James Agar, BHP’s Group Procurement Officer, has called for systematic collaboration and radical transparency within the mining sector in his address to an audience of leading mining professionals during the main session at the International Mining and Resources Conference (IMARC).

 

Mr Agar said the industry must reflect on the experience of Covid-19 and use it to strengthen the industry’s resilience from supply chain constraints. 

 

“As a result of COVID, global demand vanished almost overnight. Unemployment rates skyrocketed. Commodity prices plummeted in such unimaginable circumstances that the price of oil briefly went negative,” he recalls. “Yet we find ourselves today, just over two years on, in an environment where operating cost inflation has emerged as a central element of the resource industry narrative.”

A mixed picture

Like the broader economy, the mining industry has been experiencing a combination of “good, or demand–led inflation”, and “bad, supply bottleneck inflation”, observed Mr Agar, who noted that the balance between the two has been skewed heavily towards the “bad” since the Russian invasion of Ukraine.  

“Labour markets are tight globally, with no sign of easing soon,” he continued. “The energy crisis in Europe is profound and will continue to drive volatility in energy markets.”

Nonetheless, BHP’s Group Procurement Officer did remark that the industry was seeing some improvement in global supply chain performance. “Aggregate supply chain disruption in manufacturing is now significantly lower than in the second half of calendar 2021. And shipping delays and port congestion have eased considerably over the same timeframe,” he observed. “So the picture is mixed, labour and energy markets presenting a major challenge, while constraints across broader manufacturing supply chains are easing. 

Uncertain near-term macro outlook

“All said, we do expect the lag effect of inflationary pressures to remain a persistent challenge through the 2023 financial year,” Mr Agar advised. “Globally, the near-term macro outlook remains very uncertain and fragile. It seems that Europe and the UK are almost certainly going to experience recession, and headwinds elsewhere are strong. We expect the US economy to slow down; and it’s that economy that tends to drive overall sentiment towards investment in assets,” he stressed. “We think China will be a source of stability for commodity demand over the next 12 months, as stimulus policies progressively take effect.”

While stimulus has produced growth in infrastructure and autos, Mr Agar said his firm expects improvement in the housing sector to take a bit longer, adding that the zero-Covid policy remains an overhang that creates additional uncertainty. 

Mining’s crucial role in meeting future challenges

Of course none of this near-term volatility changes the essential role of mining in meeting our future challenges. “The global megatrends of the electrification of transport, decarbonisation of power and the pursuit of higher living standards are all inherently commodities intensive,” noted Mr Agar. “Our industry must come together to produce more essential materials, more sustainably than ever before. 

Within the context of a number of challenges – to combat inflation; to manage supply chain disruption, labour market tightness and energy market volatility, to support decarbonisation in the mining supply chain; and to maintain discipline and grow through continued investment in future facing commodities – BHP’s Group Procurement Officer asked the IMARC audience how such success might be achieved.  

“The first realisation is that just like we learnt through Covid, we cannot do it alone. We know we can’t be successful without successful partnerships. So what is a successful partnership? What are the hallmarks of a truly great partnership? At BHP, we know we haven’t always been perfect in this regard – big corporate processes, transactional mindsets and sometimes a bit of a closed book. I’m sure there are others in this room who would see some of themselves in that description.”

Embracing “radical transparency”

While collaboration, openness, transparency should be the essential ingredients of partnership – they can at times be seen as sources of competitive disadvantage, according to Mr Agar, who said the mining sector needed to break through, and embrace a new form of transparency? “Radical Transparency”.  

“A bedrock of clear mutual understanding to anchor our partnerships to. This is what I think can be the ‘silver bullet’,” he told the IMARC audience. “But how do we make this more than just nice sentiment? How do we make the transparency that underpins our partnerships systematic, totally embedded in our approach? 

“Like many in the industry, BHP puts a lot of time and effort into improving the ways we work. For us, it’s called BOS, BHP’s Operating System. BOS has been one of the main enablers of BHP’s safe and reliable operating performance.”

BHP’s Operating System starts with Purpose – to define and share a meaningful purpose. “With this approach working well within BHP, we now want to take it outside the gates and open it up through our supply chain,” he continued. “As we engage new partners and cement existing partners in our supply chain, we now invite them sit down with us to co-define the purpose of our relationship. Why are we coming together? How are we going to create value together? What is important to each party? How can we use our commercial relationship to drive better outcomes for the industry, for communities, for the world? 

“With a purpose defined – the next level of transparency is to routinely and openly measure 


the health of the relationship. Are we living up to the Purpose we defined? Where are the continuous improvement opportunities and how successfully are they being deployed?  How systematically are we working together to solve problems? It is this kind of Radical Transparency, systematically embedded, that can take our industry to new heights.”

Partnering through the full life-cycle

“Imagine a world where we take our life of asset plans to our supply partners and we say: This is how we plan to operate over the long-term; This is how we plan to grow; This is how we ultimately plan to close and rehabilitate; We want to partner with you through this full life cycle; We want you to challenge us to innovate, to do things differently; We want you to grow and be successful with us,” enthused Mr Agar. “Pleasingly, we are already a way down this path at BHP. 

 

This spirit of transparency is driving BHP’s approach to creating opportunities and successful partnerships in strategic areas such as: Traditional Owner and Indigenous Procurement; decarbonising the firm’s supply chain; and making BHP’s camps more appealing to a more inclusive and diverse workforce. 

Mr Agar went on to share with the IMARC audience a few of the ways BHP and its partners are benefiting from this approach. 

“Some of our most important partnerships are with the Traditional Owners on whose land we operate. Procurement is a critical key to unlocking the value of these partnerships for Traditional Owners and their communities,” he stressed. “To be honest – and in the interests of transparency – we heard from some of these partners last year that we weren’t doing enough to provide genuine opportunities for their businesses on Country. We had some difficult conversations and realised that we needed to make a change. Not for the sake of it, but because we know that for every $1 spent with an Indigenous business, around $4 of value is delivered to community,” he advised. “That’s what has motivated us to set bold, ambitious targets for Traditional Owner and Indigenous procurement – in Australia and globally.  

BHP’s Group Procurement Officer reported that his firm had already seen the impact of such targets – for example, through WA Iron Ore’s partnership with waste business North West Alliance, who now employ more than 70 people in the Pilbara. “It is these kinds of partnerships that have given us confidence to target a more than doubling of our spend with Indigenous vendors at WA Iron Ore to over US$300m per annum by the end of the 2024 financial year,” he revealed.

Decarbonisation drive

Similarly in decarbonisation, to reduce BHP’s diesel consumption, which makes up around 40 per cent of the firm’s operational emissions, Australia’s leading mining company knew it had to work very differently with its OEM partners. “Several years ago, it was clear from the positioning of some of our major suppliers that ‘the diesel engine was here to stay’. There was also a level of scepticism internally – was there really a viable pathway to electrify a 400-tonne haul truck? By being transparent around our demand projections and creating the space to respectfully challenge each other, it led to a fundamental shift in our partner’s R&D focus towards the decarbonisation of mining fleet,” noted Mr Agar. 

“Fast forward to today – we are now working to co-create zero emissions fleet with our major partners through our GHG Alliance with Komatsu and our standalone agreement with Caterpillar. Together, we are working towards trialling battery electric haul trucks on our sites in 2024,” he reveals. “We’ve also partnered with Rio Tinto and Vale in the Charge On Innovation Challenge, which is a global initiative for technology innovators to develop concepts for large-scale haul truck electrification systems. This is a great example of looking beyond the mining sector for solutions, and we’re really excited by the response from vendors so far.”

This is a similar concept to what BHP is doing with Camps to Communities – a global competition for innovative ideas to make our accommodation safer, and more inclusive, and encourage the company’s workforce to connect as a community.  

“It’s these examples that bring home to me what I love about Procurement,” Mr Agar enthused. “As I mentioned at the start, my personal journey at BHP has included time in Corporate Affairs. It’s largely big-picture in that space. It’s the platform from which we get to announce the grand declarations for the Company – stand in nice rooms like this one and say nice things. But as these examples demonstrate, it’s in procurement that we have the opportunity to turn those visions into reality. And this is where we must keep building. Through opening ourselves up to our supply chain, inviting partners in, co-creating purposeful intent and anchoring ourselves to radical transparency.

A transformational time for the industry

Mr Agar describe it as a “transformational time” across the industry, in terms of “shifting this previously male dominated industry towards gender balance; decarbonising an emissions intensive sector; and empowering Traditional Owner businesses to form lasting partnerships.”

Wrapping up his speech, Mr Agar said that he wanted to leave the audience of mining professionals at the IMARC conference with one final thought: “It is clear that none of these opportunities can be realised individually or internally. They are challenges to be solved together. By being transparent with each other – clear about our goals, open about our challenges – we stand to build mutual value,” he emphasised, adding: “We will minimise disruption. And we will build truly resilient supply chains. 

“At BHP, we say our purpose is to bring people and resources together to build a better world. The people in this room, and the partners we deal with every day, are absolutely fundamental to that purpose. With radical transparency, we can build that better world together.” 

The most critical issues within the mining and resources segment are to be explored and debated across numerous sessions – featuring some the industry’s biggest names and minds – in the coming days at IMARC, Australia’s largest international mining event.

  

For more information, visit: https://imarcglobal.com