BHP had a strong start to 2025 and is singing a bullish tune (JSE: BHG)

Importantly, they feel more confident on copper guidance

As we know, copper is all the rage at the moment. In an update for the six months to December 2025, BHP highlights that there was a 32% increase in copper prices. That certainly does the job, with a 4% increase in iron ore prices as further good news.

You still have to mine the stuff of course, something that BHP seems to be doing rather well. Based on the first-half performance and the outlook for 2026, they’ve raised the midpoint of copper guidance. This is an important step in maintaining the support of the market for the extensive efforts in copper.

In iron ore, the Western Australia Iron Ore (WAIO) business achieved record production and has given the group a strong foundation as they head into the traditionally wet third quarter. You may recall that they also announced a deal with Global Infrastructure Partners that should unlock capital tied up in WAIO’s inland power network.

Steelmaking coal and energy coal both increased as well.

Looking to the future, the Jansen potash project in Canada is on track for production to start in mid-2027. In a separate update on the day, BHP noted that the cost estimate for the project has been increased from $7 billion to $7.4 billion. That’s not ideal obviously, with inflationary pressures clearly coming through here. With around 18 months still to go on this project, the risk is that costs come in even higher than the revised expectations. There are also risks of delays, even though the project is 75% complete at the moment.

Based on the updated expectations for Jansen, the project has an internal rate of return of 7.9% to 9.1% (is this really enough, even in hard currency?) and a payback period of 11 to 15 years. This gives you insight into how difficult the capital allocation decisions are, as they need to invest on a through-the-cycle basis.

Although the production story is bullish overall in terms of volumes, the unit cost guidance is unchanged for all assets. This is another indication of inflationary pressures coming through the system.

Unsurprisingly, Merafe’s production has fallen through the floor (JSE: MRF)

This is what happens when your smelters are suspended

The ferrochrome industry is in crisis. Smelters are struggling to be economically viable, as they are high energy users and Eskom is taking no prisoners in terms of energy costs. A stable financial power utility is good news for South Africa, but it has really tightened the screws on industrial users.

With smelters suspended from operating in this environment as they would be losing money, Merafe’s attributable ferrochrome production from the joint venture with Glencore (JSE: GLN) fell to almost zero in the quarter ended December. They literally managed attributable production of 0.1 kt vs. 70 kt in the December 2024 quarter. The year-on-year decline may be 63%, but that isn’t even getting close to telling the real story of what will happen with more quarters of negligible production.

Attributable chrome ore production was up slightly at 222 kt, which means the annual result of 932 kt was almost 2% lower on a year-on-year basis. They attribute this decrease to temporary equipment breakdowns.

PGMs concentrate production was 4 koz, up from 3 koz in the December 2024 quarter. The full year result of 15 koz was higher than 2024 at 14 koz.

The share price is down 26% in the past 12 months. The only reason it isn’t much lower is that the market is hoping for a resolution of the energy issue with Eskom. As the saying goes: hope isn’t a strategy.

Nibbles:

• Director dealings:
  • A director or senior executive of Richemont (JSE: CFR) sold shares worth around R10.7 million. This is Switzerland we are talking about, so the announcement doesn’t include the name of the person involved. There was another share sale announcement by Richemont, but it looks like it relates to the sale of share options with no indication of the taxable portion.
  • The CEO of Sirius Real Estate (JSE: SRE) sold shares worth around R5.5 million. It’s a small portion of his stake, but still a significant sale when viewed in isolation.
  • The CEO of Spear REIT (JSE: SEA) has bought more shares for his family, this time to the value of R85k.
  • A director of a major subsidiary of Stefanutti Stocks (JSE: SSK) bought shares worth R42k.
  • Here’s an odd one that you certainly won’t see every day: two directors of Visual International (JSE: VIS) have partially reversed a trade with each other. The reversed trade has a value of R500k. And no, the website still doesn’t work.

• Araxi (JSE: AXX) – previously known as Capital Appreciation Limited, in case you’ve forgotten the change of name – has renewed its cautionary announcement regarding a potential acquisition of a controlling interest in a payment services business. The payments segment is certainly the area of the business they should be focusing on expanding, as the other major segment in the group (software) has been a detractor from the story rather than a strong element of the bull case. At this stage, there’s no guarantee of a deal happening.

• Raubex (JSE: RBX) is another company that has renewed its cautionary announcement. They are considering a disposal of Bauba Resources (either the entire stake or a portion). The wording is deliberately vague as they are giving themselves maximum flexibility. I think getting out of that asset would be beneficial to the investment case.