BHP CEO Mike Henry revs up WA unionisation warning amid copper overtaking iron ore as biggest earner

WA iron ore no longer makes up the lion’s share of BHP’s earnings and boss Mike Henry “fears” an “explosion” in union activity will stifle long-term investment in the business unit.

Half-year underlying earnings from the Big Australian’s South American-centric copper division surged 59 per cent to $US8 billion ($11.3b), versus a 4 per cent rise to $10.6b for WA iron ore.

“Copper generated over half of BHP’s earnings for the very first time,” Mr Henry said following the release of the results on Tuesday.

He said BHP, unlike many of its peers, was not “M&A dependent” to secure copper growth.

This was likely a thinly-veiled dig at the company’s main rival Rio Tinto, which recently tried to merge with Glencore to significantly boost its production pipeline of the red metal.

BHP’s decreasing reliance on iron ore in favour of copper comes as the miner is targeted by China’s state-run procurer of iron ore — China Mineral Resources Group.

Tense pricing negotiations have dragged on since September with certain BHP ore products being barred from the key export destination.

While BHP made no mention of the dispute in its results announcement, Mr Henry said he was “confident” a reasonable resolution would be reached when grilled on the topic by journalists.

“I’m confident that at the end of the day there’s a path through this, given the respect that we have for each other, to a resolution that is acceptable to both parties, but it takes time,” he said.

BHP remains the most profitable iron ore producer in WA and said labour inflation pressures across the country were easing.

“In Australia, labour market conditions have eased, and wage growth has largely normalised to long-run average,” the company stated.

Yet, Mr Henry said BHP was “not at all more relaxed or less worried about the impact” in the long-term from Federal Labor’s industrial relations policies.

“We see that within our Western Australian iron ore business, where we have a very marked uptick in (union) right of entry requests,” he said.

“We are having to devote specific resources just to care for this explosion in request for rights of entry, where you’ve got mandated bargaining taking place, and so there’s a lot more effort going into this.

“And I do fear for the long-term drag this is going to create, not just for our business, and at the end of the day we’re a global business and we can deploy capital into other jurisdictions where required.”

On a global level, BHP’s first-half group profit rose by 28 per cent to $8b while revenue jumped 11 per cent to $39.5b — both driven by copper growth. BHP is now the world’s largest producer of the metal.

The Big Australian declared a fully franked interim dividend of US73¢ a share, up from US50¢ a year earlier.

BHP on Tuesday also announced it would receive more than $6b after signing a silver streaming agreement covering its Antamina copper and zinc mine in Peru.

The deal buoyed a 6.8 per cent rise in the miner’s share price to $53.76 by 7.50am.