By Ernest Scheyder
(Reuters) - Freeport-McMoRan (NYSE:FCX) is turbo-charging its copper output across three continents with no plans to join a buyout frenzy sweeping the mining industry, a strategy that analysts say positions the company well to capitalize on the clean energy transition's rising demand for the red metal.
Used widely across the global economy, copper is an ideal conductor of electricity and easily malleable, qualities that have made it widely popular for use in wiring, engines, construction equipment, electronics and other devices.
Global demand is poised to jump at least 60% by 2050, according to the International Energy Agency. Analysts at Jefferies expect prices for the red metal to rise more than 40% in the next two years.
Yet new copper mines are proving difficult to develop, due in part to opposition from Indigenous groups, conservationists, local communities and others.
The difficult backdrop has pushed BHP, Rio Tinto (LON:RIO), Glencore (LON:GLEN) and other diversified miners of iron ore, nickel and other critical minerals to hunt for deals to boost their copper output even while balancing shareholders' expectations for payouts.
Phoenix-based Freeport has long focused primarily on copper - it produces 9% of global supplies, more than any other company - and now finds itself in the rare position of being able to concentrate on expanding mines it already owns and avoiding the distraction of a buyout.
"We're really, really focused on creating value from the assets that we have," Kathleen Quirk, who became Freeport's CEO in June, told Reuters ahead of the LME Week conference in London, one of the world's largest annual gatherings of mining executives. "I don't see Freeport as having to aggressively go out and have to overpay for things."
Freeport expects to produce 800 million pounds (362,874 metric tons) of copper annually as soon as 2027 by leaching the metal from piles of old waste rock at its U.S. mines previously thought to be worthless.
Drones and helicopters have been installing irrigation lines atop miles-long waste piles that release an acid solution to tease out low concentrations of copper.
The leached copper will cost a third less to produce than Freeport's hard rock mines - already some of the cheapest in the industry, according to analysts - and will not require a smelter for processing. Freeport estimates it would need to spend at least $10 billion on a new mine to mimic output from leaching.
"It's a huge opportunity for us and one that we're pursuing aggressively," Quirk said.
That leaching plan alone would produce nearly half the copper that Anglo American (LON:AAL) - which BHP tried unsuccessfully to buy earlier this year - mined across the entire globe in 2023.
'STICK TO THEIR KNITTING'
Freeport has four other expansion projects underway that could add more than 1 billion pounds (453,592 metric tons) of copper annually to its production in coming years, including more than 500 million pounds (226,796 metric tons) annually by 2025 in the United States.
Another is in Indonesia, where it is expanding Grasberg, the world's second-largest copper mine. Freeport is also hoping to negotiate an extension of its mining rights beyond 2041 with the new Indonesian president, who takes office next month.
The company is preparing its application now to extend the license and Chairman Richard Adkerson - who led the last round of negotiations when he was CEO - plans to join the discussions, Quirk said.
"Indonesia is part of the fabric of our company as we've been working hard to improve the livelihood of the people, provide benefits to the government, all while providing returns on investments for our shareholders," she said. "I want to continue that positive relationship."
In Chile, Quirk said the regulatory climate has improved under President Gabriel Boric after a period of uncertainty fueled by an unsuccessful attempt to change the country's constitution last year.
"Chile is a more stable environment for investors now," said Quirk. An application to expand the El Abra mine, which counts state-owned Codelco as a minority partner, should by filed next year, she said.
Freeport's stock has risen 30% the past year as investors have warmed to the company's plans to expand existing operations. Seventeen of the 24 analysts that track Freeport's stock recommend buying it and none recommend selling, according to LSEG Workspace.
"Freeport is a workhorse in my portfolio," said Derek Bone of the Optica Rare Earths & Critical Materials ETF, which holds shares of Freeport. "I want them to stick to their knitting."
Quirk, who had been Adkerson's deputy for more than 20 years, is facing a challenge recruiting workers in the United States, where the company has moved as a result to deploy autonomous trucks.
"I'm hoping that with everybody focused on our future economy and how it will require more use of metals, we'll get the best and brightest into our industry to help us," said Quirk.
That is top of mind for Freeport's customers, who are gobbling up more copper.
Nvidia (NASDAQ:NVDA), for example, said in March it would use copper cables for AI data centers - rather than fiber optic cables.
"That bodes well for copper demand over the longer term," said Steve Schoffstall of the Sprott Energy Transition Materials ETF, which holds Freeport shares. "Companies like Freeport are in a good spot."