The World’s Top Miner Appoints Its Next CEO

(Bloomberg) -- BHP Group named Mike Henry, the head of its Australian operations, as chief executive officer to steer the world’s top miner through looming challenges from slower growth in China and investor pressure over climate change.

Henry, 53, a Canadian-born executive who joined BHP in 2003 from Mitsubishi Corp., previously led the company’s marketing division and coal operations. He will take up his new position on Jan. 1, the company said in a statement Thursday.

He replaces 62-year-old Andrew Mackenzie as growth in China, source of more than half of BHP’s revenue, slumped in the third-quarter to the slowest pace since the early 1990s. Against this backdrop and broader trade concerns, BHP is seeking to bolster output in copper and oil as long-term demand weakens for iron ore, its top earner.

Henry will take over as the company debates its exposure to China, “the growth path there and how they can diversify away from that,” said Camille Simeon, a Sydney-based investment manager at Aberdeen Standard Investments, which holds BHP shares and manages about $670 billion in global assets.

“Climate change and the energy transition the world is going though are going to also be a key consideration, along with the maintenance of their strong asset base,” she said.

For more on the biggest challenges facing BHP’s incoming CEO

BHP shares traded 0.3% lower in London after advancing 0.1% in Sydney trading.

Henry had long been among the leading contenders for the job -- a group that included other executives, such as Chief Financial Officer Peter Beaven and Danny Malchuk, head of operations in the Americas. A few months ago, BHP approached external candidates including Anglo American Plc boss Mark Cutifani about the position, according to people familiar with the matter.

Regarded by investors and staff as thoughtful and diplomatic, Henry built a public profile at BHP by leading the company’s opposition to proposals for a new tax on iron ore production in Australia. More recently, his division has encountered operational missteps including fires and a train derailment that left railcars loaded with iron ore strewn across Australia’s Outback.

Henry, who will earn a base salary of $1.7 million, will tour BHP’s operations for the rest of the year before making any decision on potential changes to the executive leadership team. He plans to update investors at February’s half-year earnings on initial plans for reforms, he told reporters in Melbourne.

“I am all about performance and improvement,” Henry said. “We have a great strategy and I see it as my job as the next CEO to build upon that foundation we’ve created to accelerate performance.” BHP will seek to better utilize data and technology to improve operations, and will maintain its focus on limiting the company’s impact on the environment, he said.

Underlying profit is forecast to rise about 12% to $10.2 billion in fiscal 2020, before declining in each of the following two years, according to analysts’ estimates compiled by Bloomberg.

“His biggest challenge will be to keep the return on assets going -- they’ve had the advantage of growing iron ore over the last 4-5 years, but that’s tapered off,” said David Lennox, a Sydney-based resources analyst at Fat Prophets. “They’ve really now got to look at what’s going to be the next item to grow them.”

BHP’s new leader takes over a business that’s been stripped down and simplified under Mackenzie, in the post since 2013. This included the $9 billion spinoff of unwanted assets into South32 Ltd. in 2015 and a near $11 billion exit from U.S. shale operations last year. The producer had cut its number of operations by more than half, and is now considering potential new growth options.

A pipeline of more than $8 billion worth of projects to expand petroleum output are being considered alongside other already sanctioned investments, the company said Monday.

The producer will decide in early 2021 whether to press ahead with spending as much as $5.7 billion to bring the Jansen potash project in Canada into production, adding the fertilizer to its roster. The crop nutrient would add a material with a demand outlook that’s tied to population growth, rather than metals-intensive urbanization in China, according to BHP. Some investors oppose the plan, arguing potash prices are likely to remain weak and projected returns are too low.

What Bloomberg Intelligence says:

Significant experience in various commercial roles in both minerals and petroleum, as well as a stint as chief marketing officer, sets him up to lead the company as it embarks on a number of projects in several business lines.

-- Andrew Cosgrove, senior analyst

Top miners are preparing for a shifting outlook as China’s pace of growth cools, and amid prospects for steel output to plateau. Urbanization and industrialization in Africa and other parts of Asia, along with the need to supply metals to a rapidly expanding electric vehicle sector, will offer potential new sources of demand Ivan Glasenberg, chief executive officer of miner-to-trader Glencore Plc, said in a May presentation in Barcelona.

Henry will also continue to grapple with costs and ramifications tied to the fatal 2015 waste dam spill at BHP’s Samarco iron ore joint venture in Brazil that’s overshadowed Mackenzie’s tenure. The disaster killed 19 people and is the subject of ongoing civil claims and investigations. Samarco is on track to resume some operations in the second half of 2020.

Mackenzie will step down from his post at the end of this year, and retire from BHP at the end of June.

--With assistance from James Thornhill and Thomas Biesheuvel.

To contact the reporter on this story: David Stringer in Melbourne at dstringer3@bloomberg.net

To contact the editors responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net, Keith Gosman, Jake Lloyd-Smith

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