Freeport-McMoRan’s Focus on Copper Production

By Ernest Scheyder

Freeport-McMoRan (NYSE:FCX) is significantly increasing its copper output across three continents without engaging in the ongoing mining industry buyout frenzy. This strategy, favored by analysts, positions the company to benefit from the rising global demand for copper as part of the clean energy transition.

Copper, renowned for its excellent electrical conductivity and malleability, is essential in various sectors, including wiring, engines, construction, and electronics. The International Energy Agency predicts that global copper demand will surge by at least 60% by 2050. Furthermore, Jefferies analysts anticipate copper prices will increase by over 40% in the next two years.

However, developing new copper mines is challenging due to opposition from Indigenous groups, conservationists, and local communities. This difficulty has prompted companies like BHP, Rio Tinto (NYSE:RIO), and Glencore (OTC:GLNCY) to seek acquisitions to enhance their copper production, even while striving for shareholder returns.

Based in Phoenix, Freeport mainly focuses on copper, producing 9% of the world’s supply, the highest among any company. It is in a unique position to expand its existing mines without the distractions of pursuing acquisitions. CEO Kathleen Quirk stated, “We’re really, really focused on creating value from the assets that we have. I don’t see Freeport as having to aggressively go out and have to overpay for things.”

Freeport plans to produce 800 million pounds (362,874 metric tons) of copper annually by 2027 through leaching from waste rock piles that were previously deemed worthless. Innovative methods, including using drones and helicopters for irrigation, allow for extracting low concentrations of copper at reduced costs, eliminating the need for a smelter.

This leaching initiative alone could yield nearly half the copper produced globally by Anglo American (JO:AGLJ) in 2023. Additionally, Freeport is undertaking four more expansion projects poised to add over 1 billion pounds (453,592 metric tons) of copper production in the coming years.

These include plans in the U.S., where they expect over 500 million pounds (226,796 metric tons) annually by 2025, and expansions in Indonesia at the Grasberg mine, the world’s second-largest copper mine. Freeport is actively negotiating to extend its mining rights beyond 2041 with Indonesia’s new president.

In Chile, where the regulatory climate has stabilized under President Gabriel Boric, Freeport plans to file for an expansion of the El Abra mine, in partnership with state-owned Codelco, next year.

Freeport’s stock has risen by 30% over the past year, reflecting investor confidence in its expansion plans. Currently, 17 out of 24 analysts recommend purchasing Freeport’s stock.

Quirk is also addressing workforce challenges in the U.S. by employing autonomous trucks, hoping to attract talent to the metal industry due to increasing demand. Companies like Nvidia (NASDAQ:NVDA) are now opting for copper cables for AI data centers instead of fiber optics, pointing to a promising future for copper demand. According to Steve Schoffstall of the Sprott Energy Transition Materials ETF, “Companies like Freeport are in a good spot.”