BHP vs RIO - Which is a better buy right now?

BHP Group and Rio Tinto are good choices for investors who want exposure to the global commodities industry but their latest operating results and market valuations reveal some important differences. Both companies are set to benefit from structural demand for copper and other commodities. Future demand is backed by support from investment in artificial intelligence infrastructure along with electrification and industrial development.

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Rio Tinto reported a great third quarter in 2026 as global iron ore sales rose 3% year-on-year to 90.8 million tonnes. Sales from its Pilbara iron ore operations also increased 2% which is a reflection of the strength of its core iron ore business. Copper also made a positive contribution to the company's performance. At Oyu Tolgoi in Mongolia, production rose 27% year-on-year during the quarter and 29% over the first nine months of 2026 backed by the ramp up of underground operations and higher recovery rates. The company also recorded a 33% increase in lithium production year-to-date while alumina production grew 9%. Rio Tinto has exposure to several important and is not entirely dependent on one commodity. Not all parts of its business performed well as Bauxite production fell 6% year-to-date while average iron ore prices stood at US$97 per tonne during the quarter which was 8% lower than the previous quarter.

BHP reported a 4% year-on-year rise in iron ore production to 66.5 million tonnes during the first quarter of FY27. Its Western Australia Iron Ore business also set production records across both mines and ports despite significant planned maintenance. The company's steelmaking coal production increased 1% while energy coal production rose 26%.  Average realised prices for steelmaking coal and energy coal also increased 34% and 23% respectively, compared with the corresponding quarter last year. Copper was the main area of weakness for BHP. Production declined 19% year-on-year to 401,000 tonnes due to lower planned feed grades along with scheduled maintenance and severe weather in Chile. The suspension of operations at Escondida for safety reasons and the earlier conveyor failure at Carrapateena also affected output.

Growth Opportunities and Future Prospects

Rio Tinto's main growth opportunities lie in its expanding copper and iron ore businesses. Oyu Tolgoi is still ramping up its operations while the Simandou iron ore project in Guinea achieved an annualised production runrate of approximately 10 million tonnes during the September quarter. The Simandou project is on track to reach an annualised production run-rate of 60 million tonnes in the second half of 2028. The company is also making progress in lithium with the ramp-up of Fenix 1B underway and management has set a target to achieve an annualised productivity benefit run-rate of US$1.8 billion by the end of 2026.

BHP has an interesting growth strategy as well backed by major investments in copper expansion and plans to enter the potash market through its Jansen project in Canada. The company has an aim to raise annual production from Copper South Australia to approximately 500,000 tonnes by 2035 which could increase further to 650,000 tonnes by 2040. The Jansen Stage 1 project had reached 87% completion and is on track for first production in mid-2027. Such developments could help BHP diversify its future earnings. Its Western Australia Iron Ore expansion programme also targets production of more than 305 million tonnes by the end of FY28 on a 100% basis.

Valuation and Dividend Income

The biggest difference between the two companies at present is their valuation. Rio Tinto is trading at a trailing P/E ratio of 14.2 compared with BHP's P/E ratio of 21. This valuation gap is particularly noteworthy because Rio Tinto has also shown strong operational momentum. Its growing copper production at Oyu Tolgoi and the ongoing development of Simandou provide further support to its business. Rio Tinto also has a fully franked dividend yield of 4.35% which is slightly higher than BHP's fully franked yield of 4.09%.

Conclusion

BHP has attractive long-term growth opportunities through its copper expansion plans and the upcoming Jansen potash project. Its strong iron ore performance also demonstrates the resilience of its established operations. The recent decline in copper production and its higher valuation make BHP relatively less attractive than Rio Tinto. At current valuation, Rio Tinto has the more attractive risk-reward proposition backed by several major growth projects.

(Source: Company Announcements)