Copper miner Freeport-McMoRan‘s (NYSE: FCX) stock is down 37% from its all-time high, yet the price of copper is almost at an all-time high. While the company’s news hasn’t been entirely positive over the last year, the share price performance and valuation disparity suggest that the stock looks great and is worth picking up in the general market downturn. Here’s why.
Let’s start by understanding why there might be such a fundamental disconnect between the price of copper and the stock’s performance and the price of copper; after all, the metal’s price is the key driver of its earnings. There are two reasons, and both of them look unjustified.
First, Freeport suffered a fire at a recently opened smelter in Indonesia. This is problematic for the company because the country has imposed an export ban on copper concentrate (effective Jan. 1, 2025) to encourage domestic processing. As such, Freeport will now need a permit to export copper concentrate, and given that its smelter isn’t running at full capacity due to the fire, it’s likely to run out of storage capability.
That said, the good and recent news is the government will issue a six-month permit to export concentrates while Freeport repairs the smelter, according to Energy Minister Bahlil Lahadalia.
Second, the stock might be sold off on fear that the recent rise in the U.S. price of copper is mainly due to importers and speculators buying ahead of a potential tariff on copper imports. That may be true, but it’s challenging to predict where the price of copper is heading. In any case, the global price of copper (as represented by the London Metal Exchange price) is also up significantly in 2025.
I’ve discussed elsewhere why the miner is ideally placed to deal in an environment of tariff conflict and also benefit from a concerted, and likely, determination by the current U.S. administration to encourage the production of a crucial metal like copper.
Freeport produces for the U.S. in the U.S. and neither imports significantly into the U.S. nor exports its U.S. production. Its international production is sold internationally, with Indonesian production earmarked for Asia. As for encouraging U.S. production, Freeport already has plans for brownfield expansions to existing mines in Arizona, which management believes could add up to an incremental increase of 650 million pounds of copper per annum in the future.
Similarly, management estimates its U.S.-focused leaching initiative (recovering copper from existing stockpiles) will result in 800 million pounds of copper recovered annually by 2030. These figures are significant for a miner set to produce 4 billion pounds of copper in 2025.
