What Are Major Revenue Streams For Freeport-McMoRan Inc.?

by Trefis Team
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Freeport-McMoRan Inc.
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Freeport-McMoRan Inc. (NYSE: FCX) is one of the world’s largest copper, gold, and molybdenum-mining companies in terms of reserves and quantity produced. The company has had a rough year so far, having declined 30% from its 52-week high and 20% in the third quarter till now, largely because of weaker copper prices, increased regulatory curtailments in China, and an uncertain regulatory environment in Indonesia. In this note, we will discuss major revenue sources for FCX.

We currently have a price estimate of $15 for the company, which is slightly higher than the current market price. View our interactive dashboard – Freeport’s Revenue Streams – and modify the key drivers to visualize the impact on its valuation.

FCX is involved in mining, smelting, and refining of copper, gold, and molybdenum. The company runs its mining and smelting operations in North and South America and Indonesia. It derives the majority of its revenues from its copper mines. Based on our estimates, the company’s total revenues are expected to be $21.98 billion in 2018.

Copper (~52%) – FCX has copper mining operations in North America, South America, and Indonesia.

  • North-America (~19.5%) FCX’s copper operations in North America has seven operating mines – Morenci (FCX-72%), Sieritta, Bagdad, Safford, Miami, Chino, and Tyrone. Most of the copper concentrate produced by the North American mines is cast into copper rod by the company’s rod and refining operations. Some of FCX’s copper mines also produce Molybdenum concentrate, gold, and silver. All of North America’s mining operations are wholly owned by FCX, except for Morenci. We expect copper mining revenues from North America’s mines to be $4.3 billion in 2018.
  • South-America (~17%) – FCX’s copper mining operations in South America have two operating mines: Cerro Verde in Peru and El Abra in Chile. FCX’s owns 53.56% ownership in Cerro Verde and a 51% interest in El Abra. The South American mines sell copper concentrate or copper cathode. In addition to copper, the Cerro Verde mine produces Molybdenum concentrate and silver. According to our estimates, the revenue from this region for copper mining is expected to be $3.7 billion in 2018.
  • Indonesia (~15.5%) – FCX has mining operations in the Grasberg mine in Indonesia of which Freeport owns 90.64% (including 9.36% through its wholly owned subsidiary: Indocopper Investama). Based on the negotiations around this mine, Freeport would require divesting its interest in Grasberg to 49%, negatively impacting the revenues.  The Grasberg mine in Indonesia contains the largest single recoverable copper and gold reserve than any other mine in the world. The copper mining revenue from this region is  expected to be $3.4 billion.

Gold (~15%) – FCX’s gold operations are almost wholly concentrated in the Indonesian mines. The company produces gold as a byproduct in its North-American and South-American operations. The company has the potential to significantly boost its gold output from its Indonesian operations. A revenue of $3 billion is expected from gold operations of FCX in 2018.

Molybdenum (~4%) – FCX’s Molybdenum operations are mainly concentrated in Colorado, North America. The company has two Molybdenum operating mines: Henderson and Climax both in Colorado. FCX has a 100% ownership in both these mines. Nearly, a third of the company’s Molybdenum production comes from the Henderson Molybdenum mine. We expect $1 billion revenue from this segment in 2018.

Other Revenue Streams (~30%) – Other Revenue streams include Rod & refining operations (~20%), Atlantic copper smelting operations (~9%), and revenues from silver sales (~2%). We have a revenue estimate of $6.6 billion from this segment in 2018.

 

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