What happened

Shares in copper miner Freeport-McMoRan (FCX -1.55%) surged by 16% in October, according to data provided by S&P Global Market Intelligence. Usually, when such moves occur, investors first look at the price of copper over the month. However, the industrial metal started the month trading at around $3.40 per pound and ended at a similar level.

Instead of slavishly following the copper price trend over the course of the month, investors elected to take a glass-half-full approach to the miner's prospects. It's a viewpoint supported by the mining company's third-quarter earnings, released in the third week of the month. 

During the presentation, CEO Richard Adkerson allayed investors' fears over the impact of a slowing economy on copper. The industrial metal is always seen as being highly sensitive to the economy because it's used across a broad swath of industries, including construction, electricity/power, transportation, consumer products, and industrial machinery. 

However, Adkerson argues that there's a discrepancy between a tight physical market for copper and its price. Accordingly, if the physical market remains tight and the relatively low price encourages more buying and less investment in supply, then the likelihood is for higher prices down the line -- good news for Freeport-McMoRan. 

So what

The argument over the future price is one thing; the fact that the mining company is still highly profitable at the current price is another. For example, management argues that at a price of copper of $3 per pound, Freeport-McMoRan would generate $6 billion in earnings before interest, taxation, depreciation, and amortization (EBITDA) on average in 2023 and 2024. Despite the substantial rise in the price, Freeport-McMoRan's market cap is still only $44.6 billion. 

Now what

If the economy, particularly the Chinese economy (a key consumer of copper), falls off a cliff, then all bets are off. However, the underlying demand for copper looks positive over the long term, with marginal demand growth driven by its use in electric vehicles, renewable energy, and electrification in the economy. On the other side of the equation, supply growth is constrained by increasing regulations and environmental concerns – one reason large miners are making takeover bids for smaller miners

On balance, gaining exposure to copper via buying Freeport-McMoRan is an attractive investment proposition on a risk/reward basis.