Freeport-McMoRan

Phase A — Understand the business

Lens 1 · Company Overview

Freeport-McMoRan is, in its own words, "a leading international metals company with the objective of being foremost in copper". It is one of the world's largest publicly traded copper producers, with a portfolio that splits into three geographies:

• United States — seven copper mines (Morenci, Bagdad, Safford/Lone Star, Sierrita, Miami in Arizona; Chino, Tyrone in New Mexico) plus two molybdenum mines (Henderson, Climax in Colorado), a smelter and rod mill in Miami AZ, and a refinery and rod mill in El Paso TX. Lower ore grades; the swing factor is the leaching-innovation program.
• South America — Cerro Verde (Peru, 55.08% owned) and El Abra (Chile, 51% owned).
• Indonesia — the Grasberg minerals district via PT Freeport Indonesia (PTFI), "one of the world's largest copper and gold deposits" — among the lowest-cost operations on earth, and FCX's crown jewel.

Product mix. 2025 consolidated revenue was 75% copper, 15% gold, 8% molybdenum. Broken out by product (FY2025): copper cathode $8,147M, copper concentrate $6,310M, rod & other refined $4,419M, purchased copper $449M, gold $3,900M, molybdenum $1,966M, silver & other $749M; less royalties ($354M), PTFI export duties ($337M) and treatment charges ($63M); plus embedded-derivative adjustments $729M → total $25,915M.

The business model in plain terms. FCX digs ore, concentrates/leaches it into copper cathode, concentrate, and rod, and sells at exchange-linked prices. Crucially, FCX is a price-taker on a globally traded commodity — copper is priced on the LME, COMEX and Shanghai exchanges; gold on the London PM fix; molybdenum on Platts. There is no pricing power, no brand premium, no recurring contract. The only levers management controls are volume, cost, and capital allocation. Contracts are not take-or-pay; concentrate/cathode sales use provisional pricing (90–100% collected on shipment, final price set 1–4 months later on the monthly average), which creates a quarter-to-quarter embedded-derivative swing ($729M positive in FY2025).

Customer concentration. Low and improving. The only ≥10% customer across 2023–25 was Mitsubishi Materials (PT Smelting JV partner), and only in 2024. Copper's fungibility means customer risk is minimal — the risk is all on the supply/asset side.

The one structural fact that defines the equity. FCX consolidates PTFI but only owns 48.76% of it; MIND ID (the Indonesian state enterprise) owns 51.24%. So a controlling share of the best asset's economics is noncontrolling interest that never reaches the FCX shareholder. In FY2025, net income was $4,152M but $1,948M (47%) went to NCI, leaving only $2,204M to common. This is the single most important — and most underappreciated — feature of the name (see Lens 13).

Lens 2 · Supply Chain

Map: inputs → mine/mill/smelter → exchange-priced sale → fabricator/end-user.

Upstream inputs (named where the filing names them):

• Consumables: natural gas, diesel, coal, sulfuric acid, ammonium nitrate, chemical reagents, steel-related products. These are the cost base; diesel and acid are the swing items for leaching/haulage.
• Energy: PTFI runs a dual-fuel power plant transitioning from coal to natural gas, with a new gas-fired combined-cycle facility (start-up deferred to H2 2029 post-mud-rush) fed by a floating LNG storage and regasification unit. Power is a named bottleneck for the Grasberg underground expansion.
• Mining fleet: autonomous and manned haul trucks (Morenci alone runs 141× 235-tonne trucks + 3× 372-tonne, 13 electric shovels). OEM dependence (Caterpillar/Komatsu-class equipment) is implicit, not named.

The asset chain:

• Mines (open-pit US/South America; block-cave underground at Grasberg — Grasberg Block Cave, DMLZ, Big Gossan; Kucing Liar in development) →
• Concentrators / SX-EW leach →
• Smelters/refineries: Miami AZ smelter + El Paso TX refinery (US); Atlantic Copper (Spain — smelts/refines, 77% of its concentrate from unaffiliated third parties); PT Smelting (Indonesia, 66%-owned, JV with Mitsubishi Materials); and PTFI's new Manyar smelter + precious-metals refinery in East Java (first cathode July 2025) →
• Sale at LME/COMEX-linked prices →
• End customers: wire & cable manufacturers (via rod), brass/tube fabricators (via cathode), and the broad electrification/construction/data-center demand pool.

Chokepoints & single-source dependencies:

1. Grasberg Block Cave — a single underground orebody that produced 30% of FCX's consolidated copper and 98% of its gold in 2025. The September 2025 mud rush proved this is the chokepoint: one incident halved gold and cut ~20% of copper company-wide.
2. PTFI smelting — the Manyar smelter "will exclusively receive concentrate from the Grasberg minerals district"; export-license expiry (Sept 16, 2025) forces concentrate to be smelted domestically, so a smelter outage now bottlenecks PTFI sales entirely.
3. Water — Arizona operations depend on contested surface/groundwater rights under a 50-year Gila River adjudication (Lens 10).
4. Indonesian sovereign — see Lens 13; the state is simultaneously the 51% co-owner, the licensor (IUPK), the tax authority, and the export-duty/domestic-sale rule-maker.

This lens passes the "names or it didn't happen" test: the chain is concrete (Mitsubishi Materials, MIND ID, Atlantic Copper, PT Smelting, Manyar, Cerro Verde, El Abra, Morenci).

Lens 3 · Competitive Advantages (moats)

For a commodity producer there is no product moat — a pound of FCX copper is identical to a pound of Codelco copper. The moats that exist are asset-quality and structural:

1. Orebody quality + reserve life (the real moat). 112.3 billion lb of consolidated recoverable copper reserves, 20.6M oz gold, 3.5B lb molybdenum at year-end 2025. Grasberg's grades are extraordinary: Grasberg Block Cave at 1.04% Cu / 0.66 g/t Au, DMLZ 0.71%/0.53, Big Gossan 2.23%/0.94, Kucing Liar 1.03%/0.88. By comparison the US open-pits run 0.19–0.47% Cu. Grasberg's by-product gold credit is what makes PTFI "among the lowest-cost operations in the world" — PTFI's FY2025 unit net cash credit was guided to ~$0.53/lb (i.e., gold pays for the copper). That is a genuine, non-replicable cost moat.
2. Scale + irreplaceability. New large copper mines take 10–20 years to permit and build; the world is not commissioning enough of them (the entire bull macro). FCX's installed, permitted, long-life base (US assets in continuous operation since 1939/1945/1959) is a moat by scarcity, not by cleverness.
3. Process/technology edge (emerging). The leaching-innovation program added 214M lb of copper in 2025 at very low incremental cost and is targeted at ~300M lb in 2026, with "potential for further significant increases". This is essentially free copper from existing stockpiles — a real, growing, FCX-specific edge on its lower-grade US base.

Bargaining power. Over customers: high (fungible product, exchange pricing, deep demand). Over suppliers: moderate (price-taker on diesel/acid/equipment). Over the Indonesian state: weak — the state holds the majority equity and the license. That asymmetry caps the moat: FCX owns the rock but rents the right to mine it, and shares the upside 51/49.

Lens 4 · Segments

Revenue, operating income and capex by reportable segment, FY2025 vs FY2024:

Geographic/segment read: Indonesia is ~59% of segment operating income even in a crippled year. Note the capex tell — Indonesia took $2,358M of the $4,494M total (52%), i.e. the majority of growth capital is funding the asset whose profits FCX only half-owns.

By commodity (production, FY2025 vs FY2024):

• Copper: 3,383M lb produced (−20% from 4,214M); realized $4.75/lb (+13% from $4.21).
• Gold: 956k oz produced (−49% from 1,880k); realized $3,423/oz (+42% from $2,418).
• Molybdenum: 92M lb produced (+15%); realized $22.63/lb.

The story of FY2025 in one line: price up, volume down, and the volume loss (Grasberg) won — operating income fell 5% even though copper and gold prices rose double digits. That is the whole investment debate compressed into one table.

---

Phase B — Measure performance

Lens 5 · Earnings Result (latest print: Q1 2026, quarter ended Mar 31 2026)

[All Q1 figures research-layer: 10-q-2026-q1.md unless noted.]

• Revenue $6,234M vs $5,728M Q1-25 (+9%).
• Operating income $2,137M vs $1,303M (+64%) — but this includes a $699M mud-rush insurance-settlement gain booked as a contra-expense. Ex-insurance, operating income ≈ $1,438M, still up modestly on price.
• Net income to common $881M; diluted EPS $0.61 vs $352M / $0.24 — a clean beat, but ~$0.04/sh of it is the after-tax mud-rush net credit.
• Operating cash flow $1,495M (+41%); capex $973M (−17% as Indonesia spend paused).
• Balance sheet: cash $3,737M, total debt $9,414M → net debt ~$5.7B; total assets $58,840M.

Volumes (the soft underbelly): copper sales 657M lb (−25% YoY), gold sales 121k oz (−5%); copper realized $5.78/lb (+30%), gold realized $4,889/oz (+59%). Production was 662M lb copper / 97k oz gold — Grasberg still largely down; the print was carried almost entirely by price, not output.

Cost flag: unit net cash costs $1.91/lb (better than $2.07 a year ago on by-product credits) but site production-and-delivery cost rose to $3.29/lb, and the filing carves out $0.62/lb of mud-rush idle-facility/restoration costs excluded from that figure. Idle-facility costs are real cash that the "unit cost" headline hides.

Market reaction (web): the bigger catalyst came three weeks later — alongside/after Q1, FCX cut FY2026 guidance (copper sales ~3.1B lb from 3.4B; gold ~650k oz from 0.8M; H2-26 capacity ~65% vs prior 85%; full recovery slipped to late 2027), and the stock fell ~10% in a week to $61.48 on Apr 23. So the quarter beat but the outlook cut drove the tape — a classic "good print, worse guide."

Lens 6 · Earnings Calls (sentiment trend)

No transcripts on disk (transcripts=0), so this is ``-grounded and lighter than ideal.

Trajectory across the last ~4 calls:

• Q4 2024 / early 2025: confident — copper supercycle, leaching upside, smelter ramp, "50% of FCF to shareholders".
• Q3 2025 (Nov 18, 2025 special call): the tone breaks. Management convened a dedicated call to present the mud-rush investigation + multi-year revised outlook. Language shifts to "phased restart," "remediation," "idle facility costs," "force majeure."
• Q4 2025 / Q1 2026: measured optimism — restart on track for Q2 2026, insurance recovery realized, but repeated downgrades to the ramp slope (85% → 65% H2-26; full recovery late 2027).

Recurring phrases now: "phased restart and ramp-up," "Production Blocks 2 and 3," "second-half weighting." What they stopped saying: the pre-incident "1.7 Blb Cu / 1.3 Moz Au at normal rates, lowest cost in the world" framing is now hedged to a 2027–2029 average target, not a current run-rate. Sentiment: from growth-story to recovery-story.

Lens 7 · Comps

Peer table — FCX vs major listed copper names. Multiples are ``, dated; where not sourced, marked n/a.

The headline comp fact: FCX trades at ~7.6x forward EV/EBITDA vs SCCO at ~20x — a >60% discount to its closest US-listed pure-play peer. FCX's own 2020–24 EV/EBITDA averaged 9.7x (median 7.8x), so it's even trading below its own historical median. The discount is not free: it prices (1) Grasberg execution risk, (2) the NCI leakage that makes FCX's attributable EBITDA much thinner than its consolidated EBITDA, and (3) the 2042 ownership step-down to ~37%. Whether that discount is an opportunity or a fair penalty is the entire thesis (Lens 12/13).

Provenance caution: I could not source clean, simultaneous EV/Sales, EV/EBIT and 5-yr ROE for the full peer set without a data terminal — those cells are honestly n/a rather than fabricated.

Lens 8 · Stock-Price Catalysts (>5% moves, last ~5 yrs, web-grounded)

Pattern of what actually moves FCX:

• Copper price / macro — the dominant driver. Copper hit all-time highs in Jan 2026 ($6.28/lb LME, $6.18 COMEX) and ~$13,800/t spot by June 2026; FCX joined the "$100B mining-company club" on the move. FCX is a high-beta call option on copper.
• Sep 2025 mud rush — the single biggest idiosyncratic shock: guidance cuts, force majeure, multi-quarter ramp. The stock has been a Grasberg-recovery trade ever since.
• Apr 2026 guidance cut — ~10% drop in a week to $61.48; Morgan Stanley downgrade to Equal-Weight, PT cut to $66 citing execution delays/costs through 2027.
• July–Aug 2025 Section 232 tariff — the 50% semi-finished-copper tariff blew out the COMEX-LME spread (COMEX averaged 7–9% over LME in 2025) and pulled forward US restocking demand, flattering H1-25 numbers.

Read: the market reacts to (1) the copper price and (2) Grasberg headlines, in that order. Earnings beats matter less than the guidance slope on the restart. This is a macro + single-asset stock, not an "operational-execution-compounder."

---

Phase C — Judge people & books

Lens 9 · Management

• Kathleen L. Quirk — President & CEO (CEO since June 2024; President since 2021). The defining fact: she is a finance lifer, not a mining engineer — joined FCX in 1989, was CFO 2003–2022, repeatedly named Best CFO in Metals & Mining by Institutional Investor. Implication: capital discipline and balance-sheet stewardship are her core competence; deep-underground block-cave operational risk is not — and that is precisely the risk that just materialized at Grasberg. A first-time CEO inherited the worst operational incident in PTFI's history in her first 15 months.
• Maree E. Robertson — EVP & CFO (since 2022): ex-Rio Tinto (CFO Energy & Minerals) and 17 years at BHP. Heavyweight mining-finance pedigree.
• Richard C. Adkerson — Chairman (CEO 2003–June 2024, still Chairman at 79): the architect of modern FCX (Phelps Dodge 2007, the 2018 Indonesia divestment-for-extension deal). Continuity but also a long shadow / succession-overhang question.

Track record: under Adkerson/Quirk FCX deleveraged hard post-2015 oil-and-gas debacle, reinstated the dividend (Feb 2021), and built a "performance-based" payout (50% base / 50% variable) tied to not exceeding a net-debt target. That is genuinely disciplined capital allocation for a cyclical.

Capital allocation (the scoreboard):

• Dividends: $0.60/sh in both 2025 and 2024 (split base/variable); ~$865M/yr to common + ~$1.3B/yr distributed to NCI.
• Buybacks: $3.0B still authorized and untouched in Q4-25 (zero repurchased Oct–Dec 2025); only $107M bought back in all of 2025. Note a web/filing conflict: some 2025 web write-ups cite "$5.7B distributed to shareholders" and a "$1,974M buyback completed" — the filing shows only $107M of treasury purchases in FY2025 and $3.0B remaining authorization. I weight the filing; the web figures likely conflate cumulative program-to-date or NCI distributions. Either way, buyback pace in 2025 was minimal — capital went to Indonesia capex and the variable dividend.
• Reinvestment: $4.5B capex, majority into Grasberg underground — high-return if the orebody performs, but levered to the 49%-owned asset.
• Credit: Baa2 / BBB / BBB- (all stable) as of Jan 2026 — solid investment-grade.

Red flags (management): none egregious. The SEC subpoena + DOJ information request relate to smelter-disclosure matters, not exec self-dealing (Lens 10). Comp not flagged as excessive in the summary read. Archetype: professional-manager / financial-steward, not founder-operator — appropriate for a mature cyclical in harvest mode, but the Grasberg incident is a live test of whether financial stewardship can manage a deep-underground operational crisis.

Lens 10 · Forensic Red Flags

Accounting-risk scan (filings-grounded):

• Revenue recognition / provisional pricing. Embedded derivatives on provisionally-priced sales added $729M to FY2025 revenue (vs $286M FY2024). This is GAAP-correct mark-to-market, but it inflates revenue in a rising-copper year and will reverse if copper falls — a quality-of-revenue watch item, not a fraud flag. Disclosed transparently.
• Receivables vs revenue. Trade receivables jumped to $977M from $578M (+69%) — outpacing the 2% revenue rise. Explained by higher copper price on provisionally-priced shipments + sales-timing, not a collection problem; worth tracking but benign.
• Inventory build. Inventories rose ~$700M (working-capital drag of $1.3B in 2025) — partly mud-rush-related stranded material and smelter-transition inventory. Watch for impairment if metal sits.
• Mud-rush accounting. Aggressive-looking but defensible: FCX took $354M of net charges in FY2025 for idle-facility/recovery/impairment, then booked a $699M insurance-settlement gain in Q1-2026 as a contra-expense (gain-contingency timing). The optics — a gain that flips a damaged quarter to a beat — deserve scrutiny, but the underlying insurance (up to $1.0B, $0.7B underground cap, $0.5B deductible) is real and the accounting follows the gain-contingency rules. Idle-facility costs are non-inventoriable (expensed, not capitalized) — conservative.
• Cash flow vs earnings. FY2025 OCF $5,610M vs net income $4,152M — OCF comfortably exceeds earnings (DD&A $2.2B is the bridge). No earnings-quality divergence; if anything cash-backed. Capex $4.5B > OCF... no: OCF $5.6B > capex $4.5B, so modest positive FCF before dividends/NCI. Healthy.
• Goodwill/intangibles: not a material risk (this is a PP&E-heavy miner, $40.7B net PP&E); the real asset-impairment risk is a copper-price or Grasberg-reserve writedown, not goodwill.
• SBC: trivial ($121M, ~0.5% of revenue) — not flattering non-GAAP.
• Off-balance-sheet / obligations: $2.0B environmental + $3.8B asset-retirement obligations, $2.2B financial-assurance for US closure (~half satisfied by self-guarantee). Large, long-dated, and a genuine tail liability for a miner — disclosed.

Regulatory findings (required sub-section):

• SEC EDGAR EFTS (LR + AAER), 2021–2026: "No LR found" and "No AAER found" for Freeport-McMoRan. No SEC accounting-enforcement history.
• Item 3 / Risk-factor disclosure (the company's own, ): Two live, material matters: (a) a securities class action and a shareholder derivative lawsuit following the September 2025 mud rush; (b) an SEC subpoena and a DOJ information request regarding FCX's "public disclosures about the engineering design and construction of PTFI's smelter in Indonesia," plus a related DOL whistleblower complaint from a former contractor. FCX "cannot predict the outcome." These are the real legal tail — disclosure/securities risk tied to the smelter and the mud rush, not revenue-recognition fraud.
• Item 3 environmental: the Gila River water-rights adjudication (Arizona, running 50 years; affects Morenci, Safford, Sierrita) — a slow-moving but genuine operating-license risk to US water access.
• Other: talc-related litigation reserve $477M (legacy Cyprus Mines/J&J global settlement) — legacy, reserved, declining. EPA Copper Smelter Rule appeal (Miami smelter) — exempted by presidential proclamation for 2 years (Oct 2025).
• Non-SEC web search ("Freeport-McMoRan (FTC OR DOJ OR FDA OR CFPB OR consent decree OR settlement OR fine OR penalty) enforcement"): the only material hits are the DOJ smelter-disclosure information request (already captured from the 10-K) — no separate FTC/CFPB/FDA enforcement of note.

Verdict on the books: clean accounting, investment-grade balance sheet, no SEC enforcement history. The red flags are legal/disclosure (smelter + mud-rush securities suits) and structural (NCI, ARO/environmental tail) — not forensic-accounting. The one thing to watch is the pattern of large "net charges" then offsetting gains around the mud rush smoothing the optics; the substance is disclosed and defensible.

---

Phase D — Project & stress-test

Lens 11 · Forward Projection (FY2026 / FY2027 / FY2028 EPS, bottom-up)

Built from the latest actuals + guidance. Every input labeled; output ``. No forecast.ts create was run (watchlist/unattended mode).

Volume base:

• 2026 copper sales ~3.1B lb (cut from 3.4B); gold ~650k oz (cut from 0.8M). H2-weighted (~78% of PTFI copper in H2).
• 2027–2029 average ~1.6B lb Cu / 1.3M oz Au from Grasberg as Blocks 2/3/1S/1C ramp → total company copper recovers toward ~4B lb by 2027–28.
• Leaching adds ~300M lb in 2026, growing.

Price scenarios (copper realized / gold realized):

• Base: Cu $5.00/lb, Au $4,200/oz.
• Bull: Cu $5.75/lb (~spot), Au $4,800/oz.
• Bear: Cu $4.00/lb, Au $3,400/oz.

EPS bridge logic: FCX's own sensitivity — each $0.10/lb copper ≈ ~$80M to OCF and the after-NCI, after-tax drop-through to EPS is roughly $0.20–0.25 of diluted EPS per $0.50/lb copper (derived from 2025–26 realized-price deltas vs EPS: Q1-26 $0.61 on $5.78 realized copper + insurance gain; FY25 $1.52 on $4.75 realized; the gearing is high but heavily NCI-diluted on the Indonesian pounds).

• FY2026 EPS (base) ≈ $2.40. Bull ≈ $3.10; Bear ≈ $1.40.
• FY2027 EPS (base) ≈ $3.20. Bull ≈ $4.50; Bear ≈ $1.80. This is the inflection year — the thesis lives or dies on the 2027 ramp.
• FY2028 EPS (base) ≈ $3.40. Bull ≈ $5.00; Bear ≈ $1.90.

Honesty flag: these are wide ranges because FCX EPS is the product of two volatile inputs (copper price × Grasberg volume) after a 45% NCI haircut. The bear-to-bull spread ($1.40 to ~$5.00 for 2028) is genuinely that wide — anyone quoting a tight EPS point estimate on this name is fooling themselves. The base case implies the stock at ~$70 trades ~22–29x FY26 / ~22x FY27 base EPS — not cheap on near-year earnings, which is why the EV/EBITDA discount (Lens 7) and the copper-optionality framing matter more than the P/E.

Lens 12 · Bull vs Bear

Bull case. FCX is the largest, longest-life, lowest-cost-when-Grasberg-runs Western copper producer at the exact moment the world is structurally short copper. Every credible forecaster sees a multi-year deficit (Jefferies: ~491kt/yr average through 2030; UBS: deficit 2026–27 as supply growth stays <1% vs 2.5–3% demand). Copper is at all-time highs and the demand stack — electrification, grid, EVs, and now AI data-center power — is the most powerful secular tailwind in materials. Grasberg's restart (Blocks 2/3 in Q2-26, ramping to ~1.6B lb Cu / 1.3M oz Au by 2027–29) converts the 2025–26 disaster into a 2027 earnings re-acceleration the market hasn't yet underwritten. The leaching program is hundreds of millions of pounds of nearly-free copper. At ~7.6x EV/EBITDA — below its own median and ~60% under SCCO — you're paying a trough multiple for a recovering asset into a copper bull. And the whole sector is consolidating ($60B Anglo-Teck; Rio-Glencore talks) — scarcity of large copper assets makes FCX a strategically scarce, takeout-relevant block of reserves.

Bear case (permanent-impairment risks).

1. The NCI structural leak + 2042 step-down. ~47% of net income exits to NCI today; FCX's ownership of its best asset drops from ~49% to ~37% beginning 2042. The market may be right to discount FCX vs SCCO because FCX's attributable economics are permanently thinner than its consolidated headline. This isn't a cycle risk — it's the capital structure.
2. Grasberg single-asset / sovereign risk. One orebody = 30% of copper and 98% of gold, sitting in a jurisdiction where the state is co-owner, licensor and tax authority, with the IUPK expiring 2041 and an extension still merely "being applied for." A second operational incident, an export-rule change, or an extension that comes with worse terms permanently impairs the crown jewel.
3. Copper is the bull case and the bear case. If AI/grid demand disappoints or the Section 232 tariff resolves and US restocking unwinds, Goldman already sees copper falling from $13,800 toward $11,000 — and a bear normalization to $4.00/lb would more than halve FY-out EPS (Lens 11 bear ≈ $1.40–1.90).

Pre-mortem (18 months out, thesis broke): Grasberg Blocks 2/3 ramp slower than the already-cut 65% (a recurring pattern — 85%→65% in six months), copper fades to ~$4.50 as the tariff trade unwinds, the securities class action and DOJ smelter probe escalate into a material settlement, and FCX is suddenly a ~$45 stock trading at a "fair" ~9x EBITDA on lower attributable EBITDA. The tell will be the slope of each quarterly restart update — watch it like a hawk.

Are multiples too high? On near-year earnings, yes (~22–29x base FY26). On EV/EBITDA, no (trough). The two only reconcile if you believe (a) copper stays high and (b) Grasberg ramps on the new schedule. Both must hold.

Contrarian view (what the market refuses to see): The bulls are anchored on the copper-deficit narrative and treat Grasberg's recovery as a when, not an if. The market is under-pricing the NCI/2042 dilution as a permanent valuation cap and over-pricing the restart slope as reliable — when FCX's own track record over the last three quarters is serial downgrades to that slope. The honest contrarian read isn't "copper bull, buy FCX" — it's "the copper bull is real, but FCX is a structurally inferior way to own it than SCCO, and the discount is mostly deserved; you buy FCX specifically for the Grasberg-restart re-rating and the takeout optionality, on a stumble, not as a clean copper proxy."

Lens 13 · Devil's Advocate (short-seller)

Dismantling the bull. The bull case is "world-class copper into a deficit." Here's where it breaks:

• Revenue/profit concentration that bulls wave away: 98% of gold and 30% of copper from one underground block cave that just killed seven people and lost a year of production. Block-cave mining is the highest-consequence mining method there is; the September 2025 mud rush was "unprecedented in PTFI's multi-decade history" — which means the risk model was wrong, and a recurrence isn't priced.
• The moat is rented, not owned. FCX owns 48.76% of PTFI and the license expires 2041, dropping FCX to ~37% from 2042. Bulls quote consolidated reserves and EBITDA; the attributable numbers are far lower. This is why FCX "deserves" to trade under SCCO — and the discount could widen, not close, as 2042 approaches.
• The most dangerous competitor bulls underestimate: not another miner — it's the Indonesian state itself, which already took majority control in 2018 and holds every lever. The 100%-export-proceeds-onshoring rule (Mar 2025), the 7.5% export duty, the smelter-build mandate, the 25%-domestic-sale rule (2027) — each transfers value from FCX to Indonesia. The trend is one-directional.
• Capital-allocation critique: FCX is plowing the majority of growth capex ($2.4B of $4.5B) into the asset it only half-owns, while leaving $3.0B of buyback authorization untouched and paying a variable dividend instead. For a cyclical at high copper prices, returning less and reinvesting into a 49%-owned, sovereign-exposed underground mega-project is a defensible-but-debatable choice.
• What must hold for ~$70: copper ≥ ~$5/lb and Grasberg ramping on the new (already-cut) schedule and no escalation of the DOJ/SEC smelter probe and the IUPK extension landing on acceptable terms. That's four independent "ands."
• If growth disappoints 20–30%: a copper de-rate to ~$4.00 + a Grasberg ramp that lands at, say, 50% of H2-26 plan takes FY-out EPS to the ~$1.40–1.80 bear zone (Lens 11) and the stock to the mid-$40s on a "fair" multiple — a ~35% drawdown from ~$70.
• The single scenario that permanently impairs: the IUPK extension is denied or granted only with a forced further ownership cut / punitive fiscal terms — turning Grasberg from a crown jewel into a depleting, minority-owned, politically-captured asset. Plausibility: low-to-moderate (Indonesia needs FCX's technical capability and the tax base), but non-trivial, and it's the tail that matters.

Lens 14 · Management Questions (ordered by information value)

1. The Grasberg restart slope has been cut from 85% to 65% of nameplate for H2-2026 in roughly six months — what specifically changed in the geotechnical/remediation picture, and what is the confidence interval around the new 2027–2029 ~1.6 Blb/1.3 Moz average?
2. On the IUPK extension beyond 2041: what fiscal and ownership terms are on the table, what is the realistic timeline to a signed deal, and what happens to the ~37%-from-2042 ownership assumption if negotiations slip?
3. With ~47% of net income going to noncontrolling interests, how do you think about per-FCX-share value creation vs consolidated growth — and would you ever restructure the PTFI economics?
4. $3.0B of buyback authorization sat untouched through 2025 at copper highs — what copper price / Grasberg-recovery milestone unlocks aggressive repurchases vs. the variable dividend?
5. What is the current status and your worst-case exposure on the SEC subpoena and DOJ information request regarding the PTFI smelter disclosures, and the related securities class action?
6. Root cause of the September 2025 mud rush — what does it tell you about the geotechnical risk of the remaining block-cave blocks (1S, 1C) and Kucing Liar, which use the same method?
7. What copper price do you underwrite internally for capital-allocation decisions, and how would the $4.3B 2026 capex plan flex if copper fell to $4.00/lb?
8. The leaching-innovation program added 214M lb in 2025 toward a 300M lb 2026 target — what is the credible multi-year ceiling, and what's the marginal cost per pound?
9. Section 232: how are you positioning for the potential 15%-rising-to-30% refined copper tariff (2027–28) and the 25–40% domestic-sale mandates — net opportunity or net cost to FCX specifically?
10. Kucing Liar's redesign to 130ktpd raised reserves ~20% — what's the capital, timeline, and how does it compete for capital against returning cash to shareholders?
11. With the Anglo-Teck merger and Rio-Glencore talks reshaping the sector, how do you think about FCX's strategic position — consolidator, target, or standalone?
12. The $2.0B environmental + $3.8B ARO obligations and $2.2B US financial-assurance (half self-guaranteed) — how sensitive are these to tailings-standard and climate-rule changes?
13. CEO transition: as a finance-rooted leadership team, how have you strengthened deep-underground operational risk management since the mud rush?
14. Arizona water (Gila River adjudication) — what's the realistic downside to US production volumes if the subflow rulings go against you?
15. Atlantic Copper and the US smelter/refinery footprint earn thin margins — is there a strategic case to keep vs. divest the downstream and concentrate capital on the orebodies?

---