How to Revalue BHP Now That Copper Leads Its Earnings

For years, the shortcut to forecasting the world’s largest miner’s share price was simple: watch Chinese property starts and count the iron ore piling up at Chinese ports. That playbook is now out of date.

With the release of the FY2026 results in August 2026, the shift that management has spent years engineering is no longer a projection. It is on the balance sheet. Copper has officially overtaken iron ore as the primary engine of both group earnings and future growth.

What this changes for you is the entire basis on which you value the company. This piece lays out a working framework for revaluing BHP around copper price signals, global supply deficits, and the specific operational realities of an asset base that now looks nothing like the iron-ore proxy of the past decade.

The FY2026 tipping point in underlying EBITDA

The scale of the shift is the story. In FY2026 (the year ended 30 June 2026), copper delivered record underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of roughly US$18.2 billion, up 48% year-on-year. That single number accounted for 54% of the group total.

Iron ore, the commodity that defined the company for a generation, generated approximately US$14.53 billion in operating earnings, or about 44% of the group total. Group underlying EBITDA landed near US$32.9 billion, up 27% on the prior year.

Iron ore market dynamics in 2026 remain significant for the segment that still contributes 44% of group EBITDA: Chinese steel production constraints, a property sector that has not fully stabilised, and rising low-grade ore discounts all continue to weigh on the benchmark price that feeds the company’s second-largest earnings line.

The margin gap is what should reset your thinking. Copper produced its earnings at a roughly 70% EBITDA margin, the highest of any major segment. Iron ore, still highly profitable, ran at about 61%. Copper is not just contributing more; it is contributing more efficiently.

This is not a lucky cyclical spike layered on an unchanged business. It reads as the culmination of a deliberate multi-year strategy to pivot away from China-centric bulk commodities toward future-facing metals. CEO Mike Henry framed the half-year milestone, when copper first crossed 51% of EBITDA, as a roughly 30-percentage-point rise in just three years.

The practical takeaway is that your legacy method for forecasting dividends and fair value is now working off the wrong input. If you are still anchoring your model to iron ore shipment volumes, you are reading the smaller half of the business. The forecasting task that matters now runs through global copper price curves.

Understanding the copper market premium

To value the company today, you first need to understand why a tonne of copper earns so much more than a tonne of iron ore. The two commodities operate in fundamentally different market structures.

Iron ore is a bulk commodity: abundant, moved in enormous volumes, and priced largely off Chinese steel demand. Copper is a traded metal set on global exchanges such as the LME and COMEX, where a genuine supply deficit can push prices far above the cost of production. That structural scarcity is what creates copper’s margin premium.

Here is how analysts turn that structure into a price target, broken into the three drivers you should watch:

1. Long-term consensus pricing curves. Banks model free cash flow using agreed long-run copper prices rather than volatile spot levels. The company’s own materials reference UBS long-term consensus copper of US$4.76/lb for long-dated modelling and US$5.40/lb for the medium term (FY27-31).
2. Spot price variances. Actual market prices swing well away from those baselines. As of early September 2026, spot copper was hovering around US$6.53 to US$6.58/lb, materially above the consensus assumptions feeding most valuation models.
3. By-product credits. Gold, silver and uranium recovered alongside copper generate revenue that offsets production costs, lowering the effective cost per pound and inflating the segment’s headline margin.

The gap between that spot price and the long-term baseline is the whole game. When spot runs 20% or more above consensus, as it does now, analysts face a choice: hold their conservative curve and flag downside, or upgrade the curve and lift the price target.

That is precisely why broker targets on this stock diverge so widely. It also gives you a tool. When you read the next round of broker notes, look straight at the copper price assumption in the model. If a target moves, it is usually the curve moving, not the mine.

Price drivers, supply shocks and the Grasberg deficit

There are two stories competing to explain copper’s surge, and you need to hold both at once. The first is structural: electric vehicles, renewable grids and, increasingly, the power-hungry build-out of data centres all demand more copper than the world currently mines. The second is cyclical and far more fragile.

The structural narrative is real, but it is not what put spot prices above US$6.50/lb this year. That job fell to a run of supply failures that stripped hundreds of thousands of tonnes out of an already tight market.

The clearest example is the Grasberg mine in Indonesia, one of the largest copper and gold operations on earth. A severe mudflow in September 2025 suspended key underground operations. A Reuters analysis estimates nearly 600,000 tonnes of contained copper will be lost from the incident through to the end of 2026, with full capacity now not expected until early 2028.

The cyclical and structural narratives reinforcing today’s copper price do not behave independently: the copper supply deficit now running through 2026 is simultaneously tightening exchange inventories, compressing smelter treatment charges, and pulling spot prices well above the long-run consensus curves that underpin most valuation models.

The scale of the shortfall Barrenjoey Capital Partners metals analyst Daniel Morgan estimates roughly 900,000 tonnes of copper are “missing” from the global market in 2026, layering a sharp cyclical supply shock on top of the longer-term structural story.

What this tells you is that a meaningful chunk of the current price is temporary. If global mine supply recovers faster than the deficit camp expects, the cyclical premium can unwind quickly, and your exposure sits directly in that pullback.

The supply chain fragility factor

The deeper lesson from Grasberg is about concentration. A large share of global copper comes from a handful of enormous mines in a handful of jurisdictions, notably Indonesia and the Democratic Republic of Congo. A single-point failure at one of them ripples straight through global pricing models.

In a balanced market, one mine going offline is absorbed. In an already tight market, the same event has an outsized effect on spot prices, because there is no slack to draw on. The company’s own CEO has warned publicly that copper tightness is hard to resolve and that only a few disruptions can push the market into deficit.

For you, that fragility cuts both ways. It supports today’s prices, but it also means the price you are underwriting today depends on accidents staying unresolved.

Operational execution and the cost of becoming a copper major

Favourable pricing is only half the equation. The other half is whether the company can actually dig the metal out of the ground, and here the near-term picture demands caution.

The clearest warning sits in the guidance. FY2027 copper production has been cut to 1.65 to 1.80 million tonnes, down from the roughly 1.95 million tonnes delivered in FY2026. Higher prices met with lower volumes is not the clean tailwind the headline results imply.

The problems are specific and geographic. According to the Australian Financial Review, a mechanical failure at one of the South Australian mines (part of the former OZ Minerals portfolio) is compounding an ongoing decline in ore quality at Escondida in Chile, where each tonne of rock yields less copper than it used to.

The risks split cleanly by region:

• South Australia integration: Mechanical failure and rising execution reliance across Olympic Dam, Carrapateena and Prominent Hill, the assets absorbed through the OZ Minerals deal completed in May 2023.
• Chilean grade decline: Falling ore quality at Escondida, which raises unit costs even when the copper price is strong.
• Brazilian ESG exposure: The company’s Modern Slavery Statement 2025 flags heightened human-rights and modern-slavery risks in the Brazilian assets inherited from OZ Minerals, a genuine social-licence and reputational risk.

Chilean operational risks extend beyond grade decline: severe weather events in the Atacama region have periodically forced production stoppages at Escondida and neighbouring operations, adding another layer of geographic concentration risk to any copper-heavy portfolio thesis built on stable annual output.

Being the world’s largest copper producer amplifies all of this. Regulatory, permitting and community risks stretch across Chile, Peru, South Australia and South America, and any large future acquisition invites antitrust scrutiny given the combined market share.

The read you should take is a disciplined one. The macro backdrop is genuinely favourable, but you cannot assume a rising copper price flows straight through to a rising dividend. Site-specific execution in South America and Australia sits directly in the path between the two.

Recalibrating portfolio expectations for a transformed miner

The transition is complete. This is a copper-led earnings engine that still happens to run a very large iron ore business, not the reverse.

That flips your job as a shareholder. Tracking Chinese steel demand and port stockpiles now explains the smaller half of the company. Global copper price curves, supply deficits and forward consensus revisions are the signals that move the valuation.

The single number to watch next is FY2027 production guidance of 1.65 to 1.80 million tonnes. It is the direct test of whether operational execution can keep pace with an exceptional pricing environment. If volumes recover, the bull case holds. If they slip further, favourable prices will not save the earnings line.

Investors exploring how to position around this commodity pivot across a broader portfolio will find our dedicated guide to ASX mining stocks in 2026 useful, covering how copper-weighted producers compare to iron-ore-heavy peers on valuation multiples and dividend sustainability.

This article is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and consult with financial professionals before making investment decisions.

Past performance does not guarantee future results. Financial projections are subject to market conditions and various risk factors, and forward-looking statements are speculative and subject to change based on market developments and company performance.