Freeport-McMoRan is set to approve expansions at several of its US copper mines to capitalize on surging demand for the red metal as President Joe Biden moves to electrify the nation’s automobiles and combat climate change, Chief Executive Richard Adkerson told Reuters.
The expansions would be a major bet on the US economy – one of the company’s largest markets – and also on the rising demand for electric vehicles (EVs), which use twice as much copper as internal combustion engines.
The price of the red metal hit a nearly 10-year high this week as analysts expect that surging demand from the power and construction industries will overwhelm supply.
Adkerson also said he has no desire to combine Freeport with Barrick Gold or another gold producer and is working to give covid-19 vaccines to about 25,000 workers at the Grasberg copper mine in Indonesia, which Freeport owns jointly with the country’s government. He also is aiming to double the size of the company’s board of directors.
Phoenix-based Freeport already produces more than 1 billion pounds of copper each year in the United States, little of which is exported. While the company opened a new US mine last year in Arizona, it could soon greenlight expansions at three mines in the US Southwest, Adkerson said, adding more than 250 billion pounds of copper each year to US output.
“President Biden clearly has a commitment to addressing climate change, and any climate change initiative creates demand for copper,” Adkerson, who became Freeport’s chairman on February 2, said in an interview this week. “We’re very well-situated to address that with the assets we have.”
Biden met with lawmakers on Wednesday to discuss how to secure supplies of electric vehicles and the minerals used to make them.
Just a year ago, Freeport worried about “our ability to continue operating” due to the coronavirus pandemic, Adkerson said. With copper prices hovering near $2 a pound last April, the company was forced to make budget and dividend cuts.
Copper is a key barometer of economic health due to its use in manufacturing. In the last six months, copper prices have slowly rebounded to just above $4 a pound and Freeport’s stock has more than doubled.
“Now we can turn our attention to focusing on these growth opportunities,” Adkerson said, adding that any expansions would take several years to bring online. That timeline implies the company remains bullish on copper for the long run.
The option to expand existing mines, rather than build new ones, gives Freeport an advantage over its rivals, Adkerson said. Rio Tinto, for instance, is trying to build the Resolution Copper mine in Arizona, a project that Native Americans oppose on religious grounds. Adkerson declined to comment on that dispute.
The combination of Freeport’s improving sales and stock price has seemingly shooed away potential bidders, including Barrick. Last year, Barrick CEO Mark Bristow expressed interest in Freeport.
At the time, Barrick’s market value was twice that of Freeport. Now, given its stock surge, Freeport is worth $20 billion more than Barrick. Bristow told investors last week his first priority now is to expand the assets Barrick already owns.
“I don’t believe it makes sense to combine a company like ours with a gold company,” Adkerson said. “But I don’t criticize Mark (Bristow) for thinking we have good assets.”
Freeport’s commitment to copper, Adkerson said, will remain and the company will avoid lithium, rare earths and other EV metals that are getting more attention on Wall Street. Adkerson, who has been CEO since 2003 and is now 74, said he has no plans to retire.
“We’re on the verge of really great success, and thank God I’ve got the health and energy to be a part of it,” he said.
In early trade on Thursday, the copper price for delivery in March was up 1% with copper futures exchanging hands for $4.26 per pound ($9,372 a tonne).
Click here for an interactive chart of copper prices.
The bellwether material has already doubled since a nadir in March, and is roughly 7% below the record of $10,190 set in 2011.
According to metals trader Concord Resources copper could surge above a record to $12,000 a tonne in 18 months on new demand from green initiatives.
“People need to be aware of the potential for a changing paradigm in terms of pricing,” said Mark Hansen, chief executive officer of the trading house. “In copper, the market is not yet pricing in the addition of potentially millions of new tonnes of copper demand over the coming decade.”
Mining firms in Chile, the world’s No.1 copper producer, warned that costs could rise as labor unions and vendors also try to cash in on the trend.
“If negotiations get complex, this could lead to possible stoppages, hitting the copper supply,” said Alejandra Wood, Santiago-based head of the Center for Copper Studies (CESCO).
(With files from Reuters)