Freeport Profit Rises 27% as Copper Prices Offset Indonesia Slump
Freeport-McMoRan posted net income of $984 million even as copper sales volumes fell 30% during the phased restart of its Grasberg Block Cave mine.
Freeport-McMoRan (FCX) reported second-quarter net income attributable to common stock of $984 million, up 27% from $772 million a year earlier, even as revenue fell 7% to $7,029 million from $7,582 million. Earnings per share rose to $0.68 from $0.61 in the first quarter, a 12% sequential gain in net income that took results to their highest level since the disruption at the company's Indonesian operations began last year.
The gain came despite a steep drop in copper volumes. Consolidated copper sales fell to 710 million pounds from 1,016 million pounds a year earlier, a 30% decline driven by reduced operating rates at PT Freeport Indonesia (PTFI) during the ramp-up of the Grasberg Block Cave mine following last September's mud rush incident. PTFI copper sales alone collapsed to 153 million pounds from 443 million pounds, while gold sales at the unit fell 77% to 118,000 ounces from 518,000 ounces.
What kept earnings growing through that volume decline was price. The average realized copper price climbed to $6.17 a pound from $4.54 a year earlier, a 36% increase, and rose 7% from $5.78 in the first quarter. That price move more than offset the lost Indonesian tonnage and pushed consolidated unit net cash costs up to $1.97 a pound from $1.13 a year earlier, even as costs held roughly flat against the first quarter's $1.91. Freeport nonetheless trimmed its full-year cost guidance to $1.90 a pound from the $1.95 given in April and the $1.75 first guided at the end of 2024.
Freeport disclosed a more detailed timetable for the Grasberg restart than in prior quarters; PTFI is expected to reach about 65% of production capacity in the second half of 2026, 80% by mid-2027, and full capacity by the end of 2027. The company had previously described only a "phased restart beginning Q2 2026" in its fourth-quarter release and an "adjusted schedule" in the first quarter. The added specificity coincided with cuts to two other full-year targets: operating cash flow guidance was lowered to about $8.3 billion, assuming $6.00-a-pound copper, from $8.7 billion guided in April, and down from the $8 billion originally projected in the fourth quarter at a $5.00 assumption. Molybdenum sales guidance moved the other direction, rising to 93 million pounds from 90 million pounds guided in each of the prior two quarters.
Regional cost trends diverged. U.S. copper mines' unit net cash costs improved to $2.94 a pound from $3.04 a year earlier on higher molybdenum by-product credits, while South American operations saw costs tick up to $2.48 a pound from $2.46 on lower copper volumes. Freeport also disclosed for the first time that its Bagdad expansion project's capital cost estimate now runs about 30% above the $3.5 billion figure the company gave in 2023. Separately, leaching and technology initiatives added 47 million pounds of incremental copper in the quarter, 101 million pounds for the first half, and set a new target of a 300-million-pound annual run rate by the end of 2026.
Adjusted net income of $1.1 billion, or $0.74 a share, came in above the GAAP figure this quarter, a reversal from the first quarter, when adjusted net income of $830 million and $0.57 a share had actually trailed GAAP net income of $881 million and $0.61. The swing reflected a shift from net credits tied to an insurance settlement in the first quarter to net charges for idle-facility and restoration costs related to the mud rush in the second.
Freeport increased its stake in the Cerro Verde mine to 55.66% from 55.08% during the quarter, spending $107 million on 2.0 million shares in an open-market purchase not disclosed in either of the prior two releases. The company also repurchased 1.7 million of its own shares for $110 million, or $64.34 a share, up from $93 million for the same 1.7 million shares at $54.25 in the first quarter, a roughly 19% higher average buyback price. Net debt stood at $2.1 billion at June 30, little changed from $2.4 billion at the end of March and $2.3 billion at the end of 2024, as gross cash rose to $4.1 billion from $3.7 billion in the first quarter.