Freeport-McMoRanFCX

Freeport reported adjusted earnings of $0.74 per share, beating the $0.60 analysts expected. Revenue reached about 7 billion dollars, also coming in ahead of targets. The strong performance was driven by selling more copper than the company had predicted back in April and keeping its cash costs, what it pays to pull each pound of metal out of the ground, lower than planned.

The most important detail for the long term is that the transition to underground mining at Grasberg in Indonesia is moving forward on schedule. This mine is the company's most valuable asset, and its success is what allows Freeport to produce copper at a lower cost than most rivals. While the company slightly lowered its near-term sales outlook, the underlying business is generating high margins and plenty of cash.

See the full quarter, and how our tracked metrics did

Source: 8-K filing

Key highlights

• Copper prices surging: The company sold its copper for an average price of $6.17 per pound, which is a significant jump from the $4.54 per pound it received a year ago. These higher market prices helped the business generate $2.0 billion in cash from its operations during the quarter.
• Unit costs rising: The cash cost to produce a pound of copper rose to $1.97, up from $1.13 in the same period last year. This increase was mostly caused by lower production volumes at the Grasberg mine in Indonesia while that site works through a gradual restart.
• Expansion costs increasing: Management expects the cost to expand the Bagdad mine in Arizona to be roughly 30% higher than the previous $3.5 billion estimate from 2023. Even with these higher construction costs, the company believes the project is still worth doing as long as copper stays around $4.00 per pound.
• Production recovery timeline: Operations in Indonesia are expected to reach 65% of their normal capacity by the end of 2026 and should return to full strength by the end of 2027. This recovery is vital because the Grasberg site is one of the lowest-cost copper and gold mines in the world.
• Full year outlook: The company expects to sell 3.1 billion pounds of copper and 650 thousand ounces of gold for the full year 2026. If copper prices stay near $6.00 per pound, the business expects to generate about $8.3 billion in cash from operations for the year.

Our take: This was a strong quarter because high copper prices more than made up for temporary production hurdles in Indonesia. The business is generating massive amounts of cash, and its plan to keep net debt at $2.1 billion shows excellent financial health. These results reinforce the case for holding the stock as a leader in a tightening copper market.