Copper Hits All-Time High, Freeport-McMoRan Ready to Ride Wave
The price of copper has hit an all-time high, and Freeport-McMoRan (FCX +0.23%), a leading copper miner, is poised to benefit from this trend.
Data from S&P Global Market Intelligence shows that the metal has performed exceptionally well in recent years, with its recent run being particularly strong.
The strength of the copper price supports Freeport-McMoRan's stock even if one takes an agnostic view of the metal's price. Management estimates that the company's earnings and cash flow are sensitive to copper prices, which is evident in its latest projections for 2027/2028.
In this period, the company expects EBITDA (Earnings before interest, taxes, depreciation, and amortization) of $13 billion at a copper price of $5 per pound, rising to $20 billion if prices reach $7 per pound. Operating cash flow is also expected to increase significantly, reaching $15.5 billion in 2027/2028 at the higher price scenario.
This translates to attractive multiples for Freeport-McMoRan, with an enterprise value (EV) to EBITDA valuation of 6.8 times and a free cash flow (FCF) multiple of 11.2 times in 2027/2028. These values are significantly lower than the average EV/EBITDA multiple of 9.01x over the last decade.
The case for copper combines an ongoing shift in structural demand for the metal, following years of underinvestment in global copper mines, with a deterioration in copper ore grades. As this explosive demand grows, it's becoming increasingly difficult for miners to secure greenfield mining permissions, which can take almost 18 years to come online.
Freeport-McMoRan is well-placed to benefit from these trends due to its low-cost leaching initiative and plans to rapidly expand production in the coming years. The company expects copper production to grow from 3.1 billion pounds in 2026 to 4.1 billion pounds in 2028.