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BHP Group Ltd (ASX: BHP) has long been recognized for its dominance in the iron ore market, but recent developments in the copper sector are garnering increased attention from investors.
In the first half of the fiscal year ending December 31, the mining giant reported robust iron ore production, totaling 129 million tonnes. The company achieved an average realized price of US$103.70 per wet metric tonne, leading to underlying EBITDA of US$9.7 billion from its iron ore division.
However, with copper prices experiencing a surge in 2024, BHP's copper operations are emerging as a key focus area. Despite achieving half-year results at lower copper prices compared to the current market, BHP reported production of 894,000 tonnes of copper and realized an average price of US$3.66 per pound. This resulted in underlying EBITDA of US$3.5 billion for the six-month period.
Copper operations in BHP portfolio
The increasing significance of copper operations in BHP's portfolio is evident through its efforts to ramp up production. The Escondida mine in Chile, one of BHP's key copper assets, saw a 3% increase in half-year output to 528,000 tonnes of copper.
Sporre forecasts that BHP will produce 1.44 million tonnes of copper for the year, surpassing expectations for Codelco's output of 1.41 million tonnes of the red metal. This potential achievement comes at an opportune time for BHP shareholders, who have witnessed the company's share price struggle amidst a downturn in iron ore prices this year.
Copper prices
Unlike iron ore, copper prices have surged by over 10% in 2024, currently trading at approximately US$9,418 per tonne. Market analysts, including those from Citi, anticipate continued price appreciation driven by growing demand. Copper's critical role in global electrification efforts, coupled with increased demand from the burgeoning artificial intelligence industry, is expected to fuel further growth.
Citi's Global Head of Commodities, Max Layton, projects that copper prices could average US$10,000 per tonne in the December quarter and further increasing to US$12,000 per tonne by 2026. Layton acknowledges the potential for even greater upside, with the copper price potentially exceeding US$15,000 per tonne in the event of a strong cyclical recovery.
Amidst this favorable outlook for copper, BHP's increasing focus on its copper operations presents significant opportunities for the company and its shareholders. As demand for copper continues to rise, BHP stands to benefit from its position as a leading global producer of the red metal.
