Freeport McMoRan Enjoys Surge in Copper Market, No Plans to Approve New Projects in Near Future
With the rally in global copper prices and the ramping up of mining operations in Indonesia, it is a "special time" for global miner Freeport-McMoRan Incorporated (NYSE:FCX) (FCX) (Phoenix, Arizona), according to Chief Executive Officer Richard Adkerson. And while the company has ample expansion opportunities in North America and elsewhere, it has no plans to approve new major projects this year, he said on Monday at the BMO Capital Markets 30th Global Metals & Mining Conference.
Industrial Info is tracking $8.44 billion worth of active capital mining-related projects in various stages of development by FCX.
Industrial Info also is tracking more than $8 billion worth of capital projects by PT Freeport Indonesia , a joint venture by FCX and PT Indonesia Asahan Aluminum (Persero). These projects are mainly tied to operations at the Grasberg minerals district in Papua, Indonesia, home to one of the world's largest deposits of copper and gold. Click here for a list of related projects.
The underground expansion at Grasberg is expected increase copper production there by nearly 20% in 2021.
Adkerson remarked that several years ago, "I made a comment that if we could be ramping up Grasberg at a time with good copper prices, it would be a special time for Freeport. And that's happening."
"Man, it was a long time coming, a long and winding road, particularly when we look back on 2020 and the challenges we were so concerned about in late March and April. To end up the year as strong as we did is -- I've used the word head-spinning, and it quite frankly is," he continued.
FCX "turned the corner" in the third-quarter of 2020, Adkerson said. This followed a rough first half of the year, when a plunge in first-quarter 2020 copper prices amid the COVID-17 pandemic forced FCX to slash its planned capital expenditures last year. For more information, see April 27, 2020, article - Mining Company Freeport-McMoRan Cuts $800 Million Capex After Copper Price Plunge.
During that time, the company put on hold its economic evaluations of new projects, but resumed evaluations in fourth-quarter 2020 as markets improved. Copper prices have since surged, marking their largest monthly gain in more than four years on February 26, according to MarketWatch, as the market anticipated higher demand from expectations of a post-COVID-19 recovery.
Even so, "we are not on the verge of approving projects right now," Adkerson said.
FCX has adopted a "shareholder-friendly" financial policy that emphasizes putting more cash back in the hands of its shareholders, he said. With "a tremendous amount of cash coming in," Adkerson said, the company will "be distributing cash to the shareholder in the form of dividends, perhaps stock buybacks."
For related information, see January 29, 2021, article - Copper Miner Freeport-McMoRan Looks to Better Times as Prices Improve.
Still, expansion opportunities abound, he said, "because of the growing demand for copper beyond just global growth in standard industrial use, which had always driven (it) in the past, and which is still there. But now when you look at the role copper plays and carbon reduction in any form, when you look at the expansion of 5G networks and artificial intelligence, the buildout of infrastructure--we're talking about that here in the United States, but (also) globally--that's a lot of copper wire wherever you turn."
FCX has plenty of opportunities for brownfield development at its U.S. operations, Adkerson noted. In North America, FCX operates seven open-pit mines in Arizona and New Mexico, and two molybdenum mines in Colorado. It also mines gold and silver.
Among other projects, the company continues to mull an expansion of its Bagdad mining operation in northwest Arizona. "We have to deal with tailing sites and water issues... but that's a project we're looking at," Adkerson said. An expansion/upgrade of the 200,000-ton-per-day open pit mine, 75,000-ton-per-day flotation and solvent extraction/electrowinning plant would increase copper cathode capacity by 55 million pounds per year. Industrial Info currently assesses the project as having a low probability (0-69%) of moving forward as planned. For more information, see project report.
Adkerson also noted the completion of the $850 million Lone Star above-ground copper mine project last year in Arizona. Located seven miles from the company's Safford mine, the project has reserves of 4.4 billion pounds of copper. Production from Lone Star is expected to exceed 200 million pounds of copper this year. For more information, see Industrial Info's project report.
The Lone Star operation likely has the potential for a copper oxide mining expansion, and the site also features a big copper sulfide resource, Adkerson said.
Future opportunities also exist at the El Abra copper mine in Chile, he added. A copper concentrator addition at El Abra is in the early planning phase. For more information, see Industrial Info's project report.