BHP upgrades copper guidance, iron ore production tops forecasts but Jansen costs surge

BHP (ASX: BHP) upgraded its full-year copper production guidance while revealing a significant cost blowout at its Jansen potash project, with the miner's second quarter results showing strong operational performance across most commodities.

BHP lifted its full-year copper guidance to 1,900-2,000kt, up from the previous range of 1,800-2,000kt, driven by record performance at its flagship Escondida operation in Chile. Energy coal guidance has also been upgraded to the upper half of its 14-16 million tonne range.

However, the solid operational performance was overshadowed by a revised capital estimate for Jansen Stage 1, which has climbed to US$8.4 billion from the US$7.0-7.4 billion range announced in July 2025. The project was initially approved at US$5.7 billion in August 2021.

BHP shares are down 0.9% in early trade to $48.30.

Production beats expectations

BHP's Q2 FY26 performance topped market expectations across key divisions, with the company achieving record first-half production and shipments at WAIO.

Q2 FY26 production vs. consensus:

• WAIO (100% basis) up 5% year-on-year to 76.3Mt vs 74.4Mt (2.6% beat)

• Copper down 4% to 490.5kt vs 483.8kt (1.4% beat)

• Metallurgical coal down 3% to 4.3Mt vs 4.5Mt (4.4% miss)

• Energy coal up 25% to 4.6Mt vs 3.8Mt (21.1% beat)

Escondida delivered record concentrator throughput and Copper SA achieved record refined gold output, while NSW Energy Coal production increased 10% as the operation capitalised on stronger pricing.

FY26 guidance:

• Iron ore 258-269Mt, unchanged

• Energy coal 14-16Mt, upper half of prior guidance

• Steelmaking coal 18-20Mt, unchanged

• Copper 1,900-2,000kt vs prior 1,800-2,000kt

"BHP delivered another half of very strong performance with operational records at our copper and iron ore assets. This was achieved safely and in a positive commodity price environment, with copper prices up 32% and iron ore prices 4% higher year on year," said CEO Mike Henry.

Copper strategy paying off

The upgraded copper guidance reflects BHP's ability to capitalise on existing operations amid record pricing. Average realised copper prices jumped 58% year-on-year to US$5.9 per pound, driven by global mine supply disruptions and healthy demand.

LME copper price chart (Source: TradingView)

BHP is advancing its copper growth pipeline, with the Vicuna project in Argentina submitting its application for the Large Investments Incentive Regime in December. The project remains on track to complete its integrated technical report in the first quarter of 2026.

In Chile, BHP is progressing the Environmental Impact Declaration permit for Escondida's New Concentrator, which forms the centrepiece of the operation's growth program.

Mr Henry noted the company is investing for the decade ahead, with a pathway to approximately 2 million tonnes of attributable copper production annually.

Jansen challenges mount

The Jansen potash project in Saskatchewan represents BHP's entry into a new commodity, but cost pressures continue to mount. The latest US$8.4 billion estimate reflects a 47% increase from the original approval figure, reflecting construction hours and material quantities not captured in previous estimates.

At 75% complete, Jansen Stage 1 is expected to deliver approximately 4.15 million tonnes per annum of production from mid-2027, with underlying EBITDA margins of 63-64% due to its low-cost position.

However, the updated economics show an internal rate of return of 7.9-9.1% and a payback period of 11-15 years from first production at consensus prices, materially weaker than investors might have anticipated when the project was initially approved.

The company is also advancing Jansen Stage 2 construction and plans to update capital expenditure estimates in the fourth quarter of FY26. Total production capacity could reach 16-17 million tonnes per annum across multiple expansion stages.

Market outlook

The quarterly report noted that China's commodity demand remains resilient despite moderating momentum in construction, manufacturing and infrastructure investment in the second half of 2025. India is emerging as a key demand driver, with strong domestic activity supporting steel and rising copper consumption.

With forecast global growth around 3% in 2026, BHP sees a positive backdrop for commodity demand as it enters the second half with strong operating momentum.

Iron ore guidance remains unchanged at 258-269Mt for the full year, with the strong first-half performance positioning the company well ahead of the typically wet third quarter.