Freeport-McMoRan stock: $4.5 billion Bagdad expansion approved

Freeport-McMoRan's board approved a $4.5 billion expansion and modernization program for the Bagdad copper and molybdenum operation in Arizona on Wednesday, November 4, the company said in a Freeport-McMoRan news release. The brownfield project is designed to more than double Bagdad's mining and milling rates and strengthen the miner's US copper growth strategy.

Freeport expects the mine to produce more than 400 million pounds of copper a year in the long term, including roughly 225 million pounds of incremental output. Molybdenum production is projected to exceed 20 million pounds annually, an increase of about 12 million pounds. Those figures describe planned output after the expansion rather than near-term production.

Large investment, long construction timeline

The project will add concentrator facilities with approximately 115,000 tons per day of incremental nameplate processing capacity. Supporting infrastructure includes a primary crusher, an overland conveyor, water and power systems, mining equipment and related facilities. Freeport said the plan will use Bagdad's existing infrastructure, reserve base and operating workforce.

Engineering, procurement planning and early works are under way. Construction is expected to take approximately three and a half years, with initial incremental production targeted for mid-2030. Freeport expects about 20 percent of project costs to be funded in 2027, 30 to 35 percent in 2028 and the balance in 2029 and 2030. The company said the spending will be incorporated into its updated capital expenditure outlook and treated as discretionary under its financial policy.

The company estimates a reduction of approximately 20 percent in long-term unit net cash costs. Management attributes the expected improvement to economies of scale, modern technology, automation and molybdenum by-product credits. The project economics are supported at a copper price of approximately $4.00 per pound and a molybdenum price of $20 per pound, according to the release.

Bagdad adds US copper capacity

Freeport said the expansion would make Bagdad the second-largest copper mine in the United States, behind its Morenci operation, and a leading US molybdenum producer. The mine has operated since 1945 and has a current reserve life exceeding 80 years before additional mineral resources are considered. The company said the project covers an ore reserve base of 2.6 billion metric tons with a copper-equivalent grade of 0.43 percent.

Chief Executive Officer Kathleen Quirk called the project an important step in Freeport's US copper growth strategy. The announcement adds a long-dated domestic volume project to a portfolio whose near-term investment debate has also centered on Grasberg recovery, copper sales guidance and operating costs.

Freeport-McMoRan stock traded at 55.88 euros on Lang & Schwarz at 14:02 CET on Thursday, November 5. Investors will likely focus on the eventual capital cost, execution timetable and copper prices because the project requires substantial spending before production begins.

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