Executive Summary / Key Takeaways

• Freeport-McMoRan (FCX) stands as a global leader in copper, strategically positioned to capitalize on surging demand driven by electrification, AI, and renewable energy, with a robust portfolio of long-lived assets.
• The company's innovative leach technologies in the Americas are a significant differentiator, targeting 300 million pounds of incremental copper production by year-end 2025 and an ultimate goal of 800 million pounds per annum at exceptionally low incremental costs.
• Despite the recent Grasberg mud rush incident impacting near-term Indonesian production, FCX's new smelter and Precious Metals Refinery are ramping up, enhancing global integration and supporting long-term operating rights.
• FCX maintains a strong financial position with disciplined capital allocation, targeting 50% of available cash flow for shareholder returns and the remainder for value-enhancing brownfield growth projects.
• The company's outlook projects strong cash flow generation and lower unit costs in the U.S. and South America, although geopolitical risks and U.S. tariff policies remain key factors to monitor.

The Indispensable Metal and Freeport's Foundational Strength

Freeport-McMoRan Inc. (FCX) is a preeminent international metals company, firmly committed to its objective of being "foremost in copper." This strategic focus, adopted over two decades ago, has positioned FCX at the nexus of a global transformation, as copper emerges as an indispensable metal for electrification, artificial intelligence (AI) data centers, renewable power, and defense systems. The company's deep roots trace back to its incorporation in 1987, building upon an established franchise dating to the late 1800s, with its Indonesian operations celebrating 58 years in March 2025.

FCX's competitive landscape is defined by its scale, geographic diversity, and integrated operational model, setting it apart from other major diversified miners like BHP Group (BHP), Rio Tinto (RIO), Vale S.A. (VALE), and Anglo American (AAL). In the United States, FCX is the dominant producer, supplying approximately 70% of the nation's refined copper production through its integrated domestic mining and processing facilities. This strong domestic footprint, coupled with significant operations in South America (Cerro Verde in Peru, El Abra in Chile) and the world-class Grasberg minerals district in Indonesia, provides a diversified asset base. While larger peers like BHP may offer broader commodity diversification, FCX's focused portfolio on copper, gold, and molybdenum allows for specialized expertise and efficient resource extraction in its high-grade regions.

Technological Edge: Unlocking Value from Waste

A core differentiator for Freeport-McMoRan is its innovative approach to leaching and technology. The company is actively integrating new applications, data analytics, and operational enhancements into its leaching processes across its U.S. and South America operations. This initiative is not merely incremental; it represents a strategic pivot to unlock substantial value from material previously considered waste.

FCX is targeting an annual production of 300 million pounds of copper from these initiatives by the end of 2025, a 40% increase from 2024 levels. The ultimate goal is to achieve 800 million pounds per annum, effectively creating the output equivalent of a major new mine with significantly lower capital investment and incremental operating costs, historically "well below a dollar incrementally per pound." This is achieved through several key advancements:

• Targeted Solution Injection: Utilizing data from sensors and analytics, FCX deploys new operational tactics to direct leach solutions to previously inaccessible areas within stockpiles, including using helicopters to install irrigation lines.
• Advanced Additives: Large-scale testing of internally developed additive products is underway at Morenci, with a potential second additive showing "superior performance compared with anything we've seen to date" in initial lab tests.
• Heat Enhancement: Projects are planned to apply heat to leach solutions and enhance heat retention in stockpiles, a proven method to improve copper recoveries.

These technological advancements are particularly crucial for FCX's U.S. operations, which contend with lower ore grades. By expanding recoverable copper from leach stockpiles, these initiatives are expected to contribute to favorable adjustments in recoverable copper and significantly impact average unit net cash costs. This technological moat enhances FCX's competitive position by improving margins and expanding reserves from known mineralization that was previously economically limited.

Operational Resilience and Strategic Growth

FCX's operational strategy is characterized by a commitment to continuous improvement, disciplined capital allocation, and strategic brownfield expansions across its diverse asset base.

Indonesia's Cornerstone: Grasberg's Evolution

The Grasberg minerals district in Indonesia remains a cornerstone asset, renowned for being one of the world's largest copper and gold deposits. A major strategic milestone was achieved with the commissioning of PTFI's new downstream processing facilities. The Precious Metals Refinery (PMR) commenced operations in December 2024, and the new smelter in Eastern Java produced its first copper cathode in July 2025. This integration positions FCX as a fully integrated global producer, a strategic advantage in a world increasingly focused on critical mineral supply chain resilience.

However, the Indonesian operations faced a significant setback on September 8, 2025, with a tragic mud rush incident at the Grasberg Block Cave mine, resulting in seven fatalities and a temporary suspension of mining. PTFI recorded charges totaling $195 million in Q3 2025, including $152 million for idle facility costs. While a phased restart of the Grasberg Block Cave is anticipated in 2026, FCX does not believe this incident indicates a broader impairment of PTFI's long-lived mining assets. The company is seeking recovery under its property and business interruption insurance policies, covering up to $1 billion in losses. Despite this, discussions are advancing with the Indonesian government for a long-term extension of PTFI's operating rights beyond 2041, crucial for unlocking further value from the Kucing Liar deposit, which is expected to produce over 7 billion pounds of copper and 6 million ounces of gold between 2029 and 2041 with an estimated $4 billion in capital investments.

Americas' Growth Engine: Expanding Capacity and Efficiency

In the U.S., FCX manages seven copper operations, including the large-scale Morenci minerals district. The company is aggressively pursuing efficiency gains and cost reductions to counter lower ore grades and longer hauls. A significant operational achievement was the substantial completion of the Bagdad mine's haul truck fleet conversion to autonomous haulage in October 2025, making it the first major U.S. mine to operate a fully autonomous fleet. This initiative is expected to reduce reliance on labor and improve efficiency.

FCX is also advancing brownfield expansion opportunities. The Bagdad operation has a potential expansion project to more than double its concentrator capacity, adding 200 to 250 million pounds of copper per year with an estimated incremental capital cost of $3.5 billion, requiring an incentive copper price of less than $4 per pound. Pre-feasibility studies are also underway in the Safford/Lone Star district, aiming to define a significant expansion that could more than double current production levels of 300 million pounds per annum, with studies expected to complete in 2026.

In South America, the Cerro Verde operation continues to deliver solid performance. At El Abra in Chile, FCX is evaluating a major mill project to develop a large sulfide resource, potentially adding 750 million pounds of copper production per year from an estimated 20 billion recoverable pounds of copper. An environmental impact statement is planned for submission in Q1 2026, with project economics supported by an incentive copper price of less than $4 per pound.

Molybdenum and Downstream Processing

FCX's Molybdenum mines in Colorado demonstrate positive fundamentals with favorable demand and limited supply. The company's wholly-owned Atlantic Copper smelting and refining unit in Spain is also undertaking a "Circular Project" to recycle e-scrap, expected to be in production by the end of 2026, further diversifying its revenue streams.

Financial Strength and Shareholder Value

Freeport-McMoRan delivered a strong financial performance for the first nine months of 2025, despite operational challenges in Indonesia. Net income attributable to common stockholders reached $1.80 billion, up from $1.615 billion in the prior year period. This improvement primarily reflects higher operating income from U.S. and South America mining operations, partly offset by the impact of the Grasberg mud rush incident. Consolidated revenues for the nine months ended September 30, 2025, were $20.28 billion, compared to $19.73 billion in the same period of 2024. Operating income stood at $5.71 billion for the first nine months of 2025, up from $5.62 billion in 2024.

The company's liquidity remains robust, with $4.32 billion in cash and cash equivalents at September 30, 2025. Consolidated debt totaled $9.30 billion, resulting in net debt of $1.70 billion (excluding $3.20 billion of debt for PTFI's downstream processing facilities), well below its target range of $3 billion to $4 billion. FCX also has substantial revolving credit facility availability, totaling $3 billion for FCX, $1.50 billion for PTFI, and $350 million for Cerro Verde.

FCX's financial policy is designed to balance a strong balance sheet, cash returns to shareholders, and investments in value-enhancing growth projects. Up to 50% of available cash flows (after planned capital spending and noncontrolling interest distributions) are allocated to shareholder returns, with the remainder for debt reduction or growth. For the first nine months of 2025, FCX acquired 2.90 million shares for $107 million. The company also declared quarterly cash dividends totaling $0.15 per share in September 2025, comprising a base and variable component.

Outlook and Risks

Freeport-McMoRan's outlook for 2025 reflects a dynamic market and ongoing operational adjustments. Consolidated sales volumes for 2025 are projected at 3.50 billion pounds of copper, 1.05 million ounces of gold, and 82 million pounds of molybdenum. However, Q4 2025 is expected to see minimal volumes from Indonesia due to the mud rush, with projected sales of 635 million pounds of copper, 60 thousand ounces of gold, and 21 million pounds of molybdenum. Consolidated unit net cash costs for 2025 are estimated to average $1.68 per pound of copper, with U.S. costs expected to trend lower. Operating cash flows for 2025 are estimated at $5.50 billion. Capital expenditures for 2025 are projected at $4.50 billion, including $2.30 billion for major projects and $0.60 billion for PTFI's downstream processing facilities.

The company's modeled results for 2026 and 2027, assuming copper prices between $4 and $5 per pound, project annual EBITDA ranging from $11.5 billion to $15.5 billion, and operating cash flows from $8.5 billion to $11.5 billion. Notably, a 25% premium on U.S. copper sales (similar to current levels) could increase annual EBITDA by approximately 10% and operating cash flows by 15%.

Despite the positive outlook, several risks warrant investor attention. The Grasberg mud rush incident will significantly impact Q4 2025 and 2026 operating and financial results. U.S. tariff policies, including a 50% tariff on semi-finished copper products and potential future tariffs on refined copper, could impact costs and trade flows, though FCX is actively working to mitigate a potential 5% impact on its costs. Indonesia's new regulation requiring 100% of export proceeds to be deposited in Indonesian banks for 12 months also presents a liquidity consideration. Geopolitical risks, particularly in Indonesia, remain a constant factor, requiring ongoing dialogue and collaboration with government authorities for long-term operating stability.

Conclusion

Freeport-McMoRan stands as a compelling investment in the evolving global metals landscape. Its foundational strength in copper, underpinned by a vast and geographically diversified asset base, positions it to meet the accelerating demand from electrification, AI, and sustainable technologies. The company's relentless pursuit of technological innovation, particularly its leach initiatives, promises to unlock significant low-cost production and expand reserves in the Americas, creating a powerful competitive advantage.

While recent operational challenges in Indonesia, notably the Grasberg mud rush, present near-term headwinds, FCX's strategic integration through its new smelter and its ongoing efforts to secure long-term operating rights underscore its commitment to sustained value creation from this cornerstone asset. Coupled with a disciplined financial policy that balances shareholder returns with strategic growth investments, Freeport-McMoRan is well-equipped to leverage its unique competitive positioning and technological leadership to deliver robust financial performance and long-term value in a copper-hungry world.