Freeport-McMoRan Earnings Call Highlights Copper-Fueled Rebound

Freeport-McMoRan, Inc. ((FCX)) has held its Q4 earnings call. Read on for the main highlights of the call.

Freeport-McMoRan Signals Strong Recovery Momentum Amid Copper Tailwinds

Freeport-McMoRan’s latest earnings call struck a broadly upbeat tone, with management leaning heavily on a combination of strong copper prices, resilient cash generation and tangible progress in restarting its Grasberg operations. While executives acknowledged operational setbacks, cost pressures and execution risks across key projects, the message to investors was that rising copper prices, expanding reserves and an advancing restart plan at Grasberg more than offset the challenges, underpinning a constructive near- to medium‑term outlook.

Robust EBITDA Power and Cash Flow Leverage

Freeport reported adjusted EBITDA for 2025 of nearly $10 billion, essentially flat with 2024 despite disruption at Grasberg, underscoring the company’s earnings resilience. Management highlighted modeled EBITDA potential for 2027–2028 that ranges from about $11 billion at $4 per pound copper to more than $19 billion at $6 per pound, translating into operating cash flow of roughly $8 billion to over $14 billion. The company reminded investors of its strong leverage to copper, with each $0.10 per pound move in the metal equating to around $400 million in annual EBITDA, positioning Freeport as a clear beneficiary of a higher-for-longer copper price environment.

Cost Discipline and Delivery Against Guidance

Despite the September mudflow that reduced volumes at Grasberg, Freeport kept a tight rein on costs in 2025. Consolidated unit net cash costs came in at $1.65 per pound, within about 3% of guidance, demonstrating solid planning and execution under stress. Looking ahead to 2026, the company expects unit net cash costs to average $1.75 per pound, with the first half running above that level and the second half dropping sharply toward roughly $1.25 per pound, driven by volume recovery and operational improvements. This cost trajectory is central to management’s confidence that margins can expand if copper prices stay firm.

Copper Price Strength Amplifies Earnings Outlook

The macro backdrop for copper was one of the clear bright spots. In 2025, LME copper prices averaged $4.51 per pound, within a broad trading range of $3.87 to $5.68. Year‑to‑date in 2026, prices are running about 30% higher than that 2025 average, significantly improving Freeport’s near-term cash flow outlook. Management stressed that this price strength, coupled with the company’s volume recovery and cost initiatives, could materially lift earnings and cash generation, even as they cautioned that some of the recent price action may reflect sentiment and speculation rather than purely physical tightness.

U.S. Operations Deliver Strong Volume and Profit Growth

Freeport’s U.S. business delivered standout performance, offering investors a clear example of the company’s operating leverage to copper prices. U.S. copper production rose about 5% versus the prior-year fourth quarter and likewise increased on a full-year basis versus 2024. More strikingly, U.S. operating income in the fourth quarter came in at 3.5 times the level recorded in Q4 2024, underscoring not just higher prices but also improved conversion of revenue into bottom-line results. This strong performance gives Freeport a solid earnings base as it works through issues elsewhere in the portfolio.

Grasberg Restart Advances with PB2 and PB3 Progress

A key focus of the call was the ongoing recovery at Grasberg following the mudflow incident. Management reported that the Deep MLZ and Bigas mines restarted in the fourth quarter, and that mud removal for the crucial PB2 and PB3 blocks is now substantially complete, with roughly 97% of the required material cleared. Protective plugs are being installed, infrastructure repairs are on track to be finished by quarter-end, and the company expects a phased restart beginning in the second quarter of 2026. The goal is to restore about 85% of district production in the second half of 2026, a milestone that, if achieved, should meaningfully lift volumes and lower unit costs.

Leach Initiative Emerges as Low-Cost Growth Engine

Freeport devoted significant attention to its leach initiative, which it framed as a major near-term, low-cost growth driver. The program produced more than 200 million pounds of copper in 2025, with a target of 300 million pounds in 2026, a 50% year‑over‑year increase, and 400 million pounds in 2027. Longer term, the company outlined a path to 800 million pounds of leach production by 2030. Management described field deployment of proprietary leach additives and planned heated-solution injection tests in 2026 as pivotal steps for scaling the technology, presenting this initiative as a potential differentiator in adding low-capital, low-cost copper volumes.

Reserve Additions Strengthen Long-Term Growth Optionality

One of the more strategic developments was the substantial reserve additions recorded in 2025. Freeport added reserves well in excess of its annual production, including more than 17 billion pounds of copper tied to the El Abra expansion, moving material that had previously been classified as a resource into the reserve category. These long-life reserves, together with large resource bases across the Americas and Indonesia, underpin multiple future development options. Management positioned this reserve growth as a crucial component of Freeport’s long-term value proposition, particularly as the market focuses on structural copper supply constraints.

Capital Allocation, Cash Returns and Balance Sheet Flexibility

On capital allocation, Freeport emphasized a balanced approach between reinvestment and shareholder returns. Capital expenditure in 2025 was $3.9 billion, about $0.5 billion below plan, reflecting disciplined project execution and timing. For 2026–2027, capex is projected at roughly $4.3–$4.5 billion per year, including a sizable discretionary component of about $1.6–$1.7 billion annually and added spending for project studies. The company has returned $5.7 billion to shareholders through dividends and share repurchases, maintains investment‑grade credit ratings and faces no significant debt maturities in 2026. Management argued that this financial flexibility allows Freeport to both fund growth and sustain meaningful cash returns.

Grasberg Incident Fallout and PB1 Uncertainty

The September mudflow at PTFI weighed on 2025 results, cutting annual copper volumes by roughly 10% versus plan. While PB2 and PB3 are progressing toward a 2026 restart, the PB1S and PB1C blocks are now targeted for 2027, and management underscored that the PB1C restart remains subject to ongoing mitigation work and the outcome of investigations. This introduces multi-year operational uncertainty for that part of the ore body and represents a key risk factor investors will watch, particularly if delays extend or additional capital is required to fully stabilize the area.

South American Costs Trend Higher

Freeport’s South American operations are grappling with rising costs, providing a counterweight to improvement elsewhere. Fourth-quarter unit net cash costs in the region averaged $2.57 per pound, and management expects a similar level, about $2.58 per pound, in 2026. The company pointed to higher labor and energy costs as primary drivers, along with the impact of a weaker U.S. dollar compared with previous periods. These inflationary headwinds compress margins in South America and highlight the importance of cost reductions and growth initiatives in other parts of the portfolio to sustain overall profitability.

Execution Risk in U.S. Cost Reduction Plans

While U.S. operations are generating strong earnings, management acknowledged that its cost reduction aspirations carry execution risk. Unit costs in the U.S. were near $3.10 per pound last year, with guidance for about $3.00 per pound in 2026 and a more ambitious target of $2.50 per pound in 2027. Achieving these levels depends heavily on successfully scaling the leach program and capturing efficiency gains, including from automation and operational improvements. Should leach volumes or productivity gains fall short, the company may struggle to hit its cost targets, which would limit margin expansion even in a favorable price environment.

Indonesia Operations and Sales Timing Effects

Operational and timing constraints in Indonesia added complexity to the quarterly profile. Operations in the country ran on a limited basis in the fourth quarter, with one smelter resuming late in the year while a new smelter remained on standby, with restart planned later. As a result of shipment timing, fourth-quarter sales exceeded production by around 60 million pounds, creating a temporary disconnect between production and reported sales. Management suggested these timing factors should normalize as smelter operations stabilize and Grasberg’s restart advances.

Autonomous Haul Truck Rollout Faces Productivity Hurdles

Freeport’s push to convert the Baghdad haul truck fleet to autonomous operation is underway, but the company conceded that performance has not yet met expectations. Management said the autonomous fleet has so far fallen short of targeted productivity levels, meaning more work is required before expected efficiency gains are realized. This introduces risk to the near-term cost and productivity benefits investors might be assuming from automation, and underscores that the technology transition is still in its early innings at this mine.

Baghdad 2X Expansion: Capex and Execution Uncertainty

The proposed Baghdad 2X expansion was another area where management highlighted both opportunity and uncertainty. The current capital cost estimate of about $3.5 billion, based on a 2023 study, is under active refinement. Freeport has earmarked an additional $150 million of engineering spend in 2026 to secure fixed vendor pricing and sharpen project economics ahead of a final investment decision expected later in the year. The company cautioned that cost inflation, tariffs, vendor pricing and labor availability could all push project costs higher and affect timing, and noted that the expansion requires roughly $4 per pound copper to justify investment, making it sensitive to both market conditions and cost trends.

Copper Inventories Rise Despite Price Rally

In a nuanced view of the copper market, Freeport pointed out that global exchange inventories have risen in recent months even as LME prices surged roughly 30% year‑to‑date versus the 2025 average. This divergence introduces some near-term ambiguity for the market and suggests that the price rally may be driven in part by sentiment and speculative activity rather than purely immediate physical tightness. For Freeport, this backdrop is still clearly positive given its price leverage, but investors were reminded that volatility and potential pullbacks are possible if sentiment shifts or if inventories continue to build.

Guidance and Outlook: Volume Recovery, Cost Tailwinds and Growth Options

Looking ahead, Freeport’s 2026 guidance envisions a quarterly production run rate of roughly 1 billion pounds of copper, supported by Grasberg’s phased restart and growth from the leach initiative. Consolidated unit net cash costs are guided to about $1.75 per pound for the year, assuming $4,000 per ounce gold and $20 per pound molybdenum, with higher costs in the first half and a sharp improvement in the second half to around $1.25 per pound as volumes ramp. The company has baked in 250–300 million pounds of leach production in 2026, up from more than 200 million pounds produced in 2025, and is targeting about 400 million pounds in 2027 and 800 million pounds by 2030. Modeled 2027–2028 results point to EBITDA of roughly $11 billion at $4 per pound copper and more than $19 billion at $6 per pound, with sensitivities of about $400 million of EBITDA per $0.10 per pound change in copper and approximately $120 million per $100 per ounce change in gold. Capex is forecast at $4.3–$4.5 billion per year in 2026–2027, including around $150 million of added 2026 spending for the Baghdad study, while Grasberg’s PB2/PB3 restart in the second quarter of 2026 is expected to restore about 85% of district production in the second half of that year. Management also emphasized the strategic significance of adding over 17 billion pounds of reserves at El Abra against a backdrop of tighter long-term copper supply.

Freeport-McMoRan’s earnings call painted a picture of a miner emerging from operational disruption with strengthening fundamentals in a favorable commodity cycle. Strong U.S. performance, improving Grasberg visibility, a scaling leach initiative and substantial reserve additions provide a platform for growth, while disciplined capital allocation and a solid balance sheet support ongoing shareholder returns. Risks remain around project execution, cost inflation and the durability of the copper rally, but overall management’s tone and guidance suggest that Freeport is well positioned to capture upside if copper demand and prices remain robust.