. And look, we understand the intention of the resolution. No one wants to see a repeat of what happened at Juukan Gorge. And so although the moratorium, the resolution is well intentioned, on review, the Board has recommended that shareholders vote against it.
And that's because the Board had a particular concern with Part A, which is the moratorium. It proposes that BHP take certain unilateral actions irrespective of agreements with traditional owners. Owners. And that will have the unintended consequence of disempowering traditional owners, and it's inconsistent with the principle of self determination. So on both of those fronts, we just can't support even if it's well intentioned, we just can't support this resolution.
Now there are other parts to the resolution as well. But to be honest, we can't get past Part A. And so it really is on the basis of well intentioned, but the reality is that it would undermine the traditional owners.
Excellent. James, I might just add a bit on what we actually do in the company And I'll start with noting that almost all of BHP's operations around the world are either on or close to the traditional lands of indigenous peoples. And so this is a very important issue, Ken said, for the company. And we have deep respect for indigenous peoples and their culture and their heritage.
And this has been built up over many decades, and we've also built up strong relationships with traditional over that period. Now anything that we do related to land use that may impact on cultural heritage has to be on the back of or only or come with deep ongoing engagement with traditional owners. And that's something that we're very committed to. Now it's important to note that we already operate at a standard that is well higher than existing legislation. In fact, we've been very supportive of and advocates for legislative change, with a particular focus on legislative change that gives traditional owners more voice in the decisions related to their cultural heritage.
So we think that's important. But as Ken referenced, this is kind of one part of the equation. There's other things that we need to do in addition to just ensuring that we're in compliance with any legislative requirements that are in place. And everything that we do starts with respect or it has to start with deep respect. And to that end, senior leaders in BHP engage regularly with our traditional learner groups.
In fact, a number of us have spent time on country with indigenous elders out learning about their culture, hearing their stories, building relationships around the campfire, and that's something that will continue. In addition to what happens at the senior leadership level, 85% of BHP's employees here in Australia, 26,000 people or more, have been through training in the past year to learn about Aboriginal and Torres Strait Islanders' history and culture. So it gets a lot of focus inside the company. As part of our processes, so when we engage with traditional owners on their cultural heritage, at one point in time, we can be aligned around what we're going to do by way of land use and mine planning and so on, but find that sometime after that, and that can be years afterwards, that new information comes to light. And where that new information changes or significantly changes the understanding of the heritage significance of that site, it's down tools, and we don't do anything until there's been further deep engagement with traditional owners before we then determine what the next step should be.
Final point I'd note, James, is that recently, we formed an advisory council with the Banjima. This is specifically at South Slank, which is one of the new developments in our iron ore business in WA. We're bringing together or the Banjima and BHP have agreed to bring together Banjima elders and senior representatives from BHP to form a council that will provide advice and ongoing advice around mine planning and land use at South Flank.
Thanks, Mike. I will take a question now from Garth, who's interested to know a little on Samarco. He asked, what are the anticipated operating costs and product quality for the upcoming restart of Samarco? Perhaps, Mike, before I get you to answer that question specifically, maybe, Ken, you could give a general update of progress on the ground in Brazil. Yes.
Well, thanks for that, Garth. I mean shareholders would be well aware that, unfortunately, there was a terrible tragedy at Samarco five years ago with the failure of one of the tailings storage facilities there. And BHP is absolutely committed to doing the right thing. There was a foundation that was set up called the Renova Foundation, and it was set up to redress social, environmental and community impacts caused by the dam failure. Maybe a bit of an update on how Renova is going.
There are 42 programs across the agenda within Renova. And to date, they have spent USD 2,700,000,000.0 on those programs. And we're forecasting a further USD 2,200,000,000.0 will be spent through calendar year 'twenty two. So that's about USD 5,000,000,000 through the end of calendar year 'twenty two. And of course, both Vale and BHP are funding that, so our share of that is 50%.
The environmental rehabilitation is going extremely well and has gone well. And so our current focus and the Renova focus is around resettlement and compensation. And unfortunately, like everything these days, COVID has gotten in the way a little bit. And so there have been some delays caused to the resettlement construction. But I think in the current environment, we're pretty pleased with the progress that's now being made.
Great. Thanks, Ken. And on the specifics of restart, Mark?
Look, just maybe a few brief points, if I could, Gin. So Samarco will not restart until it's safe to do so, of course. That's an important point I want to reinforce. When Samarco does restart, it's going to be at lower volumes than it was prior to the tragedy. And in addition, we're going to have extra filtration requirements in place.
So the combination of those two things, lower volume, more filtration, will mean higher unit costs. But in terms of product quality, no change. We're not expecting any change.
All right. Well, look, we'll turn now to the portfolio. I've got a question here on potash from Stephen. Stephen asks, will you please update us on the progress and outlook of your Jansen potash project in Canada? And well, Ken, given this is ultimately going to be a decision for the Board, perhaps I'll throw to you on this one.
Great. Well, thanks for the question. I mean our decisions at Board level around Jansen will be guided by our capital allocation framework. And we're spending a fair bit of time at Board working with management, looking at the Jansen project and more specifically potash as a commodity. It's interesting that potash is not really all that well followed by market analysts.
It's a relatively small market. So we've actually had to build a lot of capability within BHP on the supply and demand side and really develop a bit of a proprietary view looking forward about the attractiveness of the commodity. And we like we've come to the conclusion we like potash, and it's very well positioned under several long term scenarios that we run. And we also like the asset, the resource position, Janssen itself. And so the question for management is really, given that we like the commodity, its long term attractiveness and we like our resource position, what's the best way to create value from shareholders with that position?
And so that's what Mike and his team will be bringing to the Board next year.
Great. Thanks, Ken. Well, Mike, you spoke earlier about, BHP's climate, targets and objectives longer term. I've got a question here from Sam who asks, how will BHP react to China's new environmental goals of carbon neutrality by 02/1960? And will it force you to diversify your customer base?
Thanks, James. Well, Sam, we welcome the announcement out China. It's right in line with the scenarios that we've assessed around decarbonization. I mentioned earlier that in reference to a question about our climate change report that the 1.5 degree scenario, so a faster decarbonizing world, is more valuable for BHP. So it's great to see the reinforcement of that with the recent statements coming out China.
And it gives us confidence around the assumptions that we've made around the world decarbonizing and the ongoing need for BHP's products, which will remain essential. As China decarbonizes, yes, of course, the mix of the commodities that they're going to require will change. But what we're confident of is that they will still need many of the commodities that BHP produces. We have strong relationships in place with our Chinese customers and suppliers, and we'll look to continue those because they've been really good business partners for BHP.
All right. Well, I've got a question on a related theme. I'll stick with you, Mike. You're on a roll here. So I've got a question from Fiona who asks that now the Australian government is supporting gas, should we get out of the coal business altogether?
Okay. Thanks, Fiona. Fiona, probably worthwhile me just noting upfront that last year, we actually sold a very, very small amount of coal domestically here in Australia. Most almost all of our coal is sold into export markets, and this is into steel mills overseas for use in steelmaking or to some power stations for thermal coal. Now I did announce that our full year results, this is a couple of months ago now, some changes to our portfolio or intended changes to the portfolio.
And one of those was an intended divestment of our thermal coal assets and our less high quality hard coking coal assets. And we've given ourselves two years to do that. But what we will also do is retain our higher quality hard coking coal assets. And one of the reasons for that is that we believe that the demand is going to be remain for that type of coal for quite a while yet. And in particular, the demand is going to be there for higher quality hard coking coal because as steel mills seek to decarbonize their processes, we believe that they're going to need more of this higher quality product, and we have a solid position in that.
So that will remain part of the portfolio.
Thanks, Mike. I'll turn back now to COVID-nineteen and BHP's role in shaping the recovery in Australia. I've got a question from Stephen that perhaps I'll throw to you, Ken. Given the COVID virus is causing havoc across the world, would BHP consider buying more Australian products instead of buying overseas?
Great. Well, thanks for that question again, Stephen. Well, BHP already engages a lot with Australian suppliers. And as I mentioned earlier, we paid about $11,000,000,000 in financial year 'twenty to Australian based suppliers. And during COVID, we reduced payment terms and released a further $100,000,000 in outstanding invoices.
So that money was able to flow out directly to support our suppliers and their cash flow requirements. We also have a local buy program, which was really directed at small entrepreneurial businesses within our communities. And again, last year, we paid $125,000,000 to small local businesses. So there's a lot of support for the Australian supply base. And then as we've mentioned before, we've got a new program, 800,000,000 skills and technology package.
There's 3,500 apprenticeships in that program and then over $450,000,000 that will be again directed towards, the Australian Mets sector. So I think a pretty comprehensive, program around support for our Australian supply base.
Okay. Thanks, Ken. Well, Mike, in August, you announced some changes to your leadership team. I was, here following those changes very closely. She's got a specific question for you.
What expertise Laura Tyler what expertise does Laura Tyler bring in her role as Chief Technical Officer on your leadership team? And what are the benefits you expect to see?
Okay. Thanks, James. That is a pretty specific question, but thank you for that question, Olga. And I'll start by saying that Laura is a really smart cookie, and she's a great people leader. The role that Laura is moving to, and it's a new role around the leadership team, and it is absolutely critical to the agenda that we've mapped out for the company to become safer, lower cost, more reliable and future fit in terms of our portfolio.
Now Laura has been on the leadership team for a while now as our Chief Geoscientist. So Laura is a geoscientist by training. In addition to her Chief Geoscientist Accountability, she was also leading our Olympic Dam asset. Now as she takes on this expanded role around the executive leadership team, she's relinquished her accountabilities for Olympic Dam. Her new role will be accountable for three things: one, building exceptional technical and operational capability to support our ability to create greater value two, we'll be bringing together the system that enables the assets and the operations to become safer, lower cost, more and more reliable.
And that's the bringing together of technology, our operating system and our centers of excellence. So we want that to be seamless and really acting in service of the front line. And then the third thing is Laura is accountable for metals exploration. And so this is finding and securing more resources in future facing commodities to help us shape the BHP of the future. So really happy to have Laura on the team and for that to have that new role in the company.
Mark, I know you've been while you've been busy shaping your leadership team, know, Ken, there's also been a bit of activity at the Board level as you focus on Board renewal and the skills and experience in that team. Anything you'd like to add?
Yes. We're also adapting to the challenges that are coming from technology. We periodically review what we call the skills matrix, and that has the skills and the experience and the knowledge that we'd like to have on the Board in order to effectively govern and support management. And back in 2018, we identified a gap, which was understanding of technology. And so we've been actively pursuing the closure of that gap at Board level.
And that's why we announced this year that Dionne Weissler and Shao Koon Cleaver will join the Board. And both of them have extensive backgrounds in technology, and we'll be able to bring that now to the table. I mean mining is becoming, as we all know, an increasingly technology, high-tech oriented business, and we need to have those skills at Board level as well.
Thanks for that, Ken. Mark, I'm gonna put you on the spot here. A very very topical question in relation to the budget, which was handed down to Australia yesterday. Derek has asked if there's anything in that budget that pleases or worries you from a BHP perspective.
Okay. Thanks, James. Look, I'm a fast reader, James, but I can't say I'm so quick as to have read it cover to cover yet. But what I have seen, so from what I've seen, both internally but also on the news, I don't think there's anything in there that should concern us. In fact, I think we should be applauding the government's focus on upskilling the nation and focus on creating jobs.
And we've said for some time now that we're in absolute agreement with what the Prime Minister has been saying around this needing to be a business led recovery with a strong focus on jobs. And I spoke with the Prime Minister a few months ago to voice our commitment to playing our part in that. And as Ken mentioned earlier, we came out with what's a I'd like to think is a pretty significant announcement last week to support 3,500 new apprenticeships and training opportunities for Australians across the nation over the next five years. And even that $450,000,000 that we've committed to the met sector, that can be seen as creating jobs but also focusing on building skills because these are a lot of them are small- to medium sized companies here in Australia. They're seeking to build a business.
And through the way that we partner with them, we believe that, one, it's going be good for us because we can bring their ingenuity to BHP, but it also helps them build a business, expand both here in Australia and overseas. So we think that through that focus on people and partnerships, we can play a role in supporting economic recovery here in Australia.
All right. Well, look, we're nearly out of time. I'll have time for for one final question, and I think it's a good question to finish on, a future facing question. It's a question from James, and he asked, what's the current status of converting the train locomotives and dump trucks to autonomous operation to reduce costs. I'll I'll again, I'll throw that to you, Mike.
Look, it and and and Ken is I think Ken mentioned earlier that technology is the way of the future for for mining. Technology is going to help us become everything I said earlier, safer, lower cost and more reliable. Now specifically, when it comes to automation of trains and trucks, there's some exciting stuff happening in this space. It was back in 2017 when we went to our first fully autonomous haulage operation at Jimblebar, and this is one of our iron ore operations in Western Australia. Since then, the site has become safer, more reliable and lower cost.
So that's kind of the proof point for us. And off the back of that then, we've announced last year three further sites where we'll move to autonomous haulage. And these sites were the Newman East operation in iron ore in WA as well as the Goonyella mine and the Donia mine up in Queensland, so two coal mines. And those three sites are currently in the process of deploying these autonomous trucks. But interestingly, because part of the question was about trains and moving to fully autonomous trains, we've decided not to go down that route for now.
And the reason for that really comes back to the capital allocation point that Ken made earlier in response to another question. We take capital allocation very seriously. And when we apply some of the automation opportunities to or when we put those opportunities through the capital allocation process, some of them make it through because they have good returns. Some of them, the financial case just isn't there to pursue. And that's where we've landed in the case of train automation, again, for now.
And it's where we've landed in the case of some other mines and where we won't pursue automation for the time being. But right now, we've got Jumbo Bar and then three others that we're proceeding with.
Excellent. Well, unfortunately, we are out of time. So thank you, Ken, and thank you, Mike. And most importantly, thanks to all the shareholders who submitted those fantastic questions. Before we do finish, I would like remind you all that we will be hosting our virtual AGM, almost this time next week, Wednesday next week at 5PM Melbourne time.
We'll be hosting our virtual AGM, and we look forward to connecting with you all again then. But in the meantime, thanks for joining us, and we'll see you again soon.
Thank you.