Investors interested in BHP Group Ltd (ASX: BHP) shares will probably know it's one of the biggest businesses on the ASX. However, the mining giant has plans for how it's going to become even bigger.
As well as iron ore, BHP has exposure to other commodities such as coal, copper, and nickel. Plus, it has plans for a potash project in Canada called Jansen. Potash is a type of fertiliser that is seen as greener than other types.
Certainly, having a diversified portfolio could make the BHP share price less exposed to one particular commodity.
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How does BHP plan to become bigger in the iron ore segment?
In FY22, BHP produced 253.2mt of iron ore. The company says, in the medium-term, it wants to increase production to more than 300mt of iron ore per annum. It's also currently studying options to produce more than 330mt per annum.
BHP said that its focus is on debottlenecking its inflow system (port and rail). Its current supply chain is "highly interconnected with limited sprint capacity", the company says.
Its port debottlenecking project is expected to be completed in FY24. It includes a yard extension and rate increases on its shiploader routes.
In terms of its mines, production at South Flank, in the central Pilbara in Western Australia, will be ramped up by FY25. BHP said there is potential to utilise latent Yandi infrastructure with proximate orebodies and remnant ore. The miner also said there are continuous productivity improvements, which include a progressive roll-out of autonomous haulage trucks.
As for its plans to achieve 330mt of iron ore production per annum, studies are expected to be completed in FY25. It could further streamline the port operations, likely through additional car-dumper, routes, and yard expansion.
As for its rail, further optimisation could be achieved through capitalising on "reduced train separation from moving block technology", the company says. There could also be increased ore carried per trip via longer trains.
BHP also pointed to various future mine options which give the company the choice of expansion.
Indeed, maintaining and growing iron ore production could be key for the BHP share price.
In a presentation about the outlook for iron ore, the big ASX mining share said it thinks that the steel value chain will be "at the centre" of many future trends. These include decarbonisation, the evolution of China's underlying demand, the rapid expected increase in Indian and southeast Asian demand, developments in the rest of the populous emerging world, and dealing with the impacts of physical climate change.
What about the other commodities?
BHP noted its other commodities will all benefit, to varying degrees, from various megatrends including population growth, urbanisation, rising living standards, decarbonising power, and electrifying transport.
The company said:
The secular fundamentals of population growth, urbanisation and rising living standards will continue to underpin demand for resources, including steel, for decades to come. The decarbonisation giga-trend will also require a vast mobilization of metal supply.
In a bid to increase its exposure to other commodities such as copper, BHP made an offer to buy OZ Minerals Limited (ASX: OZL) in August. Although the offer was knocked back because the OZ Minerals board thought it undervalued the business, I think it shows where BHP is focused on expanding.
BHP share price snapshot
In the last month, BHP shares have risen by 6.7%.
