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    Freeport-McMoRan Inc (FCX)

    Business Description

    FCX, or Freeport-McMoRan Inc., is a leading international mining company headquartered in Phoenix, Arizona, with significant operations in North America, South America, and Indonesia. The company is one of the world's largest publicly traded copper producers and also has substantial reserves of gold and molybdenum . FCX's portfolio includes the Grasberg minerals district in Indonesia, which is one of the world's largest copper and gold deposits, as well as the Morenci minerals district in Arizona and the Cerro Verde operation in Peru . The company's primary product lines include copper, gold, and molybdenum, with copper being the most significant contributor to FCX's revenues .

    1. Copper - Produces and sells copper cathode, copper concentrate, and copper rod, which are major components of the company's revenue stream.
      • Copper Cathode - Refined copper product used in various industrial applications.
      • Copper Concentrate - Intermediate product used in smelting and refining processes.
      • Copper Rod - Used in electrical applications and manufacturing.
    2. Gold - Extracts and sells gold in concentrate and anode slimes, contributing significantly to the company's revenue.
    3. Molybdenum - Mines and sells molybdenum, a metal used in steel alloys and other industrial applications.

    Q3 2024 Summary

    Initial Price$49.12July 1, 2024
    Final Price$50.38October 1, 2024
    Price Change$1.26
    % Change+2.57%

    What went well

    • Efficiency initiatives in North America: FCX is implementing multifaceted initiatives to reduce costs, including improving equipment reliability, reducing downtime, and decreasing contractor costs by about 10%. These efforts are expected to lead to lower unit costs in the U.S. starting in 2025, even as grades may not improve.
    • Significant growth potential at Safford Lone Star: FCX is conducting a pre-feasibility study to expand the Safford Lone Star operation, which has a resource base that could double current production from 300 million pounds to 600 million pounds of copper per year, potentially creating another cornerstone asset with long-lived resources and less stringent permitting requirements.
    • Strong commitment to shareholder returns: FCX follows a capital allocation framework that allocates 50% of cash flow after capital expenditures to shareholder returns, including dividends and share buybacks. With a strong balance sheet and debt levels well below targets, FCX is positioned to execute this policy and enhance shareholder value.

    What went wrong

    • Rising costs and lower grades in North America operations have significantly increased unit costs, creating a big gap compared to South America operations, and grades may not improve.
    • Significant contractor cost increases have further pressured margins, and while the company is reducing contractors by about 10%, these costs remain a challenge.
    • Equipment downtime and premature equipment failures have impacted productivity, requiring focus on maintenance and reliability, which may affect operational efficiencies and increase costs.

    Q&A Summary

    1. Smelter Fire Impact
      Q: How will the smelter fire affect operations and insurance?
      A: The smelter fire in Indonesia affected an essential area but not a large part of the facility. The company's focus is on completing repairs quickly. The insurance policy covers repair costs but does not include business interruption coverage. They expect to continue exporting concentrate during the repair period.

    2. Government Support and Export Extension
      Q: Will the government grant export extensions after the smelter fire?
      A: The government understands the situation and has been supportive, recognizing it's in everyone's interest to continue exports. The company expects to receive additional flexibility on export quotas and will work with the government to ensure continuity into 2025.

    3. Cost Reduction Initiatives
      Q: What are the plans for reducing costs, especially in North America?
      A: The company is focused on improving efficiency and productivity through maintenance, reducing contractor costs by about 10%, and leveraging technology. They expect North American costs to trend lower in 2025 despite grade challenges.

    4. Capital Allocation and M&A
      Q: Will there be share buybacks or further M&A activity?
      A: Following their cash flow allocation framework, they plan to deploy 50% of cash flow to shareholder returns, including share buybacks. They remain open to opportunistic acquisitions like increasing their stake in Cerro Verde and are monitoring the market for M&A opportunities but focus primarily on organic growth.

    5. 2025 CapEx Outlook
      Q: How should we view 2025 capital expenditures?
      A: 2025 CapEx is expected to be similar to 2024, excluding the smelter. They foresee no significant increases but will continue investments to de-risk projects like Bagdad and evaluate opportunities without major changes to capital plans.

    6. Updates on Major Projects
      Q: What is the status of major projects like Bagdad and Lone Star?
      A: The Bagdad expansion can be executed in the near term, with ongoing investments to benefit the long-term operation. Studies for Lone Star are underway and expected next year. They aim to allocate capital to the most valuable projects and can pursue multiple projects concurrently.

    7. Restricted Cash Policy
      Q: Will the restricted cash policy in Indonesia continue?
      A: Yes, the policy requiring 30% of export proceeds to be held in Indonesian banks for 90 days will continue beyond the smelter startup unless changed by regulation. It's a measure affecting all exporters in Indonesia.

    8. Cerro Verde Stake Increase
      Q: Are there opportunities to increase your stake in Cerro Verde?
      A: The recent stake increase was opportunistic. They are interested in buying more if opportunities arise, depending on willing sellers, as Cerro Verde is a high-quality asset that's difficult to replicate.

    9. Smaller Projects Update
      Q: Any updates on smaller projects like Lone Star and Atlantic Copper?
      A: The Lone Star oxide expansion will be completed around 2025, sustaining 300 million pounds of copper per year. The Atlantic Copper recycling project is under construction, expected to be operational next year, and will enhance value by recycling electronic scrap.

    10. Progress at Grasberg
      Q: How is the cleanup and equipment placement at Grasberg progressing?
      A: Significant progress has been made at Grasberg. Operations are going well, with the team exceeding forecasts, improving mill throughput, and maintaining strong grades.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    North America Copper Mines1,6701,5901,6571,3996,3161,5021,5361,591
    South America Operations1,4361,1481,2441,1134,9411,1361,5111,316
    Indonesia Operations1,3682,2372,0952,7378,4372,8252,2682,982
    Africa Mining--------
    Molybdenum Mines2231501472,9483,4681451,036918
    Rod & Refining1,5291,4731,566-2,5632,005-5071,560
    Atlantic Copper Smelting & Refining7567486803,7215,905-498759
    Corporate, Other & Eliminations(1,593)(2,087)(1,597)-0(1,459)-0
    U.S. Oil & Gas Operations--------
    Other Mining, Corporate, Other & Eliminations--------
    Copper4,0394,4994,7593,84417,141-4,4445,022
    - Cathode1,3271,3581,331--1,941-2,070
    - Concentrate1,5872,1852,365--1,818-1,786
    - Rod and Other Refined Copper Products921884992--953-1,012
    - Purchased Copper2047271--166-154
    Gold5319998541,0443,4281,1688181,394
    Molybdenum5924914792661,828421130454
    Silver and Other133170136--14942169
    Adjustments to Revenues(94)(422)(404)----(249)
    Total Revenue5,3895,7375,8245,90522,8556,3216,6246,790
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    North America12940397,0567,2641,491231,591
    South America1,1929731,025-2,7624281,1891,3291,316
    Indonesia1,1992,0392,030-4,5017673,2032,1852,982
    Atlantic Copper749744472-7141,251673898765
    - Switzerland----3,971---
    - Japan----3,431---
    - Singapore----1,178---
    - China----1,081---
    - Germany----714---
    - Philippines----396---
    - India----354---
    - South Korea----267---
    - Egypt----229---
    - United Kingdom----171---
    - Other----1,353---
    Africa--------
    Molybdenum Mines--------
    Rod & Refining--------
    U.S. Oil & Gas Operations--------
    Other Mining & Eliminations--------
    Corporate & Other597478----1,235--1,567
    Total Revenue5,3895,7375,8245,90522,8556,3216,6246,790
    KPIs - Metric / PeriodFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    **Gross Profit per Pound of Copper**$1.22$0.94$0.72$0.40-$0.51$0.96$0.57
    **Gross Profit per Pound of Molybdenum**$13.47$4.69$1.85$2.48-$1.26-$1.71-$4.17
    **Copper Sales (millions of pounds)**8321,0291,1001,100-1,1009311,000
    **Gold Sales (thousands of ounces)**270495399549-568361558
    **Silver Sales (millions of ounces)**1.01.10.90.8-0.90.9-
    **Average Realized Price per Ounce of Silver**$23.29$22.96$23.37$23.90-$28.70$30.11-
    **Molybdenum Sales (millions of pounds)**19202022-202119
    **Leach Ore Placed in Stockpiles (metric tons per day)**613,200724,100688,600740,500-617,400650,300551,200
    **Ore Milled (metric tons per day)**315,500315,800307,600290,200-314,700--
    **Average Copper Ore Grade (%)**0.340.330.300.31-0.320.290.29
    **Copper Recovery Rate (%)**80.483.881.781.0-81.084.183.1

    Executive Team

    NamePositionStart DateShort Bio
    Richard C. AdkersonChairman of the BoardFebruary 2021Richard C. Adkerson has been the Chairman of the Board at FCX since February 2021. He was the CEO from December 2003 until June 2024. He is a recognized leader in the mining industry .
    Kathleen L. QuirkPresident and Chief Executive OfficerN/AKathleen L. Quirk is the President and CEO of FCX. She has been with the company for over 35 years, previously serving as CFO for 20 years. She has extensive experience in the mining industry .
    Maree E. RobertsonSenior Vice President and Chief Financial OfficerMarch 2022Maree E. Robertson has been the Senior Vice President and CFO at FCX since March 2022. She was previously the CFO for Energy and Minerals at Rio Tinto Group and held various finance roles at BHP Group .
    Stephen T. HigginsSenior Vice President and Chief Administrative OfficerJanuary 2019Stephen T. Higgins is the Senior Vice President and Chief Administrative Officer at FCX. He has served as Chief Administrative Officer since January 2019 and was previously Vice President of Sales and Marketing .
    Douglas N. Currault IISenior Vice President and General CounselOctober 2019Douglas N. Currault II serves as Senior Vice President and General Counsel at FCX since October 2019. He previously served as Deputy General Counsel and Assistant General Counsel .

    Questions to Ask Management

    1. Given the significant cost challenges and lower grades you've been experiencing in your North American operations, can you provide more specifics on your timeline and measurable targets for reducing unit costs and improving productivity?
    2. With the recent smelter fire in Indonesia and the lack of business interruption insurance, how do you plan to mitigate potential financial impacts, and what contingency plans are in place if the government does not grant the additional flexibility you are seeking for concentrate exports?
    3. The requirement to hold 30% of export proceeds in Indonesian banks for 90 days restricts a significant amount of your cash; how is this affecting your liquidity and capital allocation plans, and what steps are you taking to address this issue with the government?
    4. Regarding your capital allocation strategy, how are you prioritizing between the Bagdad expansion, El Abra, and Lone Star projects, and can you provide clarity on how you assess the returns and risks associated with each before committing significant capital?
    5. As M&A activity picks up in the mining sector, do you risk falling behind competitors by focusing primarily on organic growth, and how do you intend to adapt if valuable assets become unavailable due to industry consolidation?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateNovember 1, 2021
    End Date/DurationNo expiration date
    Total additional amount$5.0 billion
    Remaining authorization amount$3,105,744,136
    DetailsProvides flexibility in returning capital to shareholders. The timing and amount of repurchases depend on market conditions and cash flow. The program can be modified, increased, suspended, or terminated at any time.

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      • Sales Guidance: Copper, gold, and molybdenum sales similar to previous outlook .
      • Unit Net Cash Cost: Average unit net cash cost expected to be $1.58 per pound .
      • EBITDA and Cash Flow Sensitivity: EBITDA from $11 billion at $4 copper to $15 billion at $5 copper; operating cash flows over $7 billion at $4 copper to $1.5 billion at $5 copper .
      • Capital Expenditures: $3.6 billion for 2024 and $4.2 billion for 2025 .
      • Copper Prices: LME prices averaged $4.18 per pound .
      • Leach Initiative: Expected to scale to 300 million to 400 million pounds per annum .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024 and FY 2025
    • Guidance:
      • Copper Sales Volumes: Decreased by 1% .
      • Gold Sales Volumes: Reflect change in mine sequencing .
      • Consolidated Unit Cash Costs: Estimated at $1.63 per pound .
      • EBITDA and Operating Cash Flows: EBITDA from $11 billion to $15 billion; operating cash flows from $7.5 billion to $11 billion .
      • Capital Expenditures: $3.7 billion in 2024 and $4.1 billion in 2025 .
      • Leaching Initiative: Sustaining at 200 million pounds per annum .
      • Shareholder Returns: $4.3 billion distributed .
      • Smelter Project: Advancing to commissioning phase .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      • Copper Sales Volume: Increased by 1.5% .
      • Net Unit Cash Costs: Estimated at $1.57 per pound .
      • Capital Expenditures: $3.6 billion for 2024 and $3.9 billion for 2025 .
      • EBITDA and Cash Flows: EBITDA from $11 billion to $15 billion; operating cash flows from $7.5 billion to $11 billion .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q1 2024 and FY 2024
    • Guidance:
      • Net Unit Cash Cost: $1.55 per pound for Q1 2024; $1.60 per pound for FY 2024 .
      • Capital Expenditures: $3.6 billion for 2024 .
      • Sales Volumes: Copper similar to 2023; gold 10% higher than prior estimates .
      • EBITDA and Operating Cash Flows: EBITDA from $10 billion to $14 billion; operating cash flows from $7 billion to $10 billion .
      • Production and Cost Projections: Consolidated unit costs at $1.60 per pound .