BHP just hit an all-time high, but copper could take it higher

Key results (H1 FY26)

• Underlying EPS: US$1.22 vs US$1.21 (+~2% vs consensus)
• Revenue: US$27.9bn vs US$27.34bn (+~2% vs consensus)
• Profit from operations (EBIT): US$12.3bn vs US$11.93bn (+~3% vs consensus)
• Underlying EBITDA: US$15.5bn vs US$15.11bn (+~3% vs consensus)
• EBITDA margin: ~55% (remains best-in-class for diversified miners)
• Free cash flow: US$2.9bn vs US$2.6bn (+~12% YoY)
• Interim dividend: US$0.73 per share
• Payout ratio: 60% (up from 50% last year)
• Implied dividend yield (annualised, approx.): ~5–6% depending on spot FX

• Brokers were uniformly constructive, with JPMorgan, RBC, UBS and CLSA all lifting price targets on the back of stronger copper exposure, balance sheet flexibility and Escondida/Vicuña momentum, though ratings remain mixed.
• Across 20 sell-side ratings: 30% are Buy, 55% Hold and 15% Sell; the average target rose 4.2% to A$51.80, implying 1.8% downside.
  

Do you currently hold BHP and what is your rating?

Yes, we hold it. We are overweight. We’re still buyers. Although we’re pretty much at max, it’s a big overweight in our portfolio.

What matters from the results?

I thought it was a small beat at the earnings level, but the dividend was materially higher than market. 

It was 18% above market and I think that reflects their confidence, certainly in the cash flows going forward, but also their ability to unlock value from underappreciated assets.

We saw evidence of that with the silver streaming deal at Antimina in Peru, releasing US$4.3 billion and earlier the effective sale and leaseback of the power assets in Western Australian iron ore, raising US$2.7 billion. So the balance sheet is looking extremely strong.

They’ve got some investment ahead of them, but they’re in a great position to deliver on their pipeline

How do those outcomes affect the outlook?

It gives them scope.

One of the other features of the result was that they’ve increased their production growth ambitions out to 2035 from 2–3% to 4–5%. So quite material, and a lot of that is copper.

We’re seeing South Australian copper go from broadly 300,000 tonnes to 500,000 tonnes in that period. We’re also seeing the Vicuña joint venture, which is a massive copper deposit in Argentina and Chile, in that timeframe.

Copper becomes a larger part of their mix. It’s already at 50% and it becomes a larger part of their mix. 

We know copper companies trade on higher multiples than iron ore companies, so that’s got to be good for valuation at the margin.

What should investors be paying attention to as the story unfolds?

Execution.

It is a significant pipeline, so execution is one of the big risks.

They’re setting up project assurance groups within BHP to oversee some of the projects to give them added control over what’s happening. They’re learning a lot from Janssen, which hasn’t gone well over a number of years but is now executing well in their words.

Obviously the market. We’ve got pretty buoyant commodity prices at the moment. In terms of forward-looking revenues, people are factoring in lower long-term pricing, but nonetheless the returns available to them at those lower prices are very strong.

What could you be wrong about?

One of the difficulties in valuation is just the long-dated nature of BHP’s growth pipeline.

Vicuña is a good example. Phase one will be executed. They’re looking to go to final investment decisions (FID) within this year, probably towards the end of the year. There are probably three to four phases of development, and once they get into the oxide and sulphide there are further opportunities to expand. It’s such a huge resource.

In potash, they’ve got a hundred-year life. They’ve got multiple opportunities to expand.

Some of it is market dependent, obviously, iron ore in particular. 

But from where we stand, with the deficit of copper that we’re looking at, it needs all of their projects to come in. They’ll be very busy delivering those over the next 10 years.