BHP leads pack of big dogs hungry for copper

It’s been the turn of the copper producers to strut their stuff in their FY2026 profit reports.

Over-shadowed somewhat in recent times by the impact on the gold producers of gold’s historically high prices, the copper producers have been outshining their gold cousins with their reports of swollen profits and big dividend increases.

It had to come given copper too has moved in to record price territory. It was last trading on the LME at $US6.46/lb – a 43% increase on the CY2025 average of US$4.51/lb.

For a company like BHP with its current equity apportioned annual production of 2.86 billion pounds, such a move in the copper price was bound to have telling impact.

And so it was in FY2026. For the first time on an annual basis, BHP’s copper earnings overtook iron ore as its earnings mainstay, contributing a record US$18 billion at the EBITDA level or 54% of the total.

BHP cranked up its final dividend from US60c to US99c, which was 10% above market expectations. More than that though was its conviction that the good times in copper will continue to roll on.

That was demonstrated by BHP outlining copper expansion plans priced at US$44.7 billion on a 100% basis and $US32.9 billion on an equity apportioned basis across projects in Chile, the US and South Australia.

The expansion plans are designed to increase its equity apportioned share of copper production from 1.3mtpa to 2mtpa by 2035.

In its commodity outlook report accompanying last week’s profit report, BHP said global copper mine supply is struggling to keep pace with expectations of robust demand as many existing mines face ore grade decline and reserve depletion.

It noted that commodity forecaster CRU estimates that more than 2.5 million tonnes of uncommitted mine supply (i.e. not yet approved for development) is required by 2030 to keep the market in balance.

“This gap could widen up to 10 million tonnes in the coming decade,” BHP said.

It is an astonishing statement given the world’s biggest mine, BHP’s 57.5% owned and operated Escondida high in Chile’s Andes, is expected to produce 1.1 million tonnes of copper in 2027.

Sandfire (ASX:SFR) was another to strut its stuff during the week by reporting a 214% increase in underlying earnings to US$350m on sales 41% higher at US$1.7 billion. It is paying its first dividend (A35c) in four years.

Sandfire is an annual producer of 154,000t of copper-equivalent from operations in Spain and Brazil and is angling to add another copper project in SA to the portfolio and most likely, another one somewhere else. It is now an $11 billion company, almost double its level of a year ago.

South32 (ASX:S32) is another copper producer sharpening its pencil for potential acquisitions in copper. It’s in the process of selling its aluminium business to Alcoa for $7.8 billion and its new chief executive Matt Daley revealed this week the company’s 40% payout ratio was also being pulled.

While it has organic growth underway at its Sierra Gorda copper mine in Chile and the Hermosa zinc project in the US, the company clearly wants to preserve its firepower to make a big copper acquisition.

Mineral Resources (ASX:MIN) has also put its hand up as a buyer of a copper operation after reporting record earnings from its iron ore, lithium and mining services operations.

Chief executive officer Chris Ellison said the company has a couple of potential copper project deals it is looking at, adding there was a “fair bit of competition out there in the market”.

He said MIN was interested in partnering with an owner that’s got a copper project that is near shovel-ready somewhere in the world.

Take those BHP, Sandfire, South32 and MIN copper snapshots and add in the metal’s robust outlook – barring some potential near-term weakness from a tariff-related unwinding of US stockpiles – and copper is clearly the preferred growth pathway for the miners.

The spate of producer and developer takeovers already seen in the ASX copper space in recent years – including BHP’s $9.6 billion acquisition of OZ Minerals - says as much.

Most recent M & A activity in the copper space has included Evolution’s (ASX:EVN) $213m move on Carnaby (ASX:CNB) at a 60% premium, and Austral’s (ASX:AR1) winning $80m offer for Hammer (ASX:HMX) at a 70% premium to Hammer’s undisturbed price.

So across the mining sector, corporate development teams are scouring the world for acquisition opportunities. But the field of potential candidates in the Australian, Canadian and London markets is limited.

And M & A prices have shot up in line with copper’s advance to record levels and a shortage of quality assets.

It’s why BHP is now focussed on organic growth after failing in its Anglo American bid(s) in 2024/25.

BHP’s internal growth projects have a capital intensity of US$16,000/t to US$30,000/t compared with its estimate that the pure copper plays are now trading at US$85,000/t, or US$100,000/t when a takeover premium is added on.

FireFly:

Take all of the above and Steve Parson’s FireFly Metals (ASX:FFM) needs to be viewed as a special case in the ASX copper space.

During the week it released its preliminary economic assessment (PEA) study into the redevelopment of its high-grade Ming copper-gold deposit at its Green Bay project in Newfoundland, acquired three years ago.

As Macquaire best put it after the release of the PEA, Green Bay has become too big to ignore. The broker has a $2.50 a share price target on FireFly which compares with Thursday’s close of $1.91.

The PEA is certainly worth a look. And there is no doubt that corporate development teams at the likes of Sandfire, South32, MIN and others were among the first to pull down a copy off the ASX platform.

Lots of figures and scenarios to run through but essentially Green Bay is set to become a low capex intensity 50,00tpa copper producer starting as early as mid-2029, rising to a world scale 100,000tpa in time.

Parsons commentary encapsulated what the PEA means for Green Bay and the company without referencing numbers endlessly. It all points to FireFly now being a standout takeover target.

He said the PEA confirmed Green Bay is one of the best undeveloped copper projects in the world.

“The study also makes it clear that Green Bay has the potential to be one of the largest copper mines in Canada, and also one of the largest copper mines globally that is not owned by multinational diversified mining,” Parsons said.

“The scale of the project, exceptional grades, the outstanding financial returns, and the scope for ongoing growth—all in a tier one location—put Green Bay in an exclusive club.

“And we offer concentrated copper exposure; we're not diluted by other bulk commodities such as zinc, lead, iron ore, etc.

“This PEA encapsulates the size of the prize we have at Green Bay. The opportunity is simply huge, and has every potential to keep getting better as well.”

Killi Resources:

From the update file comes the news that the Nev Power-led and Parsons-backed Killi Resources (ASX:KLI) has hit the good stuff in its first resource step-out drilling at its Lodestone magnetite project in WA’s Mid West.

Killi announced the first hole under its ownership of the project had returned a 40-50m true width intersection of the good stuff some 100m south of the current already-sizable inferred resource of 110Mt.

Last mentioned here on June 11 when it was a 25c stock, Killi closed on Thursday at 30c a share.

The good stuff in the case of Lodestone is its very rare recrystalised type of mineralisation where contact metamorphism either side of the ore body has fully recrystalised the magnetite over some 25km of strike.

It means that Lodestone is amendable to the production of direct reduction pellets for the fast-growing and environmentally friendlier electric arc furnace (EAF) method of steel production.

The processing route at Lodestone could also be much cheaper than competing magnetite projects because the coarse-grained nature of the deposit means less grinding is required to produce up to a 70% iron concentrate.

The stuff sells at a big premium to the 61% benchmark pricing for Pilbara iron ores, currently just under US$100/t. Price forecasting by Brazil’s Vale, the world’s biggest player in the DR pellet market, in studies for a Canadian project suggests Lodestone could initially be looking at US$150/t for its future product.

Power said the on-going drilling program at Lodestone has the aim of achieving substantial growth in the resource, with a future development leveraging off the existing infrastructure in the Mid West region.