BHP names Canadian as next CEO, raises intrigue about its potash ambitions
Canadian Mike Henry will be the next chief executive of giant Australian miner BHP Group, a decision that could have consequences on whether it pushes forward with a massive potash project in Saskatchewan in the coming years.
Henry, 53, takes the helm in January, leaving a month or so for him to transition from his current role as head of BHP’s Australian mining operations, where the company’s iron ore mines that account for nearly half its revenue are located.
One item on his eventual to-do list, though not necessarily at the top, will be whether the company will allocate $5 billion to construct the first phase of its Jansen potash project in Saskatchewan.
The project would initially add four million tonnes of potash to the market and as much as four times that over time, which could drastically alter the supply and demand dynamics for existing producers such as Saskatoon-based Nutrien Ltd.
Although BHP has already invested a few billion dollars into Jansen, a decline in potash prices and investor pushback have clouded the project’s future.
“He is unlikely to be as committed to Jansen as (current CEO) Andrew Mackenzie,” Ben Isaacson, a Scotiabank Capital analyst, said in a note on Thursday. “As we’ve stated several times, we believe there are issues regarding execution, costs, returns and the project was initiated during a very different time in the potash market.”
Still, the analyst noted Henry is a Canadian with experience marketing bulk products, such as potash.
BHP chairman Ken MacKenzie, also a Canadian and former chief executive of global packaging company Amcor PLC, said Henry’s global experience made him a good choice to be BHP’s next CEO.
“Mike Henry’s deep operational and commercial experience, developed in a global career spanning the Americas, Europe, Asia and Australia, is the perfect mix for our next CEO,” he said in a release.
Henry currently lives in Melbourne, and joined BHP’s coal business in 2003 in Australia. By 2010, he had moved into marketing, eventually serving as chief marketing officer, before moving back to operations. In 2016, he was promoted to president of the company’s mining operations in Australia.
“I’ve grown up in the Australian mining industry,” Henry told the Australian Financial Review. “This feels like home here in Australia.”
That paper reported he majored in chemistry at the University of British Columbia and found work in Vancouver, his hometown, in 1990 with Japanese trading giant Mitsubishi Corp. That job led him to Australia in 1999.
BHP is a diversified miner that produces metals such as iron ore, nickel, zinc and copper, as well as coal, and oil and gas.
The company has been debating whether to build its Jansen potash mine, about 140 kilometres east of Saskatoon, which current CEO Mackenzie has said is part of a long-term strategy to help diversify away from fossil fuels.
In October, Mackenzie committed to spending an additional $345 million to de-risk Jansen, on top of the roughly $2.7 billion already spent, before BHP decides whether to approve the $5 billion in capital expenditures required to start production, projected around 2025.
Scotiabank analyst Isaacson has said the project could cause headaches for Nutrien since BHP would likely sell into the same end market, the United States, which could make it harder for Nutrien to execute its plans to sell millions of additional tonnes of potash.
A Nutrien spokesman declined to comment.
Whatever Henry decides on Jansen, it won’t happen immediately. Mackenzie, who remains CEO until Dec. 31 and will stay with the company until the end of June, had set a February 2021 deadline for a final decision.
Henry will also have other issues to deal with. Some investors have said they prefer share buybacks to investments in potash, and there are also questions about whether BHP will maintain a dual listing in Australia and the U.S., and whether it will exit the coal business in an effort to green its image.
“Mr. Henry almost certainly won’t rock the boat too early in his tenure, and especially not without board support,” Isaacson said.
BHP’s underlying profit is forecast to rise about 12 per cent to US$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 four to five 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.”