Freeport-McMoRan (FCX) Shares Drop on Start of $7.5 Billion Chile Mine Expansion Permitting

TLDR

• FCX stock is down ~5% pre-market Thursday as copper futures decline
• Freeport filed for an environmental permit for a $7.5B expansion of its El Abra copper mine in Chile
• The expansion would quadruple output and add more than 300K metric tons of copper annually
• The project is a 51/49 joint venture between Freeport and state-owned Codelco
• Expanded operations are not expected to begin until 2033; a final investment decision is still pending

(SeaPRwire) –   Freeport-McMoRan submitted an application for an environmental permit on Thursday for a $7.5 billion expansion of its El Abra copper mine located in northern Chile.

Freeport-McMoRan Inc., FCX

This development was initially reported by the Chilean newspaper Diario Financiero late Wednesday and was confirmed by the company on Thursday.

The planned expansion is set to quadruple production at El Abra. Freeport estimates that the project could contribute over 300,000 metric tons of additional copper output each year.

The scope of the overhaul includes the construction of a new concentrator, a desalination plant, and facilities for tailings storage. The company had previously indicated its intention to pursue the expansion plan in mid-2024, following a period of delays.

Freeport had anticipated commencing the environmental permitting process between late 2025 and early 2026, a timeline that is now being followed.

Joint Venture With Codelco

Freeport manages the El Abra mine, holding a 51% ownership stake, while Chile’s state-owned copper company, Codelco, possesses the remaining 49%.

According to Bloomberg, Freeport executives met with Chile’s new Economy and Mining Minister, Daniel Mas, in Santiago on Thursday.

A definitive investment decision has not yet been made. The environmental permitting process represents the initial formal step towards reaching that decision.

Expanded Output Not Expected Until 2033

Should the project receive approval and funding, operations at the expanded mine are not projected to commence until 2033. This indicates a considerable timeframe before any increase in production will reach the market.

Despite this, the stock is experiencing a decline on Thursday. FCX is trading down approximately 5% in pre-market activity as copper futures are falling.

The downturn in copper prices is being attributed to rising energy costs stemming from an intensifying conflict in the Middle East, which is fueling concerns about the global economy.

Other companies involved in the copper sector are also showing weaker performance. Southern Copper (SCCO), Teck Resources (TECK), Taseko Mines (TGB), and Hudbay Minerals (HBM) are all indicated to be trading significantly lower in pre-market trading.

The El Abra mine is situated in Chile’s Atacama region, an area known for being one of the driest places on Earth. The proposed desalination plant is intended to address the water scarcity challenges inherent in operating within such an environment.

This is a long-term undertaking. Even if the permit is granted and Freeport commits the necessary capital, investors will not see production from the expanded facility for nearly a decade.