BHP profit beats forecasts as copper tops iron ore earnings on AI-driven demand

MELBOURNE, Feb 17 (Reuters) – BHP Group reported a stronger-than-expected half-year underlying profit driven by copper, which for the first time surpassed iron ore in the top global miner’s earnings, as prices for the red metal surged on AI-fuelled demand.

BHP’s shares jumped 7% to an all-time high, with investors applauding a much stronger-than-expected dividend and the prospect of sizeable payouts ahead, despite falling iron ore prices.

The strong result comes as demand for copper is soaring driven by rapid growth in power use for artificial intelligence data centres and the shift to cleaner energy, which is spurring competition among mining majors for high‑quality copper assets.

BHP, the world’s top copper producer, highlighted its own copper growth options and played down the need for acquisitions, having walked away last year from an approach to buy Anglo American.

First-half underlying attributable profit rose 22% to $6.20 billion, beating the Visible Alpha consensus of $6.03 billion. BHP declared an interim dividend of 73 cents per share, ahead of market estimates of 63 cents, representing a payout ratio of 60%.

“It was a good result,” said Andy Forster, portfolio manager at Argo Investments, a BHP shareholder. “They smashed everyone’s expectations from a dividend perspective.”

Copper, including byproducts such as gold, contributed $7.95 billion to BHP’s operating earnings in the six months ending December 31, higher than iron ore’s $7.50 billion and making up 51% of the group’s total underlying operating earnings of $15.46 billion.

That was largely driven by a 32% jump in realised prices for copper, along with soaring prices for the precious metals. A record first-half iron ore production alongside higher prices also boosted the miner’s profits.

The push to focus on copper comes amid an expected easing in prices for iron ore as supply grows over the coming years, while inflation is also boosting production costs. Iron ore prices hit a seven-month low this week.

Unit costs for iron ore grew by 7% to $19.41 per metric ton in the half year.

BHP Chief Executive Officer Mike Henry said on a media call given its organic growth options, the company did not feel pressure to pursue mergers and acquisitions for copper growth.

“For the discrete few opportunities that might come along that fit the very strict criteria that we have, we’ve got the wherewithal to pursue them, but we’re not feeling any burning need to,” he said.

Rio Tinto, the world’s largest iron ore producer, was in talks to buy Glencore , a deal that would have had major implications for the global copper sector, but walked away earlier this month citing disagreement over valuation.

BHP has been pushing to boost its copper output towards the end of the decade. In January, it lifted the bottom end of its copper production forecast for this year to between 1.9 million and 2 million tons, citing strong operational performance across its copper assets.

On Tuesday it flagged an $18 billion multi-year investment plan to develop copper, gold, and silver mining projects in northern Argentina, at its Vicuna Corp joint venture with Canada’s Lundin Mining. It said the unit has the potential to produce more than 500,000 tons of copper a year at peak production next decade.

Henry said “tough negotiations” with China over iron ore supply continued as the state buyer, CMRG, tries to extract better terms for Chinese steelmakers. He expressed confidence that the issues will be resolved, although it will take time.

BHP flagged it had seen a price impact from CMRG’s ban on its Jimblebar fines product in its quarterly report in January but did not offer further details in its earnings report.

The miner announced a silver streaming agreement with Wheaton Precious Metals for an upfront payment of $4.3 billion at completion, to deliver silver from its share of output at Peru’s Antamina mine.

That payment is part of a targeted $10 billion that BHP aims to raise from existing assets, which could help boost its dividend payout for the full year, Henry said.