Own BHP shares? ‘Almost unbelievable’ breakthrough could be key to miner’s climate strategy

The Federal Government is considering whether carbon stored in tailings dams will count towards carbon credits and offset schemes.

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Key points

  • BHP shares in focus amid carbon capture potential 
  • The ASX 200 miner’s WA nickel mine has the potential to store four million tonnes of carbon annually 
  • Carbon credits are currently worth $32 per tonne 

BHP Group Ltd (ASX: BHP) shares are in the spotlight this week amid reports the S&P/ASX 200 Index (ASX: XJO) miner’s tailings dams have been soaking tens of thousands of tonnes of carbon out of the atmosphere each year.

And that could just be the tip of the carbon sink iceberg.

The findings were actually uncovered eight years ago by scientists working with Australian, Canadian and New Zealand universities.

As The Australian Financial Review reports, they discovered the sludge dam at BHP’s Mount Keith nickel mine in Western Australia was removing some 39,800 tonnes of carbon from the atmosphere annually. When the tailings, rich in magnesium, interact with the air, carbon gets locked into mineral crystals in the dam.

Somehow those findings remained largely unknown until more recently.

“It was just, almost unbelievable to me,” says BHP’s sustainability principal Samantha Langley, addressing the day she uncovered the research in 2019.

Scientists estimate that capturing carbon in this manner could store more than 1% of global emissions annually.

BHP shares could get a lift from mineral carbonation method

BHP shares could be in for some tailwinds should the miner receive credits for the carbon its tailings dams remove from the air.

BHP shareholders are now waiting on the Clean Energy Regulator’s decision on whether Australian Carbon Credit Units can be awarded for storing carbon in minerals.

At the moment, the miner still can’t count the carbon its dams are pulling from the atmosphere when calculating its total emissions footprint, and it’s not eligible for carbon credits, currently worth some $32 per tonne.

According to Langley (quoted by the AFR):

Before BHP or anyone else can register a mineral carbonation project for carbon offsets and be able to commercialise the opportunity, we need a mechanism and methodology for being able to account for the carbon storage and to verify the amount of carbon that’s been stored.

BHP is currently working with others in industry, policy experts, research teams, governments and voluntary carbon offset schemes as well to support the development of a new method.

A Clean Energy Regulator spokesman indicated BHP shareholders can expect that method to be finalised early next year:

The Clean Energy Regulator is currently developing a carbon capture, use and storage (CCUS) method. Mineral carbonation is currently being considered as a potential activity under the CCUS method. The CCUS method is due to be finalised by February 2023.

Far more carbon capture potential

BHP shares could be in for a bigger lift if the miner can optimise its tailings dams to suck more carbon from the air.

University studies suggest BHP’s Mount Keith nickel mine could soak up four million tonnes of carbon per year. That’s more than the combined emissions from its iron ore division and its Western Australia nickel division, the AFR notes.

While BHP is optimistic it can increase the carbon capture of its tailings dams, getting to those top levels is unlikely.

“The size of the prize is big,” Langley said. “We’re probably never going to get to the full four million tonnes. But we want to get close to there and we want to get as much as we can.”

How have BHP shares been tracking?

BHP shares are down 7% over the past 12 months. That compares to a full year loss of 11% posted by the ASX 200.

At the current share price, BHP pays an 11.7% trailing dividend yield, fully franked.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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