Freeport Increases Copper Production as Competitors Seek Growth Opportunities – Reuters

Freeport-McMoRan Focuses on Expanding Copper Production Amid Market Dynamics

By Ernest Scheyder

Freeport-McMoRan is ramping up its copper output across three continents while deciding against participating in the current wave of acquisitions shaking up the mining sector. This approach positions the company to take advantage of the increasing demand for copper driven by the transition to clean energy.

Copper is a vital component of the global economy, favored for its excellent electrical conductivity and malleability, making it essential in wiring, engines, construction equipment, and electronic devices. According to the International Energy Agency, global copper demand is expected to surge by at least 60% by 2050. Analysts predict that copper prices will increase by over 40% in the next two years.

However, the development of new copper mines has become challenging, partly due to resistance from Indigenous communities, environmental advocates, and local populations. This challenging environment has prompted major diversified mining companies like BHP, Rio Tinto, and Glencore to pursue acquisitions to enhance their copper production while also managing shareholder expectations.

Headquartered in Phoenix, Freeport has long specialized in copper, accounting for 9% of the global supply, more than any other company. This unique position allows Freeport to focus on expanding its existing mines rather than being sidetracked by potential acquisitions.

"We’re concentrated on creating value from our current assets," said Kathleen Quirk, who became Freeport’s CEO in June, speaking ahead of the LME Week conference in London. "I don’t believe Freeport needs to aggressively pursue acquisitions or overspend on deals."

Freeport plans to produce 800 million pounds (approximately 363,000 metric tons) of copper annually by 2027 by recovering the metal from waste rock piles previously deemed worthless. Advanced techniques involving drones and helicopters will facilitate the irrigation of these waste piles, allowing low concentrations of copper to be extracted at a cost significantly lower than traditional mining methods.

The innovative leaching process could yield nearly half of the copper output produced by Anglo American globally in 2023. In addition to this leaching project, Freeport has four other expansion initiatives in progress that could increase annual copper production by more than 1 billion pounds (over 454,000 metric tons), including plans for significant output increases in the U.S. and Indonesia.

In Indonesia, Freeport is expanding the Grasberg mine, the world’s second-largest copper mine, and is in discussions to extend its mining rights beyond 2041 with the incoming president. Quirk expressed her commitment to maintaining positive relationships within Indonesia, emphasizing the company’s efforts to improve local livelihoods while ensuring shareholder returns.

Quirk also noted improvements in the regulatory landscape in Chile under President Gabriel Boric, suggesting a more stable environment for investments. An application to expand the El Abra mine, in partnership with Codelco, is expected to be submitted next year.

Freeport’s stock has seen a 30% increase over the past year as investors respond favorably to the company’s expansion strategies. Among analysts, 17 out of 24 recommend buying Freeport’s stock.

Derek Bone, a shareholder of Freeport, stated, "I view Freeport as a reliable asset in my investment portfolio. I want them to focus on their core operations."

Quirk, who has been with the company for over 20 years, acknowledged the challenges of recruiting talent in the U.S., prompting the company to adopt autonomous trucks to streamline operations.

As demand for copper continues to grow, Freeport is confident in its ability to meet the needs of its customers, who are increasingly turning to copper for various applications. For example, Nvidia recently announced plans to utilize copper cables for AI data centers instead of fiber optic cables, signaling a positive outlook for copper demand in the long run.

"Freeport is in a strong position," added an analyst from the Sprott Energy Transition Materials ETF, affirming the company’s alignment with market trends.