External Factors Could Keep BHP Pinned In Place

Slight Decline In Revenues Remains In Line With My Expectations

• BHP reported operational performance for H1 2025, with iron ore and copper production meeting expectations, while steelmaking coal and nickel faced declines. H1 2025 revenues declined by $2 billion year-over-year, driven by weaker realized prices in steelmaking coal and iron ore. However, unit costs improved across key assets, with Escondida mine reducing costs by 12%.
• The company’s 10% increase in copper production at Escondida is in line with my expectations that the management will turn to copper as a key mitigator of weaker revenues from other segments.
• Iron ore remains BHP’s key revenue driver, despite a 5% drop in benchmark prices due to China’s faltering property sector. However, rising steel consumption India might stage a potential turnaround down the road and it is worth keeping in mind.

Copper Growth Comes With Lower Dividends

• CEO Mike Henry touted portfolio diversification, stating that the company remains committed to copper and potash growth, as evidenced by a $10 billion capex investment in Chile. Higher copper capex is in line with my narrative expectation.
• Management also reduced the interim dividend by 50% from 72 cents to 50 cents, as I anticipated in my original narrative, albeit at a more aggressive pace (the last cut was 14%).

Higher Debt And Geopolitical Risks Pose Additional Concerns

• Net debt is expected to rise to $15 billion, reflecting capital expenditure plans and settlement costs related to the Samarco disaster. BHP remains within its target net debt range of $5–$15 billion, but ongoing litigation in the UK, Australia, and the Netherlands remains unresolved.
• Trump’s proposed tariffs on Canada could impact potash sales, but BHP is confident in finding alternative buyers. Meanwhile, the company monitors U.S.-China trade tensions, which could influence iron ore pricing.

Owing to these developments, I’m leaving my narrative unchanged.