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The BHP share price is up 10% in a month: Is it too late to invest?

Although the BHP Group Ltd (ASX: BHP) share price is dropping 1% lower on Wednesday, it has still been among the best performing blue chips over the last 30 days.

Since this time last month, the mining giant’s shares have gained 10%. This compares to a 3.2% gain by the S&P/ASX 200 Index (ASX: XJO).

Why is the BHP share price up 10% in a month?

There have been a couple of catalysts for BHP’s strong performance over the last 30 days.

The first is the positive performance of the iron ore price. The price of the steel making ingredient has been edging higher over the last few weeks and currently stands at a lofty US$118.34 a tonne according to CommSec.

It is for the same reason that the Fortescue Metals Group Limited (ASX: FMG) share price has been a very strong performer over the same period.

Another catalyst for the BHP share price rise has been its fourth quarter and full year update.

During the 12 months, BHP achieved its production guidance for iron ore, metallurgical coal, and operated copper and energy coal assets.

The Big Australian’s iron ore business was arguably the highlight of the year. Production increased 4% on the prior corresponding period to 248 Mt.

Pleasingly, this is expected to have been achieved with Western Australia Iron Ore costs in line with its guidance of US$13 a tonne to US$14 a tonne. Which is significantly lower than the average price realised of US$77.36 a tonne during the 12 months.

This could mean another year of bumper free cash flow for BHP in FY 2020, which may result in further generous dividends when it hands its report card later this month. And if iron ore prices remain stronger for longer, FY 2021 could be a similarly positive year.

Should you invest?

BHP remains my favourite pick in the resources sector even after its strong gain over the last 30 days. I think it is a top option due to its world class and low cost operations, growth opportunities, and favourable commodity prices.

Overall, I continue to class BHP shares as a buy, especially for income investors in search of dividends in this low interest rate environment.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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