EXTRA: BHP shares fall despite saying it is in "good shape"

(Alliance News) - BHP Group Ltd said on Tuesday it is well positioned to continue strong momentum into the second half of its financial year.

In an operational review, the Melbourne, Australia-based resource miner, with a market capitalisation of AUD205.65 billion or around USD128.43 billion, is in "good shape and we have a clear pathway for growth", BHP Chief Executive Officer Mike Henry said.

But shares in BHP were down 2.5% at 2,033.83 pence on Tuesday in London, and they fell 2.5% to ZAR463.26 in Johannesburg. In Sydney, shares ended 0.9% higher at AUD40.61 on Tuesday.

BHP faces tough questions about the costs of copper projects.

Berenberg estimated recently that BHP's growth projects across Chile, Argentina and Australia could cost between USD21 billion and USD26 billion over the next 10 years.

The lender thinks that BHP's medium-term capital expenditure guidance will need to rise towards USD12 billion and USD13 billion from USD11 billion.

BHP has had to resort to organic growth after failing last year to take over Anglo American PLC.

"We are well positioned to continue strong momentum into the second half with a number of assets now expected to deliver production in the upper half of their respective ranges, while maintaining tight cost control," Henry said.

The BHP chief said the miner had made further progress on its growth pathways in "future facing commodities", such as copper.

On Thursday last week, it completed the formation of Vicuna Corp with Lundin Mining Corp to advance the Filo del Sol and Josemaria copper projects, which it considers to be "one of the most significant global copper discoveries in decades".

Vicuna is a 50-50 joint venture that will hold the Filo del Sol and Josemaria projects, which are located in the Vicuna district of Argentina and Chile. Lundin Mining owns 100% of the Josemaria project.

BHP and Lundin Mining last week also completed their joint acquisition of Filo Corp for about CAD4.0 billion. Filo owns the Filo del Sol copper project, located along the border of the San Juan province in Argentina and the Atacama region of Chile.

BHP also said on Tuesday its Jansen Stage 1 potash project is now 63% complete, with first production scheduled for late 2026, and it will continue to execute Stage 2 in parallel.

For the first half of the 2025 financial year, BHP reported it had delivered "safe and reliable" performance in the first six months that ended December 31.

It noted that its flagship copper, iron ore and steelmaking coal assets delivered particularly "strong" production.

Copper production rose 10% to 987,000 tonnes for the first six months from 894,000 tonnes a year earlier.

BHP kept 2025 production guidance at all assets unchanged, with the exception of Copper South Australia, which has been lowered due to the weather-related power outage.

Annual copper production guidance is between 1.85 million tonnes and 2.05 million tonnes, compared to 1.86 million tonnes for the year to June 30, 2024.

At Copper South Australia, strong underlying performance in the first quarter was followed by a two-week weather-related power outage due to a significant storm at the beginning of the second quarter.

Iron ore production for the first half was 131 million tonnes, up 1.5% from 129 million tonnes, driven by strong output at Western Australia Iron Ore, or WAIO, in Australia.

Full-year iron ore output remains unchanged at between 255 million tonnes and 265.5 million tonnes.

Steelmaking coal production at BHP Mitsubishi Alliance or BMA - its coal joint venture with Mitsubishi Development in Queensland - fell 21% to 8.9 million tonnes from 11.3 million tonnes, from 260 million tonnes.

Also, steelmaking coal production is unchanged at between 16.5 million tonnes and 19 million tonnes, compared to 22.3 million tonnes.

BHP said it remains focused on restoring value chain stability, in particular building raw coal inventory, which will continue into calendar year 2026.

Energy coal production at New South Wales Energy Coal or NSWEC was down 1.3% to 7.4 million tonnes from 7.5 million tonnes.

Production guidance for energy coal remains unchanged at between 13 million tonnes and 15 million tonnes, with production now expected to be in the upper half of the range, from 15.4 million tonnes.

Nickel production at Western Australia Nickel in the first half slumped 31% to 28,000 tonnes from 40,000 tonnes, after BHP temporarily suspended its nickel operations in Western Australia from October last year. The miner is grappling with a glut in the global market for the metal.

BHP expects costs to be elevated in the first half, as a result of operational and ramp down activities, combined with the drawdown of inventory as the operations transitioned to temporary suspension.

It said it has redeployed over 800 employees, with the majority moving to roles across the Australian operations. BHP intends to review the decision to temporarily suspend Western Australia Nickel by February 2027.

No nickel production guidance has been provided for the 2025 financial year.

For the first half, earnings before interest, taxes, depreciation and amortisation took a knock, comprising USD150 million due to the weather-related power outage and USD300 million linked to nickel operation.

Panmure Liberum described BHP's first-half production as "good" across the board, with the only miss at Olympic Dam.

By Artwell Dlamini, Alliance News reporter

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