BHP Group BHP disclosed that the South Australian government has commenced an evaluation of its proposed Smelter and Refinery expansion at Olympic Dam.
The Smelter and Refinery expansion (SRE) initiative will be executed in two phases, aiming to escalate BHP’s copper production in South Australia from 322,000 tons in fiscal 2024 to over 500,000 tons by the early 2030s, with projections reaching 650,000 tons by the mid-2030s.
BHP’s Strategic Growth Initiatives in South Australia
After acquiring OZL in May 2023, BHP set up the Copper South Australia province, incorporating Prominent Hill (a premier copper-gold mine) and Carrapateena (an iron-oxide-copper–gold underground mine) to its portfolio. Both mines are situated in the highly lucrative Gawler Craton in South Australia, adjacent to BHP’s Olympic Dam and Oak Dam development project.
This recent endeavor signifies a crucial advancement for BHP and the South Australian government in their collaborative efforts to substantially increase copper production within the state. A final investment decision regarding phase one of the SRE plan is anticipated in the first half of fiscal 2027. The SRE strategy is forecasted to unlock approximately $1.5 billion in synergies, encompassing $0.6 billion already captured through integration.
Supported by recent exploration accomplishments at OD Deeps, BHP has identified intercepts indicating copper grades exceeding 1% and promising prospects at Oak Dam.
In its fiscal 2024 results, BHP stated that Oak Dam’s Inferred Mineral Resource stands at 1.34 billion tons with a 0.66% copper grade and 0.33 grams per ton gold grade.
BHP also reported that the Wira shaft mine expansion project at Prominent Hill is progressing, with shaft sinking completion at about 40%. The hoisting shaft system is poised to extend the mine life to at least 2036.
Meanwhile, at Carrapateena, BHP is investing in enhancing processing plant capacity to increase throughput from the sub-level cave to 7 Mtpa. The Block Cave Expansion project, presently underway, is expected to extend the mine life beyond the current sub-level cave and boost throughput at Carrapateena to up to 12 Mtpa.
BHP’s Astute Copper Portfolio Development Strategies
BHP observed a 9% year-over-year surge in copper output to 1,865 kt in fiscal 2024, marking its highest production level in 15 years. This increase was attributed to enhanced production at Spence and Carrapateena, alongside the highest production rate at Escondida in four years.
Notably, BHP’s copper output in the fiscal 2022-2024 period outpaced that of its rivals.
For fiscal 2025, BHP anticipates copper production to range between 1,845-2,045 kt, reflecting a 4% year-over-year growth at the midpoint.
Aligning with the industry trend, BHP and other mining companies are redirecting their focus towards future-facing commodities such as copper and nickel, vital components for the green energy transition. BHP intends to allocate roughly 65% of its medium-term capital to such commodities.
In July 2024, BHP bolstered its copper resource holdings and early-stage options by securing a 50% interest in the promising Filo del Sol and Josemaria copper projects in Argentina.
Beyond South Australia, BHP has an array of copper projects in progress in Chile. These include expansive plans for Laguna Seca concentrators, enhanced throughput and recovery at Spence, potential leaching ventures at Escondida and Pampa Norte, and plans for a new concentrator at Escondida. Final investment decisions for these projects are slated between fiscal 2026 and 2029.
Additionally, BHP holds a 45% stake in the Resolution Copper Project in the United States, one of the largest undeveloped copper projects worldwide with the potential to emerge as a major copper producer in North America.
Performance Snapshot of BHP’s Stock
BHP’s shares have declined by 5.3% over the past year, contrasting with the industry’s 6.2% downturn.
Image Source: Zacks Investment Research
BHP’s Zacks Rank & Top Picks
BHP Group presently holds a Zacks Rank #3 (Hold).
Other notable stocks within the basic materials sector include Carpenter Technology Corporation, IAMGOLD Corporation, and Eldorado Gold Corporation. At present, CRS, IAG, and EGO boast a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for Carpenter Technology’s fiscal 2025 earnings stands at $6.06 per share. Earnings estimate has surged by 17% in the past 60 days with an impressive average trailing four-quarter earnings surprise of 15.9%. CRS’ shares have surged by 125% in the last year.
The consensus estimate for IAMGOLD’s 2024 earnings is reported at 39 cents per share, reflecting a 44% increase in earnings estimate over the past 60 days. IAMGOLD boasts an average trailing four-quarter earnings surprise of 200%, with shares accruing gains of 103% in the past year.
Eldorado Gold is estimated to achieve earnings of $1.32 per share in 2024, marking a 22% uptick in earnings estimates over the past 60 days. The company boasts an impressive average trailing four-quarter earnings surprise of 430%, with shares seeing an increase of 37% over the past year.