Is BHP a Good Stock to Buy in 2024?

Team Veye | 23-Feb-2024

BHP CEO Mike Henry declared, We are acting to address the current market conditions. The nickel industry in Western Australia is experiencing uncertainty at the moment. At Western Australia Nickel, we are reviewing our capital plans for Nickel West and West Musgrave and reducing operating costs concurrently. 

BHP might be the best share for investors, or it depends on their own analysis and risk appetite; they may or may not be considered worth buying; the final decision is in their court.

The BHP team is basically evaluating plans related to nickel in Western Australia. These consist of capital plan reviews, operations optimization, and spending cuts. In addition, the company is examining the longer-term prospects of Western Australia Nickel, which may involve initiating a care and maintenance phase at Nickel West and evaluating the capital expenditure and phasing for the advancement of the West Musgrave project.

Nickel Price/US$ Graph:

Source: LME Nickel

There are difficulties in the nickel industry, and the price of nickel has dropped significantly. The benchmark nickel prices of the London Metals Exchange experienced a significant decline in CY2023, coinciding with a notable increase in the supply of nickel from Indonesia and the exchange's acceptance of nickel products with Indonesian origins as a response to changing industry dynamics.

It is anticipated that these unfavorable operating conditions will persist for an extended period of time. BHP has revised down its nickel price assumptions due to the worsening short- and medium-term outlooks. Furthermore, inflation has driven up Western Australia Nickel's capital costs. BHP has evaluated Western Australia Nickel's carrying value in light of these considerations.

Western Australia Nickel, outlook:

Throughout CY2023, The Nickel Industry experienced a notable excess due to the rapid growth of Indonesian supply during a period of low traditional end-use demand in the OECD and inconsistent results throughout the electric vehicle value chain in comparison to initial projections. Indonesia's production of intermediates has increased significantly over the last two years, and its production of Class-II nickel products has increased by approximately 3.6 times since CY2019. Throughout CY2023, demand for Electric Vehicles and batteries increased, but nickel and all other battery metals were negatively impacted by a large destocking cycle in the battery value chain.

In the long run, it is anticipated that nickel will be a major gainer from the electrification megatrend, with nickel sulphide being especially appealing. Despite this, a challenging few years are anticipated for the industry as growing demand gradually absorbs committed and excess supply.

HY2024 Financial Results:

BHP reported revenue of US $27.2 billion for the half-year ended 31 December 2023 (HY2024), up 6% primarily from new mines Prominent Hill and Carrapateena as well as higher iron ore and copper prices. The financial results of the company were highly regarded. 

In CY2023, BHP continued to feel the effects of inflation on its underlying cost base, especially with regard to labor and parts. This was demonstrated by the 6.3% global inflation rate that was observed throughout all operating jurisdictions. The business revealed a remarkable US$5.6 billion decline in underlying attributable profit. Higher Underlying EBITDA, lower income tax and royalty-related tax payments, and a rise in working capital somewhat offset the 31% increase in operating cash flow. There was positive free cash flow.

Key Takeaways:

  • With the approval of US$4.9 billion for Jansen Stage 2, the company is making a substantial growth investment. The company plans to continue its strategic focus on higher-quality metallurgical coal by selling BMA's Blackwater and Daunia mines for up to US$4.1 billion (100% basis) in cash. 

  • It is anticipated that the underlying EBITDA margins of roughly 65% to 70% for Jansen Stages 1 and 2 will be supported by this low-cost position of US$105 to US$120/t. BHP made headway on its expansion plan, which calls for constructing Canada's Jansen mine and authorizing Jansen Stage 2, which will double the business's projected potash production capacity.

  • Extensive exploration drilling beneath Olympic Dam has shown areas of attractive copper mineralization above 2% along a 2-kilometre strike, with a grade above 1%. BHP effectively merged its Copper SA Company in South Africa.

Reference:*All Data has been sourced from Company announcements and Refinitiv, Thomson Reuters

Frequently Asked Questions (F.A.Q)

1. Who is the biggest nickel miner that can be considered the
best share to buy right now in ASX?

The ASX-listed company IGO Limited seeks to improve the planet for coming generations by investigating, creating, and providing essential products for clean energy. IGO works with the Western Australian operations of Cosmos Nickel, Forrestania Nickel, and NovaNickel-Copper-Cobalt. 

2. Which nickel stocks are the best to invest in on the ASX?

Here we present the best shares to invest in Australia, let’s
have a look at them:

OZ Minerals Limited (ASX: OZL)

Nickel Industries Limited (ASX: NIC)

Meteoric Resources NL (ASX: MEI)

South32 Limited (ASX: S32)

Rio Tinto Limited (ASX: RIO)

BHP Group Limited (ASX: BHP)

IGO Limited (ASX: IGO)


3. What is the best Australian stock to buy in terms of largest
producer of nickel?

Australia is the world's largest producer of nickel, with BHP Group Limited's Nickel West operation and Glencore Plc's Murrin Murrin project   holding   top   spots.   Magnesium   nickel   sulphide   from komatiite deposits, which account for 82% of Australia's nickel production, is the primary source. These deposits are connected to Archean greenstone sequences. There can be many, but someone may or may not consider the potential to buy BHP as the best share to buy right now in Australia.

4. Is it good to invest in Nickel shares for beginners on ASX?

ASX exist Nickel exploration and production in Australia is the focus of nickel shares. Because nickel has better prospects for the future, it is regarded as an important base metal. For long-term investment purposes, one can undoubtedly participate in the reputable nickel share. One of the better nickel shares to trade is IGO Limited.



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