Silver deal, improved outlook lift BHP shares to record high

Australia’s largest mining company, BHP Group Ltd, hit an all-time intraday high of A$54.20 today, driven by the release of record half-year earnings and the announcement of a landmark US$4.3 billion silver streaming agreement.

For the first time, BHP's copper division has become the mining giant's leading earner, a result that underscores CEO Mike Henry's six-year strategy to shift the company toward metals essential for the clean energy transition.

BHP's stock experienced a significant jump, peaking at A$54.20 before closing 4.73% higher at A$52.74.

Strong financials and confidence

This robust market reaction was driven by traders' positive assessment of the company's strong financial results and its strategic plan for capital reallocation. 

The share price increase builds on BHP's year-to-date performance, indicating a resurgence of confidence in its operational effectiveness and commitment to shareholder returns.

BHP shares have historically been valued lower than those of companies focused solely on copper, such as Lundin and Antofagasta. 

However, Bell Financial Group’s CEO Will Riggall suggested that the increasing significance of copper might drive BHP's valuation to a level potentially exceeding its price on Tuesday.

“They’ve ticked over that 50 per cent [copper] contribution number, which puts this business in a much different light to a lot of its peers out there,” he was quoted as saying in a Financial Review report.

Record financial results boosted by copper

For the six months ending December 31, BHP reported exceptional financial results, highlighted by an 11% increase in revenue to US$27.9 billion. 

This revenue growth was primarily driven by higher prices for copper and iron ore, with copper's contribution becoming notably more significant to the company's overall earnings.

The company delivered exceptional profitability, significantly surpassing market forecasts. 

Underlying EBITDA rose sharply by 25% to US$15.46 billion, while attributable profit saw a 28% increase, reaching US$5.64 billion. 

This robust performance was spearheaded by the copper segment, which achieved a historic milestone: its record underlying EBITDA of US$8 billion constituted 51% of the total group EBITDA. 

This marked the first instance of copper being the primary contributor to BHP's group earnings, highlighting the successful strategic shift to position the red metal as a core component of the global energy transition.

The management has demonstrated increased confidence in their copper production forecast for the current financial year (FY 2026) by raising the group's guidance to a range of 1.9 to 2.0 million tonnes. 

This revision suggested that copper is expected to make an even greater contribution to earnings.

The board declared a fully franked interim dividend of 73 US cents per share, which was significantly higher than consensus analyst forecasts.

This dividend represents a substantial 46% increase compared to the previous corresponding period, reflecting the company's robust operational and financial results.

Silver streaming agreement

BHP has also disclosed a long-term silver streaming agreement with Wheaton Precious Metals Corp. 

This transaction is notable as the most valuable streaming deal ever recorded based on the upfront payment, which will see the mining giant receive US$4.3 billion when the agreement is finalised.

A streaming agreement is a financing arrangement where the buyer provides an upfront payment for the right to acquire a set percentage of a mine's future precious metal output. 

Subsequent payments are usually made at a fixed price per ounce or a fixed percentage of the prevailing spot price.

For example, under the terms of a specific deal, BHP will supply silver to Wheaton.

This delivery is calculated based on BHP's 33.75% share of the silver produced at the Antamina copper-zinc mine in Peru.

Macquarie analyst Rob Stein commented that this agreement, struck during a period of historically high silver prices, is an imaginative method for unlocking "hidden value" within BHP's current assets.

BHP's strategy to raise $US10 billion from non-core asset sales includes a silver "streaming" agreement with Wheaton Precious Metals. 

The company's rivals are also scheduled to report earnings later this week.

Glencore is expected to report on February 18, while Rio Tinto will announce its full-year financial results and dividends on February 19.