Our opinion on the current state of BHP(BHG)BHP is a global commodities company headquartered in Melbourne, Australia, with operations focused on minerals, oil, and gas. It employs approximately 62,000 people, primarily in the Americas and Australia. The company produces copper, iron, coal, oil, and gas, and holds significant stakes in some of the world's most prominent mining and resource projects.
BHP owns 57.5% of the Escondida mine in Chile, one of the largest copper producers globally, which also produces gold and silver. In Peru, it has a 33.75% interest in Antamina, which produces copper and zinc. Additionally, it owns 100% of Pampa Norte, a copper cathode producer in Chile's Atacama Desert. In Brazil, it holds a 50% stake in Samarco, which produces iron ore, and a one-third interest in Cerrejon, an open-pit coal mine in Colombia.
The company also has mineral rights in Saskatchewan, Canada, home to one of the world's largest undeveloped potash deposits. In Australia, it owns Olympic Dam, one of the world's largest copper, uranium, and gold ore bodies, as well as Western Australia Iron Ore (WAIO), a system of five mines connected by over 1,000 km of railway. BHP's Australian coal assets include Queensland Coal, comprising the Mitsubishi Alliance and Mitsui Coal, and the Mt. Arthur open-pit coal mine in New South Wales. Additionally, it owns Nickel West, a nickel operation with smelters, concentrators, and a refinery.
In petroleum, BHP owns high-quality resources in the Gulf of Mexico, Australia, and Trinidad and Tobago.
In its results for the six months to 31st December 2023, the company reported revenue up 6% and headline earnings per share (HEPS) down 48%. The tangible net asset value (NAV) per share was $8.68, compared to $8.91 in the prior period. The company stated, "At our Western Australia Iron Ore operations, we remain the lowest-cost major producer globally and in copper we set new production records at our operations in South Australia and Chile. In South Australia, our consolidated copper province has performed strongly and we are pursuing future growth options. In Canada, we’ve sanctioned Jansen Stage 2, which will almost double our planned potash production capacity. We’ve seen volatility in global commodity prices and demand in the developed world has been softer than expected. That said, China demand is healthy despite weakness in housing and India remains a bright spot."
In a report for the three months to 30th September 2024, BHP reported strong production growth across all major commodities, with copper production up 4% due to higher grades and recoveries at Escondida, and WAIO production up 3%. 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. This offer was rejected by Anglo, as were two subsequent improved offers, but negotiations continue. The offer could potentially spark a bidding war with Rio Tinto and Glencore.
In an operations update for the six months to 31st December 2024, the company reported copper volumes up 10% and steelmaking coal up 14%. BHP stated, "We are well positioned to continue strong momentum into the second half with a number of assets now expected to deliver production in the upper half of their respective ranges, while maintaining tight cost control."
BHP is a diversified international mining company that is directly impacted by commodity prices and any recovery in the global economy. The share experienced steady growth following the upward turn of the commodity cycle in January 2016 but saw a sharp decline during the coronavirus pandemic, forming a V-bottom in March 2020. It subsequently resumed its strong upward trend but has been pressured by falling commodity prices since the start of 2024. While it remains in a long-term upward trend, it is a volatile commodity share subject to market cycles.
