FCX delivers strong quarterly results, plans major expansion
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Freeport McMoRan (FCX) reported a strong second quarter in 2024, with net income of $616 million and adjusted net income of $667 million, despite shipping delays in Indonesia.
The company produced 1 billion pounds of copper, 443,000 ounces of gold, and 20 million pounds of molybdenum in second quarter (Q2). Full-year sales are projected at 4.1 billion pounds of copper, 1.8 million ounces of gold, and 82 million pounds of molybdenum.
McMoRan plans a $7.5 billion expansion of its El Abra copper mine in Chile over 7-8 years, pending permits. The project aims to support long-term copper demand, with infrastructure including a concentrator plant and desalinisation investments expected to boost annual production to 750 million pounds of copper and 9 million pounds of molybdenum.
Copper sales, production decline
In Q2 2024, copper production decreased to 1,037 million pounds and sales fell to 931 million pounds, while the average realised price increased to $4.48 per pound, highlighting a challenging market despite higher prices.
Sales volumes
In Q2 2024 copper and gold sales were significantly below estimates due to shipping delays in Indonesia related to export license renewals, with copper sales falling 5% short of estimates and gold sales 28% lower.
Unit net cash costs up
In Q2 2024 consolidated average unit net cash costs for copper rose to $1.73 per pound, exceeding both April 2024 estimates and second-quarter 2023 levels, primarily due to lower sales volumes and higher export duties.
Operations
Leaching innovations
FCX's leaching improvements boosted copper production to 55 million pounds in Q2 2024, up from 29 million pounds a year prior. In the first half of 2024 (H1 2024), production reached 106 million pounds, doubling the previous year's 51 million pounds. The company aims to expand and refine these technologies.
North America operations
FCX manages seven copper mines and a smelter in North America: Morenci, Bagdad, Safford, Sierrita, Miami, Chino, and Tyrone. Some sites also produce molybdenum, gold, and silver. Morenci is a joint venture with a 72% interest.
Development activity
FCX is assessing an expansion in Bagdad to more than double concentrator capacity, aiming for an additional 200-250 million pounds of copper annually. The project is estimated to cost $3.5 billion and requires a copper price of $3.50-$4.00 per pound.
Ongoing projects in Safford are set to increase copper production from 200 million to 300 million pounds per year. Pre-feasibility studies for a major expansion are expected to complete by late 2025.
Financial policy
FCX's financial policy targets strong balance sheet, shareholder returns, and growth, with up to 50% of cash flows allocated to dividends. As of 30 June, 2024, net debt was $0.3 billion, excluding $3.0 billion for new facilities. FCX declared a $0.15 per share dividend and repurchased 1.2 million shares for $59 million, with $3.1 billion left in its buyback program.
Copper production, sale
In Q2 2024, North American copper production and sales decreased to 298 million pounds and 292 million pounds, respectively. South American production fell slightly, with Cerro Verde at 243 million pounds and El Abra at 55 million pounds. Conversely, Indonesia's Grasberg increased production to 441 million pounds and saw improved sales.
