BHP Group's shares extended their gains on Thursday, closing 1.9% higher at A$53.28, following the release of a robust half-year financial report that surpassed market expectations. The rally was primarily fueled by the company's strategic pivot, with copper now accounting for the majority of its earnings.
Copper Takes Center Stage in Earnings Mix
The mining giant reported that copper contributed 51% of its underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) for the six-month period. This shift underscores a broader industry trend, as investors increasingly favor miners with significant exposure to metals critical for electrification and data center infrastructure. Total underlying EBITDA climbed 25% to $15.5 billion, while underlying attributable profit reached $6.2 billion. BHP has consequently increased its full-year group copper production forecast to a range of 1.9 to 2.0 million tonnes.
According to financial data, copper earnings for the half-year reached $7.95 billion, narrowly edging out iron ore earnings of $7.50 billion. "They smashed everyone's expectations from a dividend perspective," remarked Andy Forster, a portfolio manager at Argo Investments, a shareholder in the company.
Analyst Reaction and Dividend Announcement
In response to the updated figures, RBC Capital Markets raised its target price for BHP's ASX-listed shares to A$55 from A$51. However, the firm maintained its neutral, or "sector perform," rating. Analysts cited the company's substantial capital expenditure requirements and expressed caution regarding the outlook for iron ore prices, which they believe may not sustain current spot levels.
The BHP board declared an interim dividend of 73 cents per share, representing a 60% payout ratio. The company's net debt stood at $14.7 billion at the close of the half-year period.
Market Dynamics and Strategic Moves
The spotlight on copper intensified as benchmark prices rebounded by 2.2% to $12,893 per metric ton, with buyers stepping in despite reports of inventory build-up and soft short-term demand signals. This performance contrasts with the ongoing uncertainty in the iron ore market.
BHP also captured attention this week by entering a silver streaming agreement with Wheaton Precious Metals. This deal is designed to accelerate cash flow from non-core assets, with Wheaton's CEO citing a "tightening supply of quality silver production." Streaming arrangements allow buyers to provide upfront capital in exchange for a portion of future metal output at predetermined prices.
Peer Performance and Sector Divergence
The divergence between copper and iron ore fortunes is reflected across the sector. Peer Rio Tinto reported flat full-year earnings, where gains from copper prices and production helped offset weaker iron ore results. This split highlights the current market preference for commodities tied to the energy transition.
However, analysts warn this trade is not without risk. A sharper decline in iron ore prices, rising operational costs at major bulk commodity sites, or new complications in China's procurement strategy could challenge the investor appetite for dividends that are backed by strong cash flows.
Key Dates for Investors
Attention now turns to BHP's dividend timetable. Shares will trade ex-dividend on the Australian Securities Exchange and the London Stock Exchange on March 5, followed by the New York Stock Exchange on March 6. The record date is also March 6, which determines shareholder eligibility for the payout scheduled for March 26.
Looking ahead, BHP is scheduled to release its operational review for the nine months ending March 31 on April 22 at 8:30 a.m. Melbourne time, providing the next significant update on its performance.
