Freeport-McMoRan's Low-Cost Secret to Take Advantage of Record Copper Prices

With the price of copper continuing to trade near record highs, the question turns to which copper miners are best placed to take advantage of it. One answer is Freeport-McMoRan (NYSE: FCX), and based on recent developments, the case for the stock is getting stronger. Here's why.

Not just a demand issue

The narrative around the company and copper miners in general centers on the demand side. That's understandable given the crucial role of industrial metals in supporting the electrification-of-everything megatrend, which includes renewable energy, electric vehicles, AI data centers, industrial automation, and the power grid and transmission networks that enable their growth.

The demand-side story is exciting, but as ever with commodities, it's important to consider the supply side, and the good news is that the investment case for copper and Freeport-McMoRan stock only gets stronger when you do.

The supply-side story for copper

According to an S&P Global report, "Copper in the Age of AI," copper supply growth faces challenges due to a combination of declining ore grades, increasing complexity and cost of extraction, difficulty in acquiring permits, environmental activism, political interference, and very long lead times to bring an unmined greenfield site into production. According to the report, a risk-adjusted analysis of the supply and demand situation indicates that "mined supply falls short of projected demand by roughly 10 million metric tons of copper by 2040."

That kind of supply deficit implies long-term upward pressure on prices. Still, potentially higher pricing is one thing, but investors need to see that the stock they are investing in can expand supply to take advantage of that demand.

Freeport-McMoRan's supply expansion opportunities

Listening in on Chief Executive Officer Kathleen Quirk's recent presentation at the Morgan Stanley Annual Laguna Conference, it's clear the company has three major opportunities to expand production in the coming years. The first is its low-cost leaching initiative. Leaching involves recovering copper from already-mined ore, and Quirk confirmed it is currently recovering 200 million pounds of copper per year through the initiative. She also said Freeport aimed to reach a run rate of 300 million pounds per year by the end of the year, with a long-term target of 800 million pounds per year.

These numbers matter because they represent a significant percentage of its current copper production targets: 3.1 million pounds in 2026 and 3.8 million pounds in 2027. They also matter because the net cash cost of leaching is far lower than the company's current over net cash cost (excluding credits and costs for idle facilities and restoration), which is expected to be $1.90 per pound for copper in 2026.

Image source: Getty Images.

Quirk noted that the 200 million pounds per year of copper produced from leaching "has been, incrementally, a cost of less than $1" per pound. This compares favorably with the current unit net cash cost of $2.94 in the U.S. and $2.48 in South America. Freeport's copper production at Grasberg, Indonesia, has a unit net cash credit of $0.81 per pound, which is attributable to the mine's significant gold production.

It also compares favorably with the current copper price of about $6.70 per pound.

Grasberg recovery

The second growth opportunity comes from the ongoing recovery of production in Grasberg following a major mudslide event in September 2025. Quirk expects Grasberg to be at "roughly 65% of capacity in the second half of this year," and at full capacity "by the end of '27." These assumptions are likely baked into management's forecast to hit 4.1 million pounds of copper production in 2028 from 3.1 million in 2026.

Brownfield expansion

The company has brownfield expansion opportunities in existing mines. It's developing an underground mine (Kucing Liar, which is part of the Grasberg complex), which it expects to ultimately produce 750 million pounds of copper, with production starting about 2030. It's also working on a potential brownfield expansion in Chile and Stafford/Lone Star, Arizona.

Image source: Getty Images.

However, its most imminent decision in 2026 will be over an expansion in Bagdad, Arizona, with an estimated cost of $4.5 billion that could add up to 250 million pounds of copper per year in three to four years.

A stock to buy

The combination of low-cost supply expansions from leaching, a recovery in production in Grasberg, Indonesia, and brownfield expansions implies Freeport-McMoRan can expand production over the long term -- an excellent outcome if copper prices are heading higher over time.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends S&P Global. The Motley Fool has a disclosure policy.