Our opinion on the current state of BHP(BHG)BHP is a global commodities company headquartered in Melbourne, Australia, with a workforce of 62,000 primarily based in the Americas and Australia. The company processes a diverse range of minerals, oil, and gas, including copper, iron ore, coal, oil, and gas.
BHP owns significant interests in several major mining operations worldwide:
- **Escondida Mine** (Chile): BHP holds a 57.5% stake in this mine, which is one of the world's largest producers of copper and also yields gold and silver.
- **Antamina Mine** (Peru): BHP owns 33.75% of this mine, which produces copper and zinc.
- **Pampa Norte** (Chile): This operation produces copper cathode in the Atacama Desert.
- **Samarco** (Brazil): BHP holds a 50% stake in this iron ore production operation.
- **Cerrejon** (Colombia): BHP owns one-third of this open-cut coal mine.
- **Saskatchewan (Canada)**: BHP holds mineral rights to one of the world's largest unexploited potash deposits.
- **Olympic Dam** (Australia): This site hosts one of the largest ore bodies for copper, uranium, and gold globally.
- **Western Australia Iron Ore**: A system of five mines connected by more than 1000km of railways.
- **Queensland Coal**: This includes the Mitsubishi Alliance and Mitsui Coal.
- **Mt. Arthur Coal Mine** (New South Wales): An open-pit coal mine.
- **Nickel West** (Australia): A nickel mining and processing operation.
- **Petroleum Resources**: High-quality resources in the Gulf of Mexico, Australia, Trinidad, and Tobago.
In its results for the six months to 31st December 2023, BHP reported a 6% increase in revenue but a 48% decline in headline earnings per share (HEPS). The company's tangible net asset value (NAV) per share was $8.68, slightly down from $8.91 in the previous period. The company highlighted strong production records at its copper operations in South Australia and Chile, and noted progress in the Jansen Stage 2 project in Canada, which will nearly double its planned potash production capacity. Despite volatility in global commodity prices and softer-than-expected demand in the developed world, demand from China remains healthy, and India is seen as a bright spot.
For the nine months to 31st March 2024, BHP remained on track to meet its production targets for copper, iron ore, and energy coal. Copper volumes increased by 10%, driven by strong performance and additional production from South Australia, record year-to-date output from Spence, and improved grades and production at Escondida. In its operational review for the year ending 30th June 2024, BHP reported a strong performance across its copper business, with the highest production in four years at Escondida and another record year at Spence.
As a diversified international mining company, BHP is directly impacted by commodity prices and global economic recovery. The share price has been on a long-term upward trend since the commodity cycle turned upwards in January 2016 but experienced a sharp decline with the coronavirus pandemic. It recovered strongly post-March 2020, continuing its upward trend but facing pressures from falling commodity prices since early 2024.
On 25th April 2024, BHP announced a share offer for the entire issued share capital of Anglo American, contingent on Anglo unbundling Amplats and Kumba. The offer was initially rejected by Anglo, followed by two further improved offers, with negotiations still ongoing. This bid might spark a bidding war with other industry giants such as Rio Tinto and Glencore.
