FreePort-McMoran 3Q20 Earnings Analysis


Catalyst:


Copper prices fell by about 25% from January to March 2020 with the pandemic and recession. However, the recovery already started and now copper prices are around a 52 weeks high of $3.20/lbs. Copper is the second best electrical conductor after Silver and being more abundant and cheaper than Silver, it is favored in industrial uses such as making electrical wirings and water pipes. Current technological and economic trends show that the demand for Copper might increase in the coming decades with the rise of renewable energies and electrical vehicles. Wind and Solar power generators use about 4-5X more Copper than fossil fuel generators and EV use about 4X more Copper than ICE vehicles. Besides, more construction and electrification in developing countries will lead to higher demand. The supply for Copper is not increasing that fast and there could be a supply gap.


Financial Analysis:


In the third quarter of 2020, FreePort-McMoran reported $3.85 billion in revenues, and increase of 22% for the same quarter last year. For the first nine months of 2020, revenues are down 8%. The net income of the company was $329 million for the last quarter compared to a loss of $207 million for 2019. Capital Expenditures are down 18% for the year.


Production for Copper, Gold and Molybdenum are all slightly down for this year. The recent increase in Copper and Gold prices was able to generate the increase in revenues for the quarter. Net income increased as the margins of the company improved. The total production cost per lbs is $1.77 down by 14% from last year.


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