BHP hits copper turning point as profits jump

BHP’s (BHP) copper profits came in ahead of expectations and overtook the iron ore division for the first time in its interim results. This marks a turning point given the company’s strategy to increase copper production.

It was also accompanied by a renewed commitment to paying out to investors as the dividend came in well ahead of forecasts at 73¢ (54p) per share, after a drop in the payout ratio a year ago.

The copper high water mark was down to record prices for the red metal and an increase in production from the Escondida mine in Chile. Overall first-half underlying earnings before interest, tax, depreciation and amortisation (Ebitda) climbed a quarter to $15.5bn (£11.4bn), ahead of analyst consensus of $15.1bn.

The copper division contributed $8bn of this profit measure, a 60 per cent rise on a year ago. On top of the production and price impact, the figure was boosted by higher gold, silver and uranium byproduct sales, as prices soared for those materials as well.

Iron ore earnings increased at the same time thanks to higher prices.

While investors remain focused on M&A in the industry, BHP is also pushing ahead with expansion of existing assets as part of a goal to get to 2mn tonnes of annual attributable copper output annually within a decade, a 40 per cent increase on current levels.

This includes a new plant at Escondida and various improvements to the South Australian assets. BHP is also coming up to an investment decision on the Vicuña mines in Argentina, which a new study said could produce 500,000 tonnes of copper a year by 2035 at a total cost of $18bn. Stage one would require $7bn-$8bn to build a 200,000-tonnes-per-year copper mine.

The capital spending forecast for the current financial year is $11bn. This spending outlook coupled with the higher dividend has pushed net debt up by almost $3bn from a year ago to $14.7bn.

Chief executive Mike Henry said on Tuesday morning that there was a “small set of opportunities” in M&A terms in the copper space. BHP has already tried to buy for Anglo American (AAL) and has been held up as a potential bidder for Glencore (GLEN) after the deal with Rio Tinto (RIO) fell apart. Australian investors in Rio Tinto questioned the cultural fit of the Glencore deal.

Henry said that in any M&A discussions culture would come after “underlying industrial logic and fit with strategy”.

Major copper miners are now rated extremely highly, with Antofagasta (ANTO) and Freeport-McMoRan (US:FCX) trading at an enterprise value to Ebitda ratio of over 8 times (up from 5 times a year ago) compared with BHP on just under 7 times.

But BHP’s rating is also far higher than a few months ago, so the diversified miners are not being left out of the rally. One deal announced alongside the results was the $4.3bn sale of BHP’s share of silver output from the 33.75-per-cent-owned Antamina mine in Peru to Wheaton Precious Metals (WPM).

Even after this cash injection, BHP has some more juggling to do given the $25bn-plus in capital spending available in growth projects in copper alone in the coming years, but just having that growth on the table is worth the investment. Buy.

Last IC view: Buy, 2.014p, 19 Aug 2025