Copper miner Freeport McMoRan (FCX 1.02%) has significant potential to soar over the coming decade, in line with a rise in the price of copper and the company's ability to expand production. Here's why.
Demand and supply for copper support higher prices
The case for copper often relies on assumptions about future demand. The metal is a vital part of the global economy due to its uses across a wide range of sectors, including electricity transmission and distribution, construction, and transportation. It's also a vital part of the energy transition and the megatrend of the electrification of everything.
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Key Data Points
Replacing internal combustion engines (ICEs) with electric vehicles (EVs) creates increased copper demand since the latter use significantly more copper. And EV charging networks need the metal to function and connect to the grid.
Then there's the multitude of connected technologies, such as industrial automation, smart buildings/infrastructure, and data centers that drive the move toward electrification.
But there's the real possibility that a lack of investment and major copper discoveries in recent years will result in a supply shortage. For example, according to research by S&P Global, only 14 of the 239 major discoveries since 1990 occurred over the last decade, and just four in the last five years.
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Why Freeport McMoRan is in a good position
The company is ideally placed to benefit in this environment due to its potential to increase production through expansionary investment in existing projects in relatively stable countries like the U.S. and Indonesia. And its leaching technology can extract copper from existing stockpiles. Management aims to eventually hit an annual run rate of 800 million pounds of copper from leaching -- a significant amount given that it expects total production of 4.1 billion pounds in 2024.
As such, Freeport McMoRan is an ideal play on the potential for a higher price of copper.
