Buying at the current BHP Group Ltd (ASX: BHP) share price could be attractive for investors wanting exposure to the ASX mining share.
As the chart below shows, the company is not that close to its 52-week low, but it could still be a good investment at the current valuation for a few different reasons.
However, the current valuation is 5% lower than where it was at the end of August, which is a fairly sizeable drop for a company that has a market capitalisation of around $200 billion. This could be the right time to pounce for interested investors.
Let's get into the positive reasons why it could be a good investment for the long-term at this level.
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Copper exposure
BHP has made a significant effort over the last few years to expand its copper portfolio, which I think is a great move because of the global demand for copper (not just from China). Plus, the outlook for copper demand and the copper price looks compelling.
Copper demand is expected to rise in the coming years thanks to electrification, with electricity grid expansion and electric vehicles being two key drivers.
However, it is reportedly increasingly difficult to find high-grade, quality copper deposits, which may help lead to higher copper prices in the coming years.
While BHP was unsuccessful in its attempt to buy Anglo American, it would not surprise me if the business aims to make other copper acquisitions in the coming years to boost its scale.
I believe copper will become a larger part of BHP's profit generation in the coming years. It has an aspiration to double production from its Copper SA business in the coming years.
Iron ore price
Iron ore has been the key earnings generator for the company over the years, making it integral for the BHP share price. It could still be, depending what happens with the resource price.
The iron ore price has jumped to US$105 per tonne recently, an increase of around US$10 per tonne over the past two months, according to Trading Economics.
Mining companies' profitability is heavily exposed to fluctuations in commodity prices. Production costs don't typically change much month to month or even year to year for miners, so changes in the revenue per tonne can significantly add to (or take away from) the net profit.
If the iron ore price stabilises or even rises from here, I think BHP's monthly iron ore earnings can be pleasing and possibly grow materially.
The business is aiming to grow its iron ore production in the years ahead and this could help increase this division's profitability.
Potash diversification
I like that the business already generates earnings from multiple commodities – copper, iron ore and coal. It's looking to open another growth avenue with potash, which is seen as a greener form of fertiliser.
It has a project called Jansen that it's working on in Canada. BHP says Jansen is set to be a high-quality, low-cost asset with strong free cash flow conversion once ramped up. The unit cost once ramped up is set up to be US$105 per tonne to US$120 per tonne.
The estimated capital expenditure cost of this project is between US$7 billion to US$7.4 billion – it's a major project. First production is estimated for mid-2027. Having another commodity as part of its line-up is good for reducing the risk of being too exposed to one resource (like iron ore) and makes the BHP share price more appealing.
