Freeport-McMoRan

The single risk that dominated this name — Grasberg execution — got demonstrably better this quarter: the Block Cave ramp is 'on schedule', full capacity was pulled IN to end-2027 from early 2028, copper sales beat the April guide, and unit cost guidance was CUT — all while realized copper set a record at $6.17/lb and net debt fell to $2.1B, below policy target.

• The Grasberg timeline moved forward, not back, for the first time since the September 2025 mud rush: ~65% of rates in 2H2026, 80% by mid-2027, approaching full capacity by END of 2027 versus the early-2028 target carried into this refresh
• Both operating KPIs beat the company's own April estimates — copper sales above plan and unit net cash costs favourable — and FY2026 unit cost guidance was cut to ~$1.90/lb from ~$1.95/lb
• Earnings grew on 30% LOWER copper volume: net income to common $984M versus $772M, EPS $0.68 versus $0.53 — the operating leverage to price is doing exactly what the thesis requires while volume is still impaired
• Realized copper hit a record $6.17/lb, above management's own $6.00/lb planning assumption for 2H2026, so the guidance carries upside if spot holds
• Net debt of $2.1B is comfortably inside the $3-4B policy band, which keeps the performance-based payout framework live — evidenced by the $110M of Q2 buybacks at a $64.34 average and the $0.15 quarterly dividend
• Free cash flow was genuinely positive at $944M in Q2 despite $1.1B of capex and $596M of working-capital/tax outflows
• The growth pipeline is being explicitly advanced — US leach and technology initiatives, potential US brownfield expansions and a potential major El Abra expansion in Chile — none of which is in current volumes
• Management is buying its own minority interests (2.0M Cerro Verde shares for $107M, 55.08% to 55.66%) — capital allocation into known, permitted ounces rather than greenfield risk

Strip out the record copper price and this was a shrinking business: revenue -7.3% YoY, gross margin down 360bps, gold sales down 76%, and unit cash costs up from $1.13/lb to $1.97/lb — with 1H earnings flattered by a $699M insurance gain and $4.3B of capex still to spend before the volume comes back.

• Revenue fell 7.3% YoY and gross margin 34.7% to 31.1% — cost of sales was flat in dollars ($4,843M vs $4,950M) against 30% lower copper volume, which is the definition of negative operating leverage on the cost side
• Unit net cash cost went $1.13/lb (Q2 2025) to $1.97/lb — a 74% increase; the $1.90/lb FY guide is still far above the $1.65/lb FY2025 actual, so the margin depends on copper staying near record levels
• 1H2026 operating income of $4,140M includes a non-repeating $699M insurance settlement; ex-that, 1H operating margin is 26.0% rather than 31.2%
• FY2026 operating cash flow guidance was reduced to ~$8.3B from ~$8.7B, and the new guide assumes $6.00/lb copper — above the price at which the equity's downside case works
• Gold is now a materially smaller earnings contributor while Grasberg is impaired (123koz sold in Q2 versus 522koz), removing much of the by-product credit that structurally lowers FCX's net copper cash cost versus pure-play peers
• Capex of ~$4.3B in 2026 (~$3.0B major projects) is front-loaded against volume that does not fully arrive until end-2027 — free cash flow stays hostage to the copper price through the whole ramp
• The end-2027 full-capacity target is the THIRD schedule for this asset (year-end 2027, then early 2028, now end-2027); 'on schedule' after two revisions is a statement about the current plan, not a track record
• Concentration risk is unchanged: PTFI/Indonesia sovereign, permit and export exposure, plus $3.2B of PTFI project debt that the company's headline net-debt figure excludes
• At $63.64 the stock is 12% off its June all-time high and prices a clean ramp plus sustained mid-$6 copper; it remains a pure price-taker into a cyclical commodity