The world’s second richest man and biggest mining company have inked a deal to bring Australian metal into battery technology as electric car demand soars.
BHP and Elon Musk’s Tesla have sealed a deal that will bring Australian metal into battery technology as global demand for electric cars soar and the miner seeks to reposition itself as a ‘greener’ company.
BHP announced the agreement on Thursday to supply Tesla with nickel from its Nickel West business in Western Australia, with the terms of the deal confidential, although it is believed to be a multi-year arrangement.
“Demand for nickel in batteries is estimated to grow by over 500 per cent over the next decade, in large part to support the world’s rising demand for electric vehicles,” BHP chief commercial officer Vandita Pant said.
BHP says it will also collaborate with Tesla in a bid to make the battery supply chain more sustainable, identifying partners who are most aligned with these principles and using blockchain to ‘”race” raw materials end-to-end.
The mining giant says it will also work with Tesla to identify ways to lower carbon emissions from their respective operations by using more renewable energy paired with battery storage.
BHP Minerals Australia president Edgar Basto said the company produced some of the world’s lowest carbon intensity nickel in the world and a reliable stream was essential for Tesla.
“The investments we have made in our assets and our pursuit of commodities like nickel will help support global decarbonisation,” Mr Basto said, adding BHP was “on the pathway to net zero at our operations”.
WA Mines and Petroleum Minister Bill Johnston said the state was the only one that had all the other minerals needed to make a battery, noting investors and the community were “increasingly holding mining companies to the highest ESG (environmental, social and governance) standards and practices”.
The miner is on a big push to exit fossil fuels, getting out of thermal coal and reportedly considering retreating from petroleum, too.
Morgan Stanley issued a research note on Thursday, labelling the reports an “attractive” proposition for BHP, noting Bloomberg had estimated the value of its petroleum business at $US15bn ($A20.4bn) or more.
BHP, the world’s biggest miner by market capitalisation, has not officially commented on the reports, which cite sources who don’t want to be identified.
“BHP’s petroleum division has suffered from a lack of free cash flow in the past 10 years and consumes a disproportionate share of capital expenditure,” Ord Minnett said.
“We believe an exit would makes sense strategically, but only at a fair valuation.
“We see the probability of a petroleum exit as high.
“If it happens, we believe it is likely to be years away. BHP only recently reiterated its commitment to the division, so a strategic shift would likely take many years to execute.”
Ord Minnett noted BHP had historically traded at a slight premium to rival Rio Tinto due to its greater diversification, among other reasons, so this gap could close with a divestment of petroleum.
BHP shares were up more than 3 per cent in intraday trade, exceeding gains of 1 per cent on the broader market.