Strong start to the 2025 financial year

The September quarter operational review points to a consistent operating performance across BHP’s major commodities and a strong start to the 2025 financial year. Steady production volume growth has enabled unit cost guidance to be maintained, and this leaves BHP firmly on track to meet FY25 total production and earnings guidance.

Copper production was up 4 percent on the back of higher grade and recoveries at Escondida and West Australian iron ore production was 3 percent higher as export capacity previously constrained by bottlenecks at the port is unlocked. The average realised price for iron ore was US$80.10 per metric tonne, down 18 percent from the first quarter of FY24.

Copper exposure is taking a more prominent role in BHP’s future growth prospects, with the announcement of a proposed 50/50 joint venture in Argentina with Lundin Mining to advance what appears to be one of the most significant global copper discoveries in decades. BHP expects copper demand to grow by 70 percent by 2050, on the back of traditional economic growth, electrification and the energy transition and digital infrastructure, including data centres.

The steelmaking coal business recorded a 20 percent increase in production in the quarter, excluding the recently divested Blackwater and Daunia mines. The average realised price in the quarter declined by 9 percent to US$214.86 compared to the first quarter of FY24. Production guidance for FY25 remains unchanged at between 16.5 and 19 million tonnes, or 33 and 38 million tonnes on a 100 percent basis. Production of higher quality energy coal was up 2 percent to 3.7 million tonnes and the average realised price remained steady at US$124.32 per tonne.

Nickel production decreased as the temporary suspension of operations took effect at Nickel West. Handover activities will be completed by December 2024. BHP plans to invest US$300 million per annum from January 2025 to preserve the option for a potential restart when nickel prices recover. Nickel prices are down 20 percent on the previous corresponding period.

US$10.6 B Potash Project on schedule

A key takeaway from BHP’s recent operational review for the September quarter is the Jansen potash project in Canada has reached a pivotal milestone with construction surpassing the 50 per cent completion mark for Stage 1, with Stage 2 also underway. The present focus is on the completion of the mill building and processing plant, port construction, finalising infrastructure and gearing up to hand over the project to operations.

The project is on track to see first production in 2026 and be a major global producer of potash by the end of the decade. The total investment on completion will be US$10.6 billion, which marks the largest investment in BHP’s history.

Potash plays into the food security theme and is used to produce fertiliser which provides the soil nutrients required to improve crop yield to address a growing world population and constraints on agricultural land. The Jansen potash project is one of the largest potash mines in the world and the successful execution of the project construction and subsequent operation will materially bolster BHP’s investor appeal.

Positioned for a recovering global economy

BHP’s earnings are leveraged to global economic growth and despite short-term fluctuations, GDP has grown consistently throughout history. Economic growth doesn’t happen by chance, it’s how the world works. This leaves BHP well positioned to benefit from rising commodity prices that typically accompany normal global growth conditions.

While global economic growth conditions at present are subdued, China has announced a series of stimulus measures designed to encourage economic growth. China is the world’s largest manufacturing economy and accounts for 18 percent of global GDP. Similarly in the US, the Federal Reserve is showing signs that an easing in monetary policy conditions is on the horizon, following a half a percentage point reduction on 18 September. The US economy represents 26 percent of the global economy.

BHP operates in an opportunity-rich environment in which demand for its commodities is driven by population growth, urbanisation, industrialisation, rising living standards and de-carbonisation. BHP is the world’s largest mining company by market capitalisation, and has a lower cost curve than competitors, supported by operational productivity and economies of scale. These key attributes support margin expansion in times of global economic growth. Accordingly, BHP shareholders can justifiably anticipate share value accretion over the medium to long-term on the back of a stronger global economy in the period ahead.