BHP's Copper Assets Are Worth More Than the Market Thinks

The Western minerals alliance — encompassing the US, Australia, Canada, the EU, Japan, and South Korea — represents a coordinated effort to secure critical mineral supply chains outside Chinese control. China currently refines 70% of the world's copper, 90% of rare earths, and 80% of cobalt. Western governments have decided this concentration is a strategic vulnerability.

For BHP, this is a structural tailwind that compounds over years. Government subsidies for domestic processing, preferential trade terms for allied-nation miners, and import restrictions on Chinese-processed minerals all channel demand toward BHP's assets. The company operates primarily in Australia and the Americas — firmly within the Western alliance. Rio Tinto shares this advantage, but BHP's copper weighting is heavier and more strategic.

Global copper demand is projected to increase 50% by 2035, driven by electric vehicles, renewable energy infrastructure, data centres, and grid modernisation. Supply growth cannot keep pace. New copper mines take 10-15 years from discovery to production. The pipeline of permitted, financed, development-stage projects covers less than half of projected demand growth.

BHP controls approximately 10% of global copper production through Escondida, Spence, Olympic Dam, and the recently expanded Copper South Australia operations. At current copper prices of $4.50-5.00 per pound, these assets generate roughly $15-18 billion in annual revenue. At $6.00 per pound — which the supply-demand fundamentals suggest within 3-5 years — that figure rises to $22-25 billion.

Copper miners have historically re-rated 18-24 months before the supply deficit becomes consensus. We saw this with Freeport-McMoRan in 2020, when the stock doubled before most analysts had updated their copper price forecasts. BHP's re-rating cycle may already be underway.

The market values BHP at $196 billion. Assign a conservative 8x EBITDA to the iron ore business — BHP's largest by revenue — and you get roughly $100-110 billion. The coal business, even in run-off, adds $15-20 billion. That leaves $65-80 billion implied for copper.

Now value the copper business properly. At current production rates and $5/lb copper, BHP's copper segment generates $6-7 billion in EBITDA. At 12x — the lower end of pure-play copper miner multiples — that's $72-84 billion. The implied valuation is roughly in line.

But here's the gap. If copper reaches $6/lb (a scenario with over 50% probability within five years based on supply-demand modelling), copper EBITDA jumps to $10-12 billion. At 12x, that's $120-144 billion for the copper business alone. Add iron ore and the other segments, and you get a sum-of-parts valuation of $250-280 billion. Against a current market cap of $196 billion, that's 28-43% upside.

The analyst consensus target of $66 per share implies roughly $210 billion market cap — closer to our base case but still below the copper upside scenario.