BHP GROUP : Jansen Stage 2 update an incremental headwind

研报英文原文证据摘录

BHP GROUP : Jansen Stage 2 update an incremental headwind

Refinitiv

Investment case, valuation and risks

BHP Group (Underperform, Target Price 2,200p)

Investment case

Out of the three largest Iron Ore exposed portfolios, BHP is more diversified and has a

larger exposure to Copper, and the acquisition of OZ Minerals added to that. The

group's capex profile points towards cUSD11bn post FY25, with more spending

requirements at Escondida, across the copper portfolio, Jansen in potash, iron ore

debottlenecking and life extension projects. With the significant amount of capex to be

spent in the medium-term, which will only drive copper equivalent production growth

towards the end of the decade, we forecast FY26-28 FCF averaging USD8.2bn per

annum, -40% below the prior five-year average.

Stage 1 of the Jansen greenfield potash project in Canada has had two capex overruns

within six months. The timeline for first production reverted back to mid-CY27 and the

timeline for Stage 2 was thus put on pause as BHP now sees more potash supply

coming to market over the medium-term and will present an optimized capex estimate

in H2 FY26.

On ESG, the group continues its collaboration with steelmakers in China in particular

on how best to address Scope 3, even if investments remain very limited at this stage.

On Scope 2, the group has been swapping coal-fired power contracts in Chile with

renewables-based power and is taking initiatives with its bulk carriers.

Valuation methodology

Our target price is the average of our DCF, RoCE/WACC 26e (June YE) and SOTP 26e.

Risks

To the upside:

Iron ore and Coking coal prices proving stronger for longer on stabilising momentum in

China. Better operating performance and cost mitigation, in particular at Escondida.