australian
a40 aristocrat
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Been looking to diversify my investment port a bit and get some exposure to mining/minerals, so I've been looking into BHP (ASX:BHP) and wanted to share my thoughts.
Currently sitting at $49.80 AUD. Looking to start DCA'ing in five figs worth at around $46.
Copper just had its biggest annual gain since 2009. Every major bank is now bullish for 2026. UBS and Citi are both targeting $13,000 USD/t. JP Morgan sees $12,500 in Q2 2026. Bank of America has a 2026 average of $11,300 rising to $13,500 in 2027. Even the more cautious banks are calling for $12,000+. We're currently sitting around $11,000 USD/t so the upside being priced in across Wall Street is substantial.
Every EV needs 3-4x more copper than a petrol car. Data centres, solar farms and wind turbines all require massive amounts. The problem is there are almost no new large copper mines coming online. It takes 15-20 years to permit and build a major copper mine. Supply simply cannot respond that quickly to demand, which is exactly the setup for a sustained price spike.
Then you layer in tariffs. Trump's tariff threats caused US companies to panic buy copper last year, pulling forward enormous amounts of demand and driving the price surge. Even if some of that unwinds short term, the underlying tariff regime is creating a structural incentive to onshore manufacturing and infrastructure in the US, all of which is intensely copper heavy.
BHP is perfectly positioned for this. Copper is already nearly 40% of their EBITDA, up from 24% just a few years ago. They have Escondida, the world's largest copper mine, the Olympic Dam, and the Vicuna JV in Argentina targeting 700,000 tonnes per year. On the numbers, copper production just hit record levels at 1,862kt in FY24 and guidance for FY25 is up to 2,045kt. Iron ore is stable at around 260Mt. Every $500/t move in copper equals roughly $900m in EBITDA. Every $10/t move in iron ore equals $1.4bn. So if copper goes from $11,000 to $13,000 that's around $3.6bn in additional EBITDA just from that move alone.
The stock is currently trading at about 8.5x EV/EBITDA which is the low end of its historical range. ROCE is still around 27%, ROE around 44%, and the dividend payout has been disciplined at roughly 50-54% of earnings.
In my mind, bear case iron ore falls to $80/t and copper retraces to $9,000/t, EBITDA drops to $22bn and at 6.5x you're looking at $36-39 AUD. That requires both commodities to dump simultaneously. Base case is roughly where consensus sits, iron ore holds around $95-100/t and copper at $11,000/t, giving $27-28bn EBITDA and $55-62 AUD. Bull case copper hits what UBS and Citi are forecasting at $13,000/t, EBITDA jumps to $34-36bn, and at 7-7.5x you get $68-76 AUD. Worth noting those multiples are deliberately conservative. If the copper supercycle narrative really takes hold the multiple itself re-rates higher, which is upside not even captured in those numbers.
Let me know what you think, personally I'm waiting for $47 and loading up.
Currently sitting at $49.80 AUD. Looking to start DCA'ing in five figs worth at around $46.
Copper just had its biggest annual gain since 2009. Every major bank is now bullish for 2026. UBS and Citi are both targeting $13,000 USD/t. JP Morgan sees $12,500 in Q2 2026. Bank of America has a 2026 average of $11,300 rising to $13,500 in 2027. Even the more cautious banks are calling for $12,000+. We're currently sitting around $11,000 USD/t so the upside being priced in across Wall Street is substantial.
Every EV needs 3-4x more copper than a petrol car. Data centres, solar farms and wind turbines all require massive amounts. The problem is there are almost no new large copper mines coming online. It takes 15-20 years to permit and build a major copper mine. Supply simply cannot respond that quickly to demand, which is exactly the setup for a sustained price spike.
Then you layer in tariffs. Trump's tariff threats caused US companies to panic buy copper last year, pulling forward enormous amounts of demand and driving the price surge. Even if some of that unwinds short term, the underlying tariff regime is creating a structural incentive to onshore manufacturing and infrastructure in the US, all of which is intensely copper heavy.
BHP is perfectly positioned for this. Copper is already nearly 40% of their EBITDA, up from 24% just a few years ago. They have Escondida, the world's largest copper mine, the Olympic Dam, and the Vicuna JV in Argentina targeting 700,000 tonnes per year. On the numbers, copper production just hit record levels at 1,862kt in FY24 and guidance for FY25 is up to 2,045kt. Iron ore is stable at around 260Mt. Every $500/t move in copper equals roughly $900m in EBITDA. Every $10/t move in iron ore equals $1.4bn. So if copper goes from $11,000 to $13,000 that's around $3.6bn in additional EBITDA just from that move alone.
The stock is currently trading at about 8.5x EV/EBITDA which is the low end of its historical range. ROCE is still around 27%, ROE around 44%, and the dividend payout has been disciplined at roughly 50-54% of earnings.
In my mind, bear case iron ore falls to $80/t and copper retraces to $9,000/t, EBITDA drops to $22bn and at 6.5x you're looking at $36-39 AUD. That requires both commodities to dump simultaneously. Base case is roughly where consensus sits, iron ore holds around $95-100/t and copper at $11,000/t, giving $27-28bn EBITDA and $55-62 AUD. Bull case copper hits what UBS and Citi are forecasting at $13,000/t, EBITDA jumps to $34-36bn, and at 7-7.5x you get $68-76 AUD. Worth noting those multiples are deliberately conservative. If the copper supercycle narrative really takes hold the multiple itself re-rates higher, which is upside not even captured in those numbers.
Let me know what you think, personally I'm waiting for $47 and loading up.
