BHP's Copper Pivot Divides Fund Managers Even as Shares Sit Near Record Highs

BHP is now a copper company with an iron ore cash machine attached, and fund managers are arguing about what that is worth. The miner's FY26 result, handed down in August, confirmed that copper has overtaken iron ore as BHP's largest earnings contributor for the first time, arriving just as the shares trade near the record high they set in June. That combination has split opinion sharply. Some managers think the market still underestimates how much bigger BHP's copper business can become. At least one thinks the stock is simply overvalued and has taken a short position against it.

Copper has taken over as the earnings engine

Tamim Funds Management laid out the shift in detail: in the FY26 result, copper generated more than US$18 billion of underlying earnings, or 54 percent of the group total, up from 50 percent in the prior half. Group revenue rose 15 percent to US$58.76 billion and underlying attributable profit, stripping out one-off items, rose 30 percent to US$13.20 billion. Net debt fell to US$8.7 billion from US$12.9 billion a year earlier, and the fully franked final dividend of 99 US cents took the full-year payout to US$1.72 per share, the highest in four years and a payout ratio of 72 percent. Plato Investment Management called it simply a strong result, pointing out that BHP's copper margins, at around 70 percent, now sit even above its already strong iron ore margins, and that the business continues to take costs out.

Pendal Group's August newsletter framed the result as a beat, with underlying earnings 4 percent ahead of estimates on better than expected costs at the Escondida copper mine, free cash flow of US$10 billion, and a payout ratio lifted to 66 percent, above the roughly 55 percent average of recent years. Pendal noted the contrast with a year earlier, when BHP was cutting capital spending and flagging asset sales, and said it does not expect the recent re-rating in the shares to reverse in the near term.

The growth pipeline comes with a cautionary tale

The same result carried a warning. Tamim pointed to a US$2.3 billion impairment on the Jansen potash project in Saskatchewan, where the second stage's cost estimate rose 41 percent to roughly US$6.9 billion and first production slipped to late FY2031. BHP is committing close to US$11 billion a year in capital and exploration spending over FY27, split across copper growth projects including an Escondida concentrator, the Ministers North iron ore expansion in the Pilbara, and the Vicuña copper district in Argentina. Tamim's view is that the pattern at Jansen, large mining projects tending to cost more and take longer than approved, is a reason to treat BHP's growth pipeline with some caution even as the underlying assets remain high quality. Copper volumes are also guided to step down in FY27 before the growth projects arrive, as grades decline at Escondida, and a new chief executive, Brandon Craig, has just taken the reins, a transition Tamim flagged as one that often brings portfolio reviews and can produce further impairments or changed capital priorities.

Bulls see a much bigger BHP still to come

Regal Funds Management's Julian Aitken went further, arguing consensus badly underestimates BHP's future earnings. He pointed to BHP's own guidance for copper production to rise 50 percent by the mid-2030s, with three major projects due online over the next 12 to 18 months, self-funded and still leaving a projected US$35 billion of attributable free cash flow over five years. Aitken argued that investment banks forecasting BHP's earnings to go backward over the next three years are betting on commodity prices reverting to the cost curve, something copper has rarely done. On his numbers, BHP's index weight could eventually roughly double from here.

Not everyone is convinced

Leithner & Company took the opposite view in July, when BHP shares briefly touched an all-time high above $65. The fund estimated the stock was more than 40 percent overvalued at that price, with fair value closer to $37.50, or nearer $30 for conservative investors, and said it had taken a short position. Leithner does not dispute that BHP is a well-run, world-class business. Its argument is about price: that bulls have overhyped the copper outlook and, in doing so, priced in returns the company is unlikely to deliver over the next five to ten years.

That view sat alongside more cautious portfolio moves elsewhere. Alliance Bernstein trimmed its BHP position in July after the stock's outperformance, taking profits rather than adding. Blackwattle Investment Partners noted BHP underperformed for a stretch as the iron ore price came under pressure from a prolonged China property downturn, buying-power pressure from China's state-backed resources group, and rising global supply as Guinea's Simandou project ramps up, a reminder that the iron ore side of the business still carries real cyclical risk even as copper takes the spotlight.

Where the debate lands next likely depends on execution rather than argument. Fund managers say they are watching how new chief executive Brandon Craig handles the portfolio, whether the Escondida concentrator and other copper growth projects reach final investment decisions on schedule, whether Jansen's costs stabilise after two upward revisions, and whether copper prices hold up well enough to justify the premium bulls like Regal are prepared to pay. For now, BHP's shares, close to a record high after roughly doubling from their 2025 low, are pricing in a good deal of the optimistic case already.