High pressure torsion (HPT) is well known for its potential to refine microstructures of a variety of metals and alloys. Yet, the method is not limited to the processing of monolithic samples but also capable of consolidating powders and powder blends, thus, paving the way towards nanocomposite materials and microstructures that are inaccessible via conventional melting-based routes. In the present work, HPT is used to consolidate and refine powder blends consisting of hard magnetic SmCo5 and diamagnetic Cu. The ductile Cu not only acts as a binder phase that facilitates the plastic deformation of the compound but also magnetically decouples the SmCo5 grains. Microstructural analyses as a function of HPT revolutions show two refinement mechanisms acting in the brittle SmCo5 phase. Initially, the refinement is carried by fragmentation via cracking with a transition to plastic deformation at higher strains. At very high shear strains (γ≈300), regions with nanocrystalline SmCo5 embedded in an amorphous matrix are observed via transmission electron microscopy. Furthermore, a crystallographic texture with the c-axis being preferably aligned parallel to the rotation axis of the HPT disc evolves, thus, leading to anisotropic magnetic properties. The structural refinement correlates with an increase in coercivity up to more than 1.3T, showing the potential to generate nanocomposites with excellent magnetic properties via HPT.