Freeport-McMoRan: Don't Get Stuck Focusing On Q2 Results

Core Viewpoint - Freeport-McMoRan is expected to report disappointing Q2 results, but the long-term investment potential hinges on copper prices, which have recently declined despite strong cash flows at higher prices [2][4]. Group 1: Q2 Performance and Guidance - Freeport-McMoRan anticipates a Q2 average copper price of $4.45/lb, down from previous expectations of sustainable levels above$5/lb [4]. - The company faced export issues in Indonesia, resulting in a shortfall of 5% in copper and 30% in gold production targets for April 2024 [4]. - Consensus estimates for Q2 include an EPS of $0.38 (up 8.3$6.0 billion (up 4.8% YoY) [4]. Group 2: Long-term Production and Cash Flow - Freeport-McMoRan controls 104 billion pounds of copper reserves at a $3.00/lb price, with plans to increase annual copper production by ~2 billion pounds by 2030 [5][6]. - The company is investing$3.6 billion in capital expenditures this year, with plans to increase to $3.9 billion next year, while maintaining flexibility to halt spending if copper prices decline [6]. - The long-term cash flow potential is significant, with projections of over$7.5 billion annually at $4/lb copper and over$11 billion at $5/lb copper [4][6]. Group 3: Market Dynamics and Future Outlook - The demand for copper is expected to rise significantly due to the global push for electric vehicles (EVs) and renewable energy, where copper usage is 2x to 4x higher than traditional sources [6]. - Freeport-McMoRan's market cap stands at$66 billion, positioning it as a solid investment if copper prices remain above $4/lb, with potential for higher prices in the coming years [6][7]. - The recent weakness in copper prices presents a buying opportunity, as the long-term demand for copper remains strong despite potential volatility [7].