BHP’s share of third-quarter copper sales volumes is 340,000 metric tons, down 11% on the same quarter last year, while Western Australian Iron Ore, or WAIO, sales of 59 million metric tons are flat. It has also resolved its dispute with China’s state-backed entity over iron ore contract pricing.

Why it matters: Shares are up modestly since the announcement. Guidance changes are minor, and year-to-date copper and iron ore volumes are tracking broadly in line with our fiscal 2026 estimates.

  • We now forecast Escondida unit cash costs of USD 1.20 per pound, down from USD 1.30. We are at the top end of the updated range of USD 1.00-USD 1.20, from USD 1.20-USD 1.50 previously. Our other estimates are broadly unchanged.

The bottom line: Our AUD 44-per-share fair value estimate for no-moat BHP stands. Shares have risen 24% in 2026 on the rising copper price and after it completed iron ore contract negotiations with China Mineral Resources Group. They now trade 28% above our intrinsic assessment.

  • Optimism over increasing demand for use in data centers, the electricity grid, renewables, and electric vehicles, along with near-term supply issues, sees spot copper near historical highs at USD 6 per pound. The iron ore price remains solid at about USD 110 per metric ton.
  • But we are more bearish than the market in the long term and assume copper and iron ore—the key drivers of its earnings—fall to around USD 3.80 per pound and USD 75 per metric ton, respectively, from 2030, based on our estimate of the long-run marginal costs of production.

Long view: This drives our forecast negative 2% 5-year NPAT CAGR to fiscal 2030. Lower prices more than offset increased iron ore and copper production and reduced unit cash costs.

Between the lines: WAIO unit cash cost guidance remains USD 18.25-USD 19.75 per metric ton, but we forecast USD 20.00, above the top end of guidance, driven by the strengthening Australian dollar, rising diesel and other consumable costs due to the Iran war.demand and prices sees BHP overvalued

BHP is the world’s largest miner by market capitalisation. Its main operations span iron ore and copper, with smaller contributions from metallurgical coal and thermal coal. It placed its nickel operations on care and maintenance due to low prices in 2024. BHP is also developing its Jansen potash project in Canada. It merged its oil and gas assets with Woodside Energy in June 2022, vesting the Woodside shares it received to BHP shareholders, and exiting the sector. It purchased copper miner Oz Minerals in fiscal 2023, and half of the Vicuna copper joint venture in fiscal 2025.

Commodity demand is tied to global economic growth, particularly China’s. BHP benefited greatly from the China boom over the past two decades. China is BHP’s largest customer, accounting for roughly 60% of sales in fiscal 2025. But we think demand for many commodities is likely to soften as the China boom ends, particularly iron ore, which has disproportionately benefited from the boom in infrastructure and real estate investment.

Its generally low-cost, high-quality assets mean BHP is likely to be one of the few miners that remain profitable through the commodity cycle. Much of its operations are close to key Asian markets, particularly the low-cost iron ore business, providing a modest freight cost advantage relative to some producers such as those in Africa and South America.

BHP correctly values a strong balance sheet to provide some stability through the inevitable cycles and derives some modest benefit from commodity and geographic diversification. Much of its revenue comes from assets in the relatively safe haven of Australia. The development of Jansen in Canada is BHP’s major expansion project, while it is also looking to expand copper production. It is also pursuing modest expansion of its Western Australia Iron Ore operations above 290 million metric tons (100% basis) per year.

The good times during the height of the China boom saw significant capital expenditure, notably on iron ore and onshore US shale gas and oil. Over investment in the boom diluted returns to the point where we struggle to justify a moat. As a commodity producer, it lacks pricing power and is a price taker.

Bulls say

  • BHP is a beneficiary of continued global economic growth and demand for the commodities it produces.
  • BHP’s Jansen potash project gives it additional diversification, with potash being less correlated to the other commodities it produces.
  • BHP’s iron ore assets are industry-leading. The company remains well placed to continue low-cost production and increase output with minimal expenditure and an efficiency focus.

Bears say

  • BHP has shown improved capital allocation since its missteps during the China boom, but continuing high commodity prices could encourage it to once again aggressively expand output.
  • With its earnings dominated by copper and iron ore, structurally lower demand from China could lead to significantly lower earnings.
  • Resource companies could face growing sovereign risk as governments under fiscal pressure look to plug budgetary holes by taxing the industry.

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Terms used in this article

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.