One of the big earnings reports of this season came last week with the release of the BHP Group Ltd (ASX: BHP) 2023 financial performance. As we covered at the time, BHP's latest earnings were not very well received by the markets and saw BHP shares slide significantly afterwards.
The ASX 200 mining giant reported a nasty 17% slide in revenues to US$53.8 billion while underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) dropped by 31% to US$28 billion. In response, investors sent BHP shares down 0.7% at the time. The miner has since recovered though and closed trading on Monday 1.23% higher at $43.55 a share.
Although BHP's headline metrics didn't exactly elicit delight from investors at the time, digging a little deeper revealed some interesting facets of BHP's underlying business model. So today, let's talk about copper and the role it is playing in BHP's plans for its future.
Ever since divesting South32 Ltd (ASX: S32) back in 2015, BHP has focused on four 'pillar' commodities: iron ore, coal, petroleum, and copper. BHP has since exited the petroleum business, merging and spinning off its oil and gas assets with Woodside Energy Group Ltd (ASX: WDS) last year. The company has also expanded its nickel and potash operations.
Is BHP betting on copper?
But it's copper that BHP seems to be hitching its fortunes to going forward. Earlier this year, the miner finalised the $9.6 billion acquisition of copper heavyweight Oz Minerals, which significantly added to the company's copper exposure.
Copper, unlike coal or petroleum, is a commodity that has a bright future in the 21st century. It is a major ingredient in almost every electronic device in existence and plays a major role in the production of electric vehicles and batteries.
Looking at BHP's FY23 results, we can see that the company's copper operations are expanding. The company produced 1,717 kilotonnes (kt) of copper over FY23, up from 1,574 kt in FY22. BHP expects this to grow to a range of 1,720-1,910 kt in FY24.
In FY23, copper brought in US$6.7 billion in underlying earnings, making up 23% of BHP's entire earnings base. That compares to 59% for iron ore and 18% for coal. That's up from 19% in both FY19 and
FY20.
Compared to other large ASX mining shares, BHP has by far the most exposure to copper. BHP's rival miner Rio Tinto Limited (ASX: RIO) reported that over its 2022 financial year, copper made up just 8.77% of its earnings base. Fortescue Metals Group Limited (ASX: FMG) is exploring some options in copper but, as of this financial year, is not producing any meaningful levels of the metal.
So BHP is clearly the dominant producer of copper on the ASX, especially after its OZ Minerals acquisition. No doubt shareholders will appreciate this exposure to this future-facing metal. It will be interesting to see how copper evolves within BHP's portfolio over the coming years as demand for the commodity evolves.
