New Indonesian Smelter Will Fuel Integrated Global Copper Production

Key Takeaways

• The new Indonesian smelter and U.S. innovation initiatives bolster integration, lower costs, increase margins, and position for growth as demand for copper accelerates.
  
• Strong U.S. policy support, brownfield expansions, and disciplined capital allocation enhance financial flexibility, shareholder returns, and future revenue growth potential.
  
• Reliance on Indonesia, declining ore grades, regulatory pressures, and rising competition threaten Freeport-McMoRan's margins, revenue growth, and long-term operational stability.

Catalysts

Engages in the mining of mineral properties in North America, South America, and Indonesia.

• Freeport's new Indonesian smelter, starting up ahead of schedule and expected to reach full capacity by year-end, will make the company a fully integrated global copper producer, lowering operating costs, capturing more downstream value, and reducing exposure to export duties-directly supporting higher future margins and cash flows.
  
• Substantial U.S. policy tailwinds-including critical mineral designations, tariffs on imported copper, and ongoing government-industry dialogue-are driving premium domestic copper pricing. With Freeport supplying 70% of U.S. refined copper, this premium is adding $1.7 billion in annual EBITDA upside and could structurally lift revenue and profit if these differentials persist or are institutionalized.
  
• The ramp-up and scaling of precision leaching and additive innovation at major U.S. operations is poised to deliver high-margin, low-capex production growth (targeting up to +800 million pounds per year incrementally). This supports volume growth and margin expansion, especially as infrastructure and electrification-driven copper demand accelerates globally.
  
• Brownfield expansions in North and South America (e.g., Bagdad, El Abra, Lone Star) leverage existing infrastructure and Freeport's experience to deliver low-risk, high-return volume growth. These initiatives are positioned to bring 2.5 billion pounds of new copper supply online in structurally tight markets-directly impacting future revenues and earnings growth.
  
• Freeport's disciplined capital allocation-with a commitment to returning 50% of excess cash flow via dividends/buybacks while maintaining an investment-grade balance sheet-improves earnings per share and gives flexibility to fund organic growth and weather copper price volatility, further supporting long-term shareholder value.

Freeport-McMoRan Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Freeport-McMoRan's revenue will grow by 6.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.4% today to 10.7% in 3 years time.
• Analysts expect earnings to reach $3.3 billion (and earnings per share of $2.36) by about September 2028, up from $1.9 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $5.8 billion in earnings, and the most bearish expecting $2.2 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.2x on those 2028 earnings, down from 32.9x today. This future PE is greater than the current PE for the US Metals and Mining industry at 22.5x.
• Analysts expect the number of shares outstanding to decline by 0.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.69%, as per the Simply Wall St company report.

Freeport-McMoRan Future Earnings Per Share Growth

Risks

• Prolonged and increasing reliance on complex operations in Indonesia, especially the Grasberg mine, exposes Freeport-McMoRan to significant risks from potential changes in government policies, resource nationalism, and the uncertainty of extending operating rights beyond 2041, which could disrupt long-term production volumes, revenue, and margin stability.
  
• Fluctuations and potential long-term declines in ore grades at key assets like Grasberg and Cerro Verde may require sustained higher capital and operational expenditure per unit of production, leading to compression of net margins and possible underperformance of earnings growth over time.
  
• The current boost to U.S. revenues from a major premium on COMEX copper prices, driven by trade tariffs, is subject to policy changes and market adaptation; long term, the differential may narrow as domestic supply, recycling, or substitute technologies increase, threatening future revenue and margin expansion.
  
• Increasing environmental regulation, ESG scrutiny, and compliance demands in operating jurisdictions-particularly concerning permitting, tailings management, and smelter expansions-could raise costs, delay projects, or constraint growth options, negatively impacting net margins and capex efficiency.
  
• Heightened global competition from state-backed and low-cost producers, along with growing potential for metal substitution or accelerated adoption of copper recycling, could suppress copper prices or reduce demand for newly mined copper, putting future revenue growth and profitability at risk.

Valuation

• The analysts have a consensus price target of $50.479 for Freeport-McMoRan based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $57.0, and the most bearish reporting a price target of just $27.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $31.1 billion, earnings will come to $3.3 billion, and it would be trading on a PE ratio of 27.2x, assuming you use a discount rate of 7.7%.
• Given the current share price of $43.89, the analyst price target of $50.48 is 13.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.