BHP’s copper growth plans under review by South Australian Government – September 3, 2024

BHP Group (BHP Quick QuoteBHP – Free Report) recently announced that the South Australian Government has launched a review of the planned expansion of the smelter and refinery (SRE) at Olympic Dam.

The SRE plan is being implemented in two phases and is expected to take BHP’s copper production in South Australia from 322,000 tonnes in fiscal 2024 to more than 500,000 tonnes by the early 2030s. The figure is expected to reach 650,000 tonnes by the mid-2030s.

BHP’s efforts to grow copper in South Australia

Following the acquisition of OZL in May 2023, BHP established the Copper South Australia province. The deal added Prominent Hill (a high-grade copper-gold mine) and Carrapateena (an underground iron oxide-copper-gold mine) to its portfolio. Both mines are located in the highly lucrative Gawler Craton in South Australia and are close to BHP’s Olympic Dam and Oak Dam developments.

The recent development marks a significant step for BHP and the South Australian Government as they work together to significantly increase copper production in the state. A final investment decision on phase one of the SRE plan is currently scheduled for the first half of fiscal year 2027. The SRE plan is expected to unlock approximately $1.5 billion in synergies, including $0.6 billion already committed through integration

The SRE plan is supported by recent exploration success at OD Deeps, where the Company identified intercepts indicating copper grades in excess of 1% and solid prospects at Oak Dam.

BHP stated in its fiscal 2024 results that Oak Dam’s estimated mineral resource is 1.34 billion tonnes, grading 0.66% copper and 0.33 grams per tonne gold.

BHP added that the Wira shaft mine expansion project is underway at Prominent Hill, with the shaft sinking approximately 40% complete. The hoistway system is expected to extend the life of the mine until at least 2036.

At Carrapateena, BHP is investing in processing plant capacity to increase sub-level cavern throughput to 7 Mtpa. The Block Cave Expansion project, currently underway, is expected to extend the mine life beyond the existing sub-level cavern and increase throughput at Carrapateena to 12 Mtpa.

BHP’s Strategies to Grow Copper Portfolio

BHP’s copper production rose 9% year-on-year to 1,865 kt in fiscal 2024, the highest in 15 years. This was attributed to improved production at Spence and Carrapateena and the highest production in four years at Escondida.

The company’s copper production in fiscal 2022-2024 outperformed that of its peers.

BHP expects copper production for fiscal 2025 to be in the range of 1,845-2,045 kt. The midpoint of the range indicates year-on-year growth of 4%.

BHP and other miners are now focusing on increasing their exposure to futures commodities, such as copper and nickel, which are key components of the green energy transition. The company plans to allocate around 65% of its medium-term capital to futures commodities.

In July 2024, BHP strengthened its position in copper resources and its early-stage options by agreeing to acquire a 50% interest in the promising Filo del Sol and Josemaria copper projects in Argentina.

In addition to South Australia, BHP also has a pipeline of copper projects under development in Chile. These include expanding Laguna Seca concentrators, improving throughput and increasing recovery at Spence, and exploring potential leach options at Escondida and Pampa Norte. BHP is also planning a new concentrator at Escondida. Final investment decisions are scheduled from FY 2026 to 2029.

BHP also has a 45% interest in the Resolution Copper Project in the United States, one of the largest undeveloped copper projects in the world. It has the potential to become a major copper producer in North America.

BHP share price development

BHP shares have fallen 5.3% in a year, while the sector has fallen 6.2%.

Image Source: Zacks Investment Research

BHP’s Zacks Rank and Top Picks

BHP Group currently has a Zacks Rank of #3 (Hold).

Some better-ranked stocks from the basic materials sector include: Carpenter Technology Corporation (CRS Quick QuoteCRS – Free report) , IAMGOLD Corporation (IAG Quick QuoteIAG – Free report) and Eldorado Gold Corporation (EGO Quick quoteEGO – Free Report). CRS, IAG and EGO currently have a Zacks Rank #1 (Strong Buy). You can see The complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Carpenter Technology’s fiscal 2025 earnings is set at $6.06 per share. The consensus earnings estimate has moved 17% higher over the past 60 days. The average earnings surprise over the past four quarters is 15.9%. Shares of CRS have gained 125% over the past year.

IAMGOLD’s consensus earnings estimate for 2024 is set at 39 cents per share. The consensus earnings estimate has risen 44% over the past 60 days. The average earnings surprise over the past four quarters is 200%. IAG shares have risen 103% in a year.

The Zacks Consensus Estimate for Eldorado Gold’s 2024 earnings is set at $1.32 per share. The consensus earnings estimate has moved 22% higher over the past 60 days. The average earnings surprise over the past four quarters is 430%. Shares of EGO have gained 37% in a year.