BHP shares lower as higher capex offsets production increase
Make us a preferred source
Make us a preferred source on Google
More news: BHP traded lower despite reporting a 5% increase in iron ore production for the second quarter of FY25 compared with the prior corresponding period.
The result was offset by guidance that first-phase costs for its Jansen potash project are expected to reach USD8.4 billion ($12.5 billion), approximately USD1 billion above last year’s revised range, driven by “inflationary and real cost escalation" pressures.
Shares fell 1.77% to $47.88 per share at 2:02pm AEDT.
RBC Capital markets analyst Kaan Peker said the momentum supports full-year delivery and reaffirmed cost discipline, positioning BHP well against competitors. RBC Capital expects BHP to trade higher on the back of strong operational results, though this may be muted by higher capital expenditure at the Jansen potash project.
RBC Capital has a sector perform rating on BHP, setting the price target to $49 per share.
BHP iron ore production lifts 5% in December quarter
The news: BHP posted a 5% year-on-year increase in iron ore production and a 4% slide in copper production in the December quarter. Full-year guidance for iron ore production has been reiterated but has been raised for some copper projects to capitalise on high prices.
In its December operational review, BHP also issued a third increase in the investment estimate for its stage 1 Jansen potash project in Canada to USD8.4 billion ($12.5 billion) and reverted to the original first production schedule to mid-2027.
The numbers: Iron ore production for Q2 FY25 was 5% higher compared to Q2 FY25 with half-year production up 2% compared to the previous corresponding period.
The average realised iron ore price for the first half of FY26 was 4% higher than the previous comparable period. Full-year production guidance was reiterated.
FY26 copper production guidance range has been narrowed from between 1,800 and 2,000 kilo tonnes to between 1,900 and 2,000 kilo tonnes.
This is being driven by increased production guidance from the Escondida project in Chile and the Antamina project in Peru.
BHP flagged that average realised copper prices in the first-half of FY26 were up 32% year on year to USD5.28 per pound.
Escondida’s copper production guidance range has been lifted from between 1,150 and 1,250 kilo tonnes to 1,200 and 1,275 kilo tonnes. Antamina’s guidance has been increased from between 120 and 140 kilo tonnes to between 140 and 150 kilo tonnes.
The guidance has been upgraded despite a 4% slip in copper production in Q2 FY26 compared to the Q2 FY25 and half-year copper production that was in-line with the previous corresponding period.
The context: The diversified mining giant also said it is progressing copper growth options. The Vicuña joint venture in Argentina remains on track to complete its integrated technical report in Q1 CY26 and submitted an application for the Incentive Regime for Large Investments program in December.
At the Escondida project, an environmental impact declaration for a new concentrator remains on track for submission in the second half of FY26.
The miner said it is on a pathway to lift annual copper production to about two million tonnes in the 2030s.
The cost increases at the Jansen Stage 1 potash project are being driven by “inflationary and real cost escalation pressures, design development and scope changes and lower productivity outcomes”.
