VALUATION HIGHLIGHTS

1. Copper (North American Mines, South American Mines, Indonesian Mines) constitutes 70% of the Trefis price estimate for Freeport-McMoRan Inc.'s stock.
2. Gold constitutes 19% of the Trefis price estimate for Freeport-McMoRan Inc.'s stock.

WHAT HAS CHANGED?

1. Q3 2024 Earnings
   • Freeport-McMoRan posted a better-than-expected set of Q3 results. While revenue rose by about 16% year-over-year to $6.79 billion, adjusted earnings came in at $0.36 per share. Consolidated copper production for the quarter stood at 1.05 billion lbs, down 3% year-over-year, although price realizations improved 13% year-over-year to $4.30 per pound.

2. Outlook for copper market
   • The company is witnessing a strong demand for copper, which is offsetting the impact of a cyclical slowdown. In the U.S., there is a strong demand for power cable and building wire associated with substantial investment in electrical infrastructure and AI data centers. This growing sector more than offset weakness in traditional demand sectors in residential construction and autos. Demand from China continues to be supported by significant investments in the electrical grid and continued growth in China's production of electric vehicles. Notably, China's demand for copper continues to grow despite a weak property sector. Recent announcements for economic stimulus in China to support the country's economic growth targets could provide further support for metals demand in 2024 and 2025.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Freeport's value that present opportunities for upside or downside to the current Trefis price estimate:

Indonesian Copper Mines Division

• Copper Sold: Shipments rose from 667 million pounds in 2019 to 804 million pounds in 2020 due to higher mining rates and higher copper ore grades. In 2021, the metric increased further to 1.3 billion pounds and rose to about 1.58 billion pounds in 2022 although it fell to 1.53 billion in 2023. Trefis expects the metric to rise steadily to over 1.8 billion tons by 2030. However, if the metric only grows to about 1.6 billion due to risks relating to development activities in key mines, there could be a 10% decline in the stock price.
  


• Average Realized Price per Pound: Average Realized Copper Price Per Pound rose by over 45% to $4.40 per pound in 2021, due to strong demand from the renewables and EV industry and supply constraints, although they declined a bit to about $3.82 per pound in 2022 and stood at $3.9 per pound in 2023. We expect prices to recover to over $4.30 by 2030. However, if prices only rise to about $4, there could be a 5% decline in our price estimate. On the other side, if prices rise to over $5 per pound by the end of our review period, there could be a 10% upside to our price estimate.
  

BUSINESS SUMMARY

Freeport-McMoRan Inc. (FCX) is involved in the mining, smelting, and refining of copper, gold, and molybdenum. The company runs its mining and smelting operations in North and South America and Indonesia.

FCX is one of the world's largest copper, gold, and molybdenum mining companies in terms of reserves and quantity produced. The Grasberg mine in Indonesia contains the largest single recoverable copper and gold reserve in any mine in the world.

The company's earnings are sensitive to the prices of these metals, particularly copper. Prices of copper, gold, and molybdenum have been recovering recently. A sudden decrease in spot prices would negatively impact the company's earnings, while any upward movement would increase earnings.

SOURCES OF VALUE

Copper is the primary source of revenue

Copper mining is the most important division for Freeport-McMoRan in terms of revenues and profits.

KEY TRENDS

Recovery in global demand and prices for copper

Demand for copper is expected to remain strong, led by investments in the renewable energy sector, including electric vehicles, charging infrastructure, and solar & wind power plants. Moreover, the plans for the revamp of U.S. infrastructure could also raise the demand outlook for copper from the U.S. and lead to a recovery in prices.