With Trump's Operation Epic Fury possibly turning into an epic failure, it's a sea of red on the stock exchange today, as it was yesterday and the day before. BHP dropped from its all-time high of $59.25 on Monday to $52.07 today — a drop of $7 and still falling! I didn't see this coming or I wouldn't have stubbornly held on until yesterday when the shares went ex-dividend. It's too late to sell now as things could turn on a dime — or drag on for months and even years — and so I console myself with this article which was posted in February by intelligentinvestor.com.au:
"It's hard not to be impressed by BHP. The world's biggest miner generated US$5.6bn of net profit, US$9.4bn of operating cash flow and paid US$0.73 in dividends. Oh, and this was all for the half year of 2026.
BHP is among the most profitable businesses in Australia, with Rio and Commonwealth Bank the only others that come close. It is an icon, a profit machine and, for some including myself, an eternal fascination.
The fantastical profits come from owning the world's best geological assets.
BHP is at once the world's lowest-cost iron ore miner, the largest copper producer, owner of the planet's largest uranium mine, as well as its richest metallurgical coal mines. The best mines in the world are only part of its story.
The BHP icon has been forged by decades of errors, squanders and misadventures. No other business has thrown money away so recklessly or made it as effortlessly for so long.
Yet over the past decade, BHP has transformed into something else. It has become sensible.
There are no more foolish forays into hot metals or exciting mines. Heck, three lithium booms have come and burst, yet BHP sat it out. It didn't buy rare earths, tin or cobalt when those were hot. Twenty years ago, it would have bought and written them off by now.
Instead, BHP has shrunk. It has spun off petroleum, industrial metals, thermal coal and shale. It has gone from being the butt of jokes to the benchmark for sensible capital allocation in global mining. I still shake my head in disbelief writing that sentence.
This change shows in the numbers. Over the past decade, BHP has returned US$110bn to shareholders. That's far from Apple, which has returned US$700bn, but its more than anything else on the ASX.
The business today is arguably in the best condition it has ever been in. Iron ore, of course, remains one of the best businesses anywhere, but it is now the second largest in BHP after copper.
Copper now contributes just over half of earnings and will grow substantially over the next decade. BHP appears to have cracked the profit code at Escondida, the world's largest copper mine, where years of spending are finally paying off.
The copper business generated operating margins of 66%, higher than even iron ore, and return on capital was an impressive 22%.
This reflects both operating nous and high copper prices. Your analyst isn't as fawning of copper as the market appears to be but it's clear BHP has the best growth assets on the planet.
Combining Oz Minerals mines with Olympic Dam will create one of the largest copper hubs in the world (also a potential uranium giant). The partnership with Lundin, a storied mining house, in Argentina is on track to unlock what appears to be the best undeveloped copper asset in the world.
Even a copper sceptic must applaud the growth path ahead. BHP doesn't need booming copper prices. It will have the lowest cost, highest quality mines in development.
After spending almost US$10bn, the miner's most unconventional bet, in potash, will start production in just 18 months. Jansen is a giant potash mine in Canada and will engage BHP in what it does best: move swathes of earth across distance at low cost.
The potash market has been a cosy oligopoly for years and Jansen will join as one of the largest sources of new supply. BHP expects to generate US$1bn in operating profits at 60% margins when production kicks off.
Profits are expected to rise even higher as stage two lifts output. We await the new project with interest. Not many of us have seen a new potash mine at scale.
The one problematic part of the business is metallurgical coal. While BHP commands the thickest, richest seams in Queensland's Bowen Basin, higher cost and usurious royalty rates mean it is losing money even while peers like Whitehaven and Stanmore generate reasonable returns. BHP paid almost twice as much in coal royalties as it made in profit last year.
Even with coal generating a near-zero return, BHP is humming and with sensible growth projects underway, the business would have to do something dramatically silly to change course.
Perhaps it's a long memory or scars from past battles; we've been too conservative about BHP. This is a fine business with excellent assets and proven management using an approach that has worked over cycles. Most portfolios would benefit from owning it. Valuations are hard in mining because they move with commodity prices, but low-cost copper expansion and new potash output ought to provide decades of growth ahead. That is impressive. HOLD, with our Sell price at $60."
It's time for an afternoon nap. The share market can take care of itself.
P.S. BHP closed at $52.81. Apart from the obvious short-sellers, both BHP and RIO are down because of renewed tensions with Chinese buyers. China’s state-backed buyer reportedly urged traders to halt purchases of new BHP cargoes after shipments were found to breach existing procurement restrictions, further escalating a standoff.
