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BHP is doubling down on Copper.

BHP has forecast copper demand to grow by 70 per cent from 2021 to 2050 and shown its appetite for the red metal in July by agreeing to pay $US2.1bn to grow its copper footprint through projects near the Chile-Argentina border, and with the $9.6bn acquisition of OZ Minerals in 2023.​

BHP to rely on iron ore operations to pay for growth in copper

BHP is set to rely even more heavily on its iron ore operations to help pay for growth ambitions in so-called future-facing commodities, with ramifications for its plans in Western Australia.

The mining giant’s reliance on iron ore for free cashflow is back in the spotlight as chief executive Mike Henry weighs up copper growth options and a renewed bid for Anglo American.

Analysts at Barclays are among those who expect BHP to become even more dependent on iron ore as it contends with issues at the Escondida copper mine in Chile.

Barclays rates BHP the worst of seven major diversified miners in terms of growth prospects to the end of the decade, assuming it does not return with a takeover offer for Anglo and its copper assets.

The underwhelming growth outlook is based on a grade decline at Escondida, the shutdown of BHP nickel business in Australia and the slow recovery of metallurgical coal volumes.

Glencore and Rio are among those rivals who suspect it is a matter of time before BHP revives its takeover play for Anglo. BHP is now free of “put up or shut up” restrictions under British takeover laws six months on from the failure of its £39bn ($76bn) takeover bid.

The reset at Escondida is expected to result in a drop in production towards the end of the decade as capital expenditure peaks.

Barclays said this highlighted the attractiveness of adding near-term exposure through M&A and would probably increase reliance on iron ore free cashflow in the second half of the 2020s to fund copper and potash growth plans.

It also added complexity to BHP’s call on whether or not to expand WA iron ore production to 330 million tonnes a year.

“Permitting timelines and market considerations can have a big influence (on capital allocation). We believe the WAIO 330 project in particular has question marks on the latter given BHP’s reliance on iron ore for free cashflow is going to increase materially as a result of the growth planned in copper,” Barclays said in a note to clients.

Iron ore industry rivals expect BHP to increase production from its WA mines but it remains unclear by how much. Most of the industry acknowledges Chinese demand has peaked, with prices expected to soften as a result.

BHP, the world’s lowest-cost producer, has been sitting on plans to boost iron ore production to 330 million tonnes per annum (mtpa) from the Pilbara in light of market factors.

It sold 287.7 million tonnes of iron ore from the Pilbara in 2023-24 and has said it can rise to 305 million tonnes in the medium term at a low cost.

Mr Henry has said the substantial investment required to reach 330 million tonnes is being considered along with the impact it would have on iron ore prices.

BHP told analysts who visited the Escondida and Spence copper operations in November that it had a superior record of delivering projects on time and on budget than its iron ore peers in WA.

Bank of America has warned iron ore prices could soften towards $US75 a tonne in 2025 on the back of strong production from Australia and Brazil, and weaker Chinese demand. The forecast is based on a global oversupply of almost 190 million tonnes, or 8 per cent of global production.

The $34bn Simandou project in Guinea – owned by Rio and Chinese steelmakers – is expected to be in production late in 2025 and slated to be producing 90 million tonnes a year by 2028.

BHP warned in August that if global surpluses persisted as forecast, some high-cost suppliers would be “driven out of the market over time”.

Industry players remain optimistic China is holding back on a major economic stimulus package until there is a clearer picture of US president-elect Donald Trump’s tariff and other trade policies.

Fortescue executive chairman Andrew Forrest is among those backing China’s economic might, saying its iron ore demand will withstand any trade war.

Other business leaders have emerged from recent talks with Chinese authorities with the impression a major stimulus package will focus on consumers, after previous efforts to prop up the flagging property sector.

WA Premier Roger Cook has warned a US-China trade war poses a major threat to the state’s miners and jobs.

The share price of iron ore junior Fenix Resources jumped sharply on Friday after it secured new hedging contracts for a total of 120,000 tonnes between January 2025 and June 2025 at an average price of $152 a tonne.

Fenix said it had taken advantage of recent stability in the iron ore prices above $US100 a tonne and a weaker Australian dollar to extend the hedge book.

A former BHP executive, who did not want to be identified, said he expected BHP to make a renewed offer for Anglo, reflecting its conviction about decades-long strong demand for copper as part of the energy transition.

Escondida needs a capital injection of about $US10bn over the next seven years to return production to current levels in the 2030s, strengthening the case for “buy over build” in the eyes of some analysts.

BHP appointed former WA iron ore asset president Brandon Craig to lead Minerals Americas in March in a sign of the importance it placed on restoring Escondida and other copper growth projects. Mr Craig led the iron ore business to record production and results before the move.

The Anglo share price climbed 5 per cent in trading in London on Friday and is up 18 per cent since BHP’s initial offer in April.

The BHP share price has slipped 11 per cent since the all-scrip takeover deal was first touted. The share price is closely linked to iron ore prices, which are down about 30 per cent since the start of the year.

Aside from the change in valuations, another complication in winning over Anglo is the progress its chief executive Duncan Wanblad has made on a major restructure.

Anglo has raised almost $US530m through the sale of a 6.6 per cent stake in Anglo American Platinum, also known as Amplats, in a move that increased the South African business’s free float in advance of a demerger planned for next year.

Anglo also strengthened its defences against a revised BHP takeover bid by gaining a higher than expected price for its Australian steelmaking-coal mines, selling them for $US3.8bn in a deal with Peabody Energy.

Mr Henry, who will chalk up five years at the helm of BHP on January 1, is likely to regard an Anglo deal as unfinished business after the two miners butted heads over the structure of a BHP offer that required Anglo to first spin off Amplats and South African-based Kumba Iron Ore.

Mr Henry and BHP chief development officer Catherine Raw, whose responsibilities include M&A, fuelled speculation about a renewed bid for Anglo in October when they travelled to South Africa, where Anglo was founded more than a century ago, and met government officials.

Ms Raw did not take up her role as M&A boss until April 29, five days after news broke of BHP’s takeover approach.

BHP has forecast copper demand to grow by 70 per cent from 2021 to 2050 and shown its appetite for the red metal in July by agreeing to pay $US2.1bn to grow its copper footprint through projects near the Chile-Argentina border, and with the $9.6bn acquisition of OZ Minerals in 2023.
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Lobo got the past two years right with his conviction calls of uranium in 2023 and gold in 2024. Can he score a hatrick with copper in 2025?

He has a big qualifier in there on global economy, which is an easy out of he's wrong. Lots of ifs.

Copper specific starts at 24:35.

 
Sean K said:
Lobo got the past two years right with his conviction calls of uranium in 2023 and gold in 2024. Can he score a hatrick with copper in 2025?

He has a big qualifier in there on global economy, which is an easy out of he's wrong. Lots of ifs.

Copper specific starts at 24:35.

Click to expand...

Thanks @Sean K . that was very interesting particularly about the possibility of a further drop before a bull market in copper.

gg
 
redsmartie said:
Any hedge fund managers here care to explain where to now for copper stocks? I hold SFR and AIS in the copper play pen, lock in them profits and offer loans, sounds like a good tactic.
Click to expand...
well i manage a fund , for a single eccentric customer ( me )

but using SOL as a guide , when SOL buys a big piece of a company , it normally signals a slow grind to eventual success , in fact of the holdings i have where SOL is a significant holder , SOL's entry onto the register is often a signal for an 'average down ' strategy

SFR ? i could never crunch the numbers attractively for them

i suspect copper plays ( where copper is the dominant income source ) will continue to struggle on rising costs

regarding copper plays , don't neglect EVN ( they invest in other juniors ) they could easily flip into a ( mostly ) copper play , with a good JV find or acquisition

and despite the stumbles and delays .. the elephant in the ( copper ) room is BHP ( especially after they evicted me from Oz Minerals )

i hold AIS , EVN , and BHP
 
@Captain_Chaza is right onto this. China announces it's intention to boost its economy by implementing "more proactive fiscal policies and moderately "loose" monetary policies."

Chinese stocks on the US market are all going to gap up on open. Copper has perked up too.
 
Good morning
Published AFR electronic 12/12/24:

Citi initiated coverage on metal producer Capstone Copper with a “buy” rating and a $C12.30 per share target price which the broker converted to $13.60. “We see positive earnings momentum on execution of growth projects and upward revisions to copper prices”, said Kate McCutcheon, an analyst at Citi.

The broker predicts copper prices to rise to $US10k/t vs the street price of $US9.2k/t.

Ms McCutcheon noted that compared to ASX peers, Capstone’s growth pipeline plans of 400kt per year is “a standout”. Delivery on guidance under the incoming chief executive will be key to incremental inflows, she said.

Citi is bullish on copper prices in the medium-term because of the global decarbonisation plan.

## Posted also within CSC thread

Have a good day, today.

Kind regards
rcw1

Kind regards
rcw1
 
peter2 said:
Copper price now near US$4/oz. Any lower ($3.9/oz) and I'll load the van. Much lower ($3.8/oz) and I load a truck.
Click to expand...
😂And even lower and you have to sell the house?
Remember that oil price went negative...
Not exactly supply and demand or is it?
There is no limit to irrationality
Note: being old school i actually bought 29,ffm and wire but have no illusion i could see severe losses here
 
I've picked up a little bit of 29M for a probable fairly long hold.
I'm relaxed knowing that lots of trucks would load up below $4 :pompous:
 
peter2 said:
The trucks are loading copper, not wannabe copper miners.

If copper gets to $3.6/oz I'm going to borrow @Sean K's semi and put the filly loaded van in the front trailer, the fully loaded truck in the 2nd trailer and fill any left over space with more copper. Only then will I place a call to the Chinese premier.
Click to expand...
Do you have a physical copper ETF @peter2? here or US ?
WIRE is as good as i use for generic copper
 
I see that Sprott has started a physical copper "trust" listed in Canada (TSX, NEO) with an OTC listing as well.
These are pretty new with low daily volume. I won't use them.

If POC goes below $3.8/oz I'll buy a futures contract or two. There's a mini contract as well.

On the ASX, WIRE looks to have a good spread of global copper miners. I'm concerned that, like gold in 24, copper miners may lag the POC when POC rallies.

All jokes aside my current copper position size is ~5% capital and even after loading the van, truck and semi I'll limit it to <10% investment capital.
 
divs4ever said:
well i manage a fund , for a single eccentric customer ( me )

but using SOL as a guide , when SOL buys a big piece of a company , it normally signals a slow grind to eventual success , in fact of the holdings i have where SOL is a significant holder , SOL's entry onto the register is often a signal for an 'average down ' strategy

SFR ? i could never crunch the numbers attractively for them

i suspect copper plays ( where copper is the dominant income source ) will continue to struggle on rising costs

regarding copper plays , don't neglect EVN ( they invest in other juniors ) they could easily flip into a ( mostly ) copper play , with a good JV find or acquisition

and despite the stumbles and delays .. the elephant in the ( copper ) room is BHP ( especially after they evicted me from Oz Minerals )

i hold AIS , EVN , and BHP
Click to expand...
Agree re BHP. It’s as good an exposure for me to Cu and Fe as any other.

I can’t remember whether they both exactly run in tandem.

gg
 
Interesting article in today's afr about Ivanhoe mining (Canada and US listed but i could only buy Canada) and congo mine/potentially take over target for bhp/rio
 

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