JPM-Freeport-McMoRan 2Q Results：Solid Beat-20250723

FCX’s 2Q adj EBITDA of $3.19B beat consensus $3.02B (JPMe $3.15B) on better-than-expected: 1) copper/gold sales (+1%/+5% vs. guidance); 2) premium COMEXpricing (+2% vs. JPMe); and 3) net unit cash costs (-25% vs. guidance). However,FY25 copper/gold sales guidance was cut 1%/19% due to revised ore grade modelingat Grasberg and pulled-forward inventory adjustments for the accelerated smelterramp, with first cathode production expected before month-end. We note FY26copper/gold guidance was unchanged. Grasberg has varying underground gradeorientations, especially for gold, with a similar model calibration last required in 2023and minimal impact expected to the 5yr plan (gold -3% vs. prior). 2H copper/goldsales are still expected to rise 9%/5% H/H, although FY25 net unit cash cost guidancerose 3% to $1.55/lb, largely driven by by-product credits. The weaker gold guidanceovershadowed the solid print, with shares (-2.1%) underperforming peers and indices(SPX/XME +0.8%/+0.4%). Much of the call was focused on forthcoming US coppertariffs and how FCX, as “America’s Copper Champion”, might respond (see below).In the meantime, the company continues to benefit from premium COMEX pricing,suggesting upside to near-term buybacks (vs. 2Q’s $52M), and is also focused on bothramping new leaching capabilities and preparing Bagdad for FID (i.e. autonomousfleet/tailings upgrades). We stay OW-rated FCX as we continue to feel the company’soutsized US (& gold) exposure provides relative upside vs. pure-play peers, alongwith incremental cash generation to grow shareholder returns.

•America’s Copper Champion: Ahead of 50% copper tariffs on Aug 1,questions remain pertaining to: 1) how FCX might expand refined capacity; 2)what role the government could play; and 3) whether the company’s non-USoperations could be in scope for tariff reprieves. Management is primarilyfocused on “cost effective” (and fast) ways to increase cathode production (i.e.leaching), but said a 30% expansion at the Miami smelter was being explored,which could support a future Bagdad expansion, and/or expanding recyclingcapabilities. We sense government engagement focused on education relatingto S232 tariffs and potential PTCs without any major advancements towardspotential financial support/partnerships at this time. Management is also notaware of any potential tariff reprieves for its non-US operations following therecent US/Indonesia trade deal (link), but noted flexibility to pivot shipments,although Indonesia has not historically exported to the US. Doing so wouldincrease FCX’s exposure to premium COMEX pricing, assuming anIndonesia/FCX tariff reprieve and broader 50% copper tariffs remain intact,although this would likely require a cap or TRQ to keep the COMEX premiumfrom collapsing.