Grasberg Runs on Schedule, but the Americas Slip and the Bill for Growth Keeps Rising

Results vs. Consensus

A quarter ago the question was whether Grasberg would keep to its plan. It did. Copper sales landed on the July estimate to within a million pounds, the block cave delivered its planned rates for a second quarter running, and the earnings beat came through on a much better composition than July's. The disappointments sat elsewhere: a gold-sales shortfall caused by smelter timing, a unit-cost miss that followed from it, and production problems in Arizona and Chile that management had not flagged three months ago.

Consensus was tight on earnings and loose on revenue. Adjusted-EPS estimates clustered between $0.80 and $0.815, so the beat is 8% to 10% under any compiled set. Revenue estimates spanned $7.09B to $7.36B. We use $7.36B, the figure most compilations carried, which makes the revenue beat modest at 2.5%.

Q3 2026 Scorecard

Year-over-year

Sequential

The sequential picture is the cleanest it has been since the mud rush. Operating income rose 17.5% on 7.4% more revenue, with no insurance gain flattering either quarter. Operating cash flow dipped 3.3%, but the second quarter included $0.7B of insurance proceeds and this quarter absorbed $0.4B of working capital as concentrate and refined metal built up behind the restarted smelter. Excluding the insurance proceeds, second-quarter cash flow was about $1.35B, so the third quarter's $1,981M was a real improvement even after absorbing the working-capital build.

Volumes and realizations

Quality of Beat

Revenue. Price did the work, again. Revenue rose 8.2% while copper sales fell 23.3% and gold sales fell 68.8%, because realized copper rose 39.7% to $6.54/lb and molybdenum rose 34.9% to $32.46/lb. Realized copper and molybdenum also rose from the second quarter, by 6.0% and 12.9%, while realized gold of $4,273/oz fell 5.5%. Two smaller items flattered the line: provisional-pricing adjustments added $116M of revenue in total ($52M of it on prior-period sales), worth $38M to net income to common or about $0.03 per share, and deferred intercompany profits added $24M to operating income. Going the other way, roughly 60,000 oz of refined gold slipped from the third quarter into the fourth. At the quarter's realized price that is about $0.26B of revenue moved forward one quarter, not lost.

Margins. Operating income grew more than twice as fast as revenue, 19.3% against 8.2%, but unit economics went the wrong way. Site production and delivery cost per pound rose 19.6% to $3.24, and unit net cash costs of $2.07/lb landed 4% above the July estimate of $2.00. The release attributes the miss to lower by-product credits from the deferred gold, which makes most of it timing. The part that is not timing sits in the Americas: U.S. unit costs rose to $3.16/lb on lower volumes and higher energy, and South America rose to $2.39/lb on profit sharing, energy and El Abra maintenance. The $244M of Grasberg idle-facility and restoration costs stayed outside the unit-cost figure.

EPS. Adjusted EPS of $0.88 excludes $101M of after-tax net charges, or $0.07 per share. The idle-facility costs account for $72M of production and delivery cost and $19M of depreciation, oil and gas asset-retirement adjustments for $24M, and a $14M PTFI historical tax credit runs the other way. The add-backs are conventional, with one important qualification from the call: management described the idle costs as fixed costs that will move into unit costs from 2027 rather than disappear. On that reading, roughly $0.06 per share of this quarter's adjusted earnings is a recurring cost that the adjusted figure leaves out. Consensus sits on the same adjusted basis, so that classification does not change the size of the beat. The tax rate and the price adjustments do: we estimate that the lower rate is worth about $0.03 per share after minority interests and the prior-period price adjustments $0.01, which leaves roughly $0.03 of the $0.07 beat as operating outperformance. Most of the quarter's strength is price, and the realizations table already shows it.

Segment Performance

Indonesia: on plan, with the smelter back

Grasberg produced 249M lbs of copper and 229k oz of gold against 311M lbs and 281k oz a year ago, and again sold far less than it produced: 153M lbs of copper and 98k oz of gold. The gap is the downstream system refilling. PTFI's own smelter restarted in late August after running down during the incident, and the company still expects about 100M lbs of copper and 70k oz of gold to sit in smelter inventory at year end. Mill throughput of 141,300 t/d was 67% of capacity, with the block cave at 69,500 t/d and the Deep Mill Level Zone running 46% above last year at 71,900 t/d. Copper grade improved to 1.01% from 0.91% in the second quarter, though it remains below the 1.15% of a year ago.

"We were successful in restarting the smelter and now have both smelters in Indonesia in operation to support our mine ramp-up." — Kathleen Quirk, President and Chief Executive Officer

The segment's unit net cash credit narrowed to $0.84/lb from $0.92 on lower volumes, and the $244M of idle and restoration costs ($1.59 per pound of copper) sat outside it. Operating income of $616M was down 52.0%, but it was up from $499M in the second quarter.

Assessment: For the second quarter running, Indonesia did what management said it would do. That is the most important operating fact in the release, because Grasberg execution was the bear point that broke the stock in April. The remaining risk has changed shape: it is now about the smelter converting inventory into sales on time and about water, not about wet ore.

U.S. Copper Mines: the earnings engine, with a production problem

U.S. operating income of $869M more than doubled on copper production that fell 2.7% to 321M lbs. Price did nearly all of it: realizations of $6.55/lb against $4.92 a year ago. The operating picture was weaker than in the second quarter. Mining rates ran 10% above last year but 3% to 5% below plan and below second-quarter levels, as an unusually high frequency of extreme weather events disrupted operations. Mill copper production fell 11.4% to 147M lbs on a lower grade (0.29% against 0.31%) and a lower recovery (80.7% against 82.4%). Leach production rose 3.8% to 221M lbs, with ore placed on stockpiles up 27.2%.

"Operating income for our U.S. mining operations more than doubled in the third quarter compared with last year's third quarter, with strong conversion to the bottom line." — Kathleen Quirk, President and Chief Executive Officer

"Strong conversion" is the right phrase. The U.S. jurisdiction, which includes corporate costs, reported $678M of pre-tax income and a $76M tax charge, an 11% rate driven by the corporate alternative minimum tax, with no minority partner below it. That compares with roughly 31% of Indonesian segment pre-tax income and 33% of South American segment pre-tax income reaching FCX shareholders after local tax and minority interests.

Assessment: The U.S. business is the highest-quality earnings stream in the company and it underdelivered on volume this quarter. The full-year U.S. cost guide of $3.08/lb only holds because molybdenum is strong. If the weather that management says has continued into the fourth quarter persists, the U.S. is now the more likely source of a fourth-quarter miss than Indonesia.

South America: Cerro Verde strong, El Abra weak

South American operating income of $1,014M more than doubled from $493M, with Cerro Verde delivering $936M of it. Production of 262M lbs fell 3.3%. Cerro Verde's mining, milling and copper sales ran above forecast, while El Abra lost access to higher-grade ore as the mine sequence was adjusted for slope management: leach ore grade in the region fell to 0.30% from 0.47%. Unit costs rose to $2.39/lb from $2.30 on profit sharing at Cerro Verde, energy, and maintenance and contractor costs at El Abra.

"In South America, our flagship Cerro Verde operation in Peru continues to demonstrate solid operating performance and productivity consistent with a large-scale, world-class operation." — Kathleen Quirk, President and Chief Executive Officer

Assessment: Cerro Verde is a dependable asset, and the stake purchased in May (to 55.66%) looks well timed at these prices. El Abra is the opposite: a current operating problem attached to a $7.5B expansion option. The full-year South American cost guide of $2.59/lb sits above the nine-month average of $2.41, which implies a weaker fourth quarter in the region.

Molybdenum and downstream: the quiet windfall

The molybdenum mines earned $55M against $5M a year ago as realized prices rose 34.9% to $32.46/lb, despite unit costs rising to $20.04/lb from $19.41. The bigger effect of molybdenum sits inside the copper segments as a by-product credit: U.S. credits rose to $0.89/lb from $0.61 and South American credits to $0.79/lb from $0.52. Rod & Refining and Atlantic Copper together contributed $22M.

"We are very positive on the outlook for moly." — Kathleen Quirk, President and Chief Executive Officer

Assessment: Molybdenum is quietly holding the consolidated cost guide together. The full-year $1.90/lb consolidated figure was maintained because by-product credits, "particularly molybdenum," offset higher input costs. That works while molybdenum stays above $30. It is a price dependency, not an efficiency gain, and it deserves to be modelled as one.

Key Topics & Management Commentary

Overall Management Tone: Expansive and, in places, promotional. Management spent more of the call on the growth pipeline and the next-generation leach additive than on the quarter, and the language on capital moved from July's defensive caution to an explicit case for spending more. It was precise and confident on Grasberg, candid on the U.S. production shortfall, and noticeably less specific than in July on the timing of the Indonesian license.

1. The Grasberg ramp is now running to plan

Mill throughput reached 67% of capacity in the third quarter, consistent with the roughly 65% guided for the second half. Haulage-level material handling upgrades are on schedule for completion in early 2027, chute gallery 45 is finished and chute gallery 44 is in progress, and Production Block 1 South is targeted for mid-2027. The capacity milestones held at about 80% by mid-2027 and near full capacity by year-end 2027.

"We operated at 67% of mine capacity during the third quarter, and progress is advancing for meaningful growth as we go into 2027." — Kathleen Quirk, President and Chief Executive Officer

The new operational wrinkle is the opposite of April's: Papua is unusually dry. Dry ground helps the cave and the mud-risk programme, but low water availability constrains the mills, and management is choosing to cut very low-grade mill feed to protect metal output. The pit-bottom programme also moved: in-pit pumping is now targeted for early 2028, and drainage through the new drift starts in 2028 after the team worked through a section of poor ground.

"The dry conditions are generally favorable for mining, but low water availability presents challenges in increasing mill rates." — Kathleen Quirk, President and Chief Executive Officer

Assessment: Two consecutive quarters on plan restores the forecasting credibility we marked down twice. We hold Grasberg execution risk at contained. The water constraint is new and weather-dependent, and the El Niño pattern management cited is expected to normalize into 2027, so we will watch mill rates rather than block-cave rates in the coming quarters.

2. The fourth quarter carries the year, again

Fourth-quarter guidance is 875M lbs of copper, 300k oz of gold and 22M lbs of molybdenum. That is 29% of the year's copper and 46% of the year's gold in a single quarter, with unit costs guided down to $1.68/lb from $2.07. Gold nearly triples as metal held in process at the smelter and refinery, including the 60k oz deferred from the third quarter, reaches market.

"We expect our fourth quarter of 2026 sales volumes to be the highest of the year, with copper sales increasing 17% and gold sales nearly tripling from third quarter levels." — Maree Robertson, Executive Vice President and Chief Financial Officer

A new and unresolved issue sits under that gold number. The release says PTFI may export refined gold to the extent the domestic market cannot absorb it, but current Indonesian regulations specify a 10% export duty, while PTFI's special mining license does not require one. PTFI is "seeking clarity" from the government. Management did not discuss it on the call.

Assessment: The fourth-quarter guide is lower than the July math implied, which reduces the risk of a miss on copper. Gold is the opposite: nearly half the year's ounces now depend on refined output moving through a newly restarted smelter and, possibly, an export channel with an unsettled duty. A 10% duty on exported gold would directly reduce realized proceeds on those ounces.

3. U.S. operations: weather, recoveries and a candid admission

The U.S. shortfall drove the 2026 trim, together with El Abra. Management attributed it to extreme weather that disrupted momentum and, unusually, said the weather has continued into the fourth quarter. Under questioning on falling recoveries, the head of the Americas business was direct that performance is behind where the company wanted it to be.

"However, an abnormally high frequency of extreme weather events in the third quarter, which have continued in the fourth quarter, disrupted some of the momentum achieved earlier in the year." — Kathleen Quirk, President and Chief Executive Officer

"To be honest, we're missing expectations of where we really wanted to be, and there's a bit of catch-up at this point in time as we increase volumes and the ore presents itself to get to the better locations for better grade." — Cory Stevens, President and Chief Operating Officer, Americas

The response is capital-intensive: a new remote operating center in Phoenix, ultra-class haul trucks of the kind that worked at Cerro Verde, and revised mine plans and road designs. U.S. site production and delivery costs are now guided at about $3.80/lb for 2026, above the $3.71/lb averaged through September, which implies a costlier fourth quarter.

Assessment: We give credit for the candour. But the U.S. has been the reliable part of this story for a year, and it is now the part with an operating shortfall, a rising cost line and a capital programme attached. The weather explanation is plausible and partly temporary. The recovery decline is about ore types and will not reverse with the weather.

4. El Abra: an operating problem now, a large option later

El Abra's production was flat year over year at 43M lbs, but below plan, as slope management restricted access to higher-grade ore. Heated-solution trials at El Abra and Cerro Verde start in the fourth quarter. Separately, the major expansion moves through Chilean permitting: an environmental impact study filed in March, a 2-to-3-year permitting process, roughly four years of construction, about 700M lbs a year of added copper, and capital of about $7.5B on 2024 estimates with economics supported below $4.00/lb.

"At El Abra in Chile, ore grades and operating rates were impacted during the quarter by mine sequencing to address slope management." — Kathleen Quirk, President and Chief Executive Officer

Assessment: The $7.5B capital figure is now two years old in a period when the company says capital inflation runs above CPI, and Bagdad's equivalent estimate rose about 30% between 2023 and 2026. We treat the El Abra number as a floor, and the 2033 start-up as an option that does not belong in a 12-month view.

5. Leach: a promising lab result and a slower ramp

Leach and technology initiatives added 55M lbs of copper in the quarter and 156M lbs over nine months, a run rate of about 220M lbs a year. The 300M lb target is now framed as 2027 production, where in July it was a year-end 2026 run rate. The news is the next-generation additive: in laboratory testing it delivers more than four times the incremental recovery of the first-generation product, two customized versions are being manufactured, and field deployment at multiple stockpiles starts in the first half of 2027.

"As you will see in the chart, lab testing of the new Freeport additive is showing incremental recoveries of more than four times those achieved with our initial additive." — Kathleen Quirk, President and Chief Executive Officer

"While we need to be cautious until it's proven in the field, this could represent the major breakthrough technology that we've been working to achieve." — Kathleen Quirk, President and Chief Executive Officer

Management was explicit that only the 300M lb level is in the forecast. The 800M lb ambition for 2030 depends on field results, which a 6-to-12-month commercial test should start to show by around this time next year.

Assessment: The lab data is the most interesting disclosure on the call, and the most speculative. It is also the cheapest growth Freeport has, since it uses existing stockpiles and infrastructure. We give it option value, not forecast value, and we note that the part already in the forecast slipped by a few quarters.

6. Inflation: energy, acid and capital

Management quantified the input-cost shock for the first time. Energy, mostly diesel but increasingly electricity, has added about $500M to 2026 costs compared with 2025. Freeport consumes about 275M gallons of diesel a year: 100M in the U.S., 80M in Peru and the balance in Indonesia. Spot sulfuric acid is more than double its 2025 average. Freeport is roughly balanced on acid globally through its smelters but is a net buyer in the U.S., where the cost shows up in unit costs.

"Rising energy costs during 2026, particularly diesel prices, have impacted costs by approximately $500 million compared with 2025." — Maree Robertson, Executive Vice President and Chief Financial Officer

Capital costs are rising too. Management said equipment and project inflation has run ahead of headline inflation for several years, and cited labor, steel, tariffs and energy as current pressures.

Assessment: We moved input-cost inflation to contained in July because the cost guide fell. It has not fallen again, and the $1.90/lb guide now holds only because molybdenum credits absorb the increase. The EBITDA framework assumes current energy prices are "baked in," so there is no relief assumed and none promised. We move this risk back to emerging.

7. 2027 capital expenditure rises again

2026 capital expenditure is now about $4.4B, up 2%, and 2027 is about $5.2B, up roughly $400M from July. About half of the increase is additional mining equipment, mainly ultra-class trucks for the U.S. The rest is inflation and higher costs to finish the CirCular project at Atlantic Copper. Discretionary spending is about $1.6B in 2026 and $2.0B in 2027, roughly half for Kucing Liar and the Grasberg gas-fired power project. The balance already includes Bagdad tailings and early works; the roughly $4.5B expansion itself is excluded.

"$5.2 billion for 2027, an increase of approximately $400 million above the July estimate, primarily reflecting additional mining equipment investments for supporting enhanced productivity improvements in the U.S. and cost inflation." — Maree Robertson, Executive Vice President and Chief Financial Officer

Assessment: This is the second consecutive increase in next-year capital, and together the two add about $700M. More important than the number is the stated philosophy: management now argues the industry is under-invested and that Freeport should spend more to push existing assets to maximum rates. That may be right for a copper market this tight. It also means the growth-capital risk we opened in July has moved from a possibility into the numbers.

8. Bagdad: a decision this quarter, at an unchanged number

The Bagdad expansion decision moved from "second half" to "fourth quarter." The capital estimate held at about $4.5B in current dollars, the build at about 3.5 years from decision, and the incentive price at about $4.00/lb. The expansion would more than double concentrator capacity and add 200M to 250M lbs of copper and 10M to 12M lbs of molybdenum a year, making Bagdad the second-largest copper mine in the U.S. Permits are in hand, and the haulage fleet is already autonomous.

"We expect to make an investment decision on the Bagdad expansion in the fourth quarter." — Kathleen Quirk, President and Chief Executive Officer

Management put capital intensity at about $35,000 per ton on a copper-equivalent basis after molybdenum credits, and argued that U.S. fiscal terms (no royalty, a low tax rate) offset the higher intensity that low grades imply.

Assessment: A held estimate is better than another increase, and the fiscal argument is fair: on this quarter's numbers a U.S. pre-tax dollar reaches shareholders at nearly three times the rate of an Indonesian one. But the operating-model offsets we asked for in July remain unquantified. If the board approves without a bridge from the 2023 economics to the current $4.5B, we will treat the $4.00 incentive price as a management assertion.

9. The three-year outlook got slightly smaller

The sales profile is now 3.0B lbs of copper in 2026, 3.7B in 2027 and 4.1B in 2028, with molybdenum at 93M, 85M and 95M lbs. Gold is unchanged, with more than 50% growth in 2027 and about 20% more in 2028. The Grasberg plan for 2026-2030 totals 6.7B lbs of copper and 5.4M oz of gold, which management called very similar to the prior plan.

"We have trimmed our 2026 copper sales by about 2%, taking into account slightly lower production in the U.S. and Chile, and by approximately 2.5% in 2027 to reflect current mine plan updates." — Maree Robertson, Executive Vice President and Chief Financial Officer

"Annual EBITDA would range from over $12 billion per annum at $5 copper to $19.5 billion at $7 copper, with operating cash flows ranging from over $9 billion per year at $5 to approximately $15 billion at $7 copper." — Maree Robertson, Executive Vice President and Chief Financial Officer

In July the same 2027-28 framework showed roughly $13B at $5 and $20B at $7, with molybdenum at $30/lb. This version assumes $32/lb molybdenum, which the company's own sensitivity values at about $170M of EBITDA, and still comes out lower.

Assessment: The direction matters more than the size. Volumes came down 2.5% in 2027 and costs went up, so the earnings power the stock is priced on is a little smaller than it was three months ago. The company's split of the sales profile also shows the ownership effect we flagged: noncontrolling interests take 0.81B lbs of 2026 copper and 1.10B lbs of 2027 copper, so FCX's net copper grows about 19% in 2027 against about 23% consolidated.

10. The 2041 license: still in documentation

PTFI filed its formal application in June on the February MOU terms: 48.76% ownership through 2041 and about 37% from 2042. The update this quarter was procedural. The chairman said the company continues to work with the Ministry on documentation and that Indonesian leaders have expressed support, and the CEO said the company is working to complete the formal process.

"We continue to work with the Ministry of Energy and Mines on documentation to implement the memorandum of understanding we signed with the government of Indonesia." — Richard Adkerson, Chairman of the Board

Assessment: In July management targeted completion this year. Neither speaker repeated a timing target on this call, and the release gave none. With about two months left in 2026, we now treat a 2027 issuance as more likely than not. The terms are agreed, so a short delay changes little in value. But a license slipping into 2027 is one of the downgrade triggers we published in July, and we keep it; the scorecard section states how we will treat it.

11. Capital returns: steady, and set to rise with cash flow

FCX returned $955M in the first nine months: $650M of dividends and $305M of buybacks (4.9M shares at an average $62.69). Third-quarter purchases were 1.4M shares for $102M at an average $70.75, during the stock's late-summer rally. The policy returns up to 50% of available cash flow after planned capital and minority distributions, and discretionary projects are funded from the other half. Net debt excluding the smelter project debt fell to $1.8B from $2.1B in June, well below the $3B-$4B target.

"Since adopting our financial policy in 2021, we have distributed $6.6 billion to shareholders through dividends and share purchases, including approximately $1 billion year-to-date in 2026" — Maree Robertson, Executive Vice President and Chief Financial Officer

Assessment: The balance sheet supports both the growth programme and higher returns. The tension is the definition of available cash flow: as planned and discretionary capital rise, the base on which the 50% payout is calculated grows more slowly than the headline cash-flow sensitivity suggests.

Guidance & Outlook

Management framed the outlook around growth rather than the quarter: copper sales up more than 20% in 2027 and about 10% more in 2028, with the Grasberg recovery as the main driver and no new capital required for it. The CFO's specific numbers came with a clear message on costs: energy is assumed at current prices, acid is a regional rather than global exposure, and capital inflation is running above CPI.

Implied fourth quarter: The full-year figures imply about $3.0B of operating cash flow in the fourth quarter ($8.5B less $5,524M through September) and about $1.16B of capital spending ($4.4B less $3,236M). They also imply about $0.87B of noncontrolling interests ($2.3B less $1,427M), up roughly 70% from the third quarter's $514M. On the rounded figures, the July guide implied about 983M lbs of fourth-quarter copper; the new guide is 875M lbs, about 11% lower, and the four quarters now sum to 2,991M lbs.

Street at: The third quarter beat a consensus of $0.80 to $0.815. For the fourth quarter, the company's own guide sets the bar: the year's highest copper and gold sales at its lowest unit cost, $1.68/lb. Any Street model that follows the guide leaves little room for slippage on gold timing.

Guidance style: Mixed. On Grasberg the company has now met its plan for two quarters, which supports the conservative posture it adopted after April. On the Americas, the July guide did not anticipate the weather or the El Abra sequencing, and the 2027 trim shows that mine-plan updates still tend to move numbers down. On capital, guidance has risen twice in a row.

Analyst Q&A Highlights

The shape of the 2027 Grasberg ramp

The first question asked how production would be distributed through 2027 as the remaining panels and Production Block 1 South restart. The answer set expectations for a back-weighted year: the first quarter will likely be the weakest and the second half the strongest, with Block 1 South contributing little in 2027 itself.

Q: "how should we think about the cadence of production for copper and gold in the first half of next year versus second half? How should we think about the mine plan heading into 2028 as you ramp up even further?"
— Richard Garchitorena, Barclays

A: "I think as you look at where we are for 2027, you should see first half starting to ramp up. The second half will likely be higher than the first half, but we expect with the start-up of these panels that are currently down, that will add a lot. PB1 South is not a huge contributor in 2027, but you will see pretty significant ramp-up throughout the year. But second half will be higher than the first half, and the first quarter will probably be the lowest of the year."
— Maree Robertson, Executive Vice President and Chief Financial Officer

Assessment: Useful and slightly cautionary. A first quarter that is the year's weakest, following the strongest quarter of 2026, means sequential comparisons will look poor in early 2027 even if the annual plan holds.

Whether the idle costs disappear when Grasberg recovers

This was the most consequential exchange on the call. The question asked how much of the roughly $244M quarterly idle-facility charge is one-off restoration spending and how much is fixed cost. The answer was unambiguous: essentially all of it is fixed cost that accounting rules route outside unit costs during the ramp, and it returns to unit costs from 2027.

Q: "How much of that relates to costs that are going to go away when Grasberg fully ramps, in other words, costs that you are spending to repair the operation, versus what portion of those costs are actually fixed costs that you will continue to carry going forward?"
— Chris LaFemina, Jefferies

A: "The idle costs are essentially fixed costs. The accounting rules require us to charge costs that are not attributable to production directly to production costs rather than going through cost of sales. But those costs won't go away, but they will be in our unit costs going forward." … "It's really an accounting classification as opposed to a change in cost."
— Maree Robertson, Executive Vice President and Chief Financial Officer

Assessment: This matters for anyone using adjusted earnings as a run rate. About $1.2B of 2026 cost, including restoration work, is excluded from both unit costs and adjusted earnings, and management expects the run rate of about $0.25B a quarter to stay. Rising volume will spread it thinly enough to keep Grasberg's unit costs very low, but 2027 consolidated unit costs will absorb it, and there is no 2027 cost guide yet to show how much.

What the 2027 capital increase buys

A recurring line of questioning asked whether the $400M increase in 2027 capital reflects inflation or new scope, and whether elevated spending continues into 2028. Management split the increase between additional haul trucks and inflation, and then broadened the answer into a case for spending more across the portfolio to meet copper demand.

Q: "It looks like it went up $400 million from the Q2 guidance. Is that just inflation on the existing planned projects, or have you added projects to the list?"
— Orest Wowkodaw, Scotiabank

A: "As we look forward at making sure that we've got the ability to grow our business in line with where we see demand for copper growing, we've got to be thinking bigger and bolder. That doesn't mean we're not going to control spend."
— Kathleen Quirk, President and Chief Executive Officer

Assessment: The follow-up on 2028 did not get a no. Management said it will add capital wherever it sees quick payouts and would conserve capital if markets turned. We read this as a deliberate shift toward higher sustained capital intensity, which makes copper prices even more central to the return case.

Bagdad capital, permits and timeline ahead of the decision

The question asked whether another quarter of engineering had moved the $4.5B estimate and what the timeline to commissioning looks like. Management confirmed permits are in place, held the estimate in current dollars, gave a 3.5-year build from decision, and acknowledged a tight Arizona labor market with competing semiconductor, power and data-center construction.

Q: "Do you see any potential change in that $4.5 billion estimate? Could you just walk us through timelines?"
— Lawson Winder, Bank of America Securities

A: "We do not know what the future inflation will be, but in current dollars, we are drawing a circle around $4.5 billion, and we are going to work very hard to manage both the capital spend and the time schedule. We expect the project would, from the final decision, come in around 3.5 years."
— Kathleen Quirk, President and Chief Executive Officer

Assessment: "Current dollars" is the important qualifier. A 3.5-year build in a market where management says capital inflation exceeds CPI means the nominal cost is likely to land above $4.5B. The answer was honest about that and did not quantify it.

Whether the next-generation additive is in the numbers

The question asked whether the additive's lab results are already in the forecast or represent upside. The answer drew a clear line: 300M lbs of leach production in 2027 and 2028 is in the plan, the 800M lb aspiration is not, and field results through 2027 will decide it. Management also raised the possibility that leach recoveries could rival mill recoveries, which could change the flow sheet at Safford and Lone Star.

Q: "is it possible that this additive is not in your numbers right now and could result in upside to your numbers, or do you think that the success of the additive would be beyond 2027?"
— Timna Tanners, Wells Fargo

A: "We feel confident we can get to 300, but the 800 is going to depend on the results in the field, and so we're not at a point where we can give guidance. We see it as a potential value driver that we're pursuing aggressively, but we're not at a point to put it into our forecast."
— Kathleen Quirk, President and Chief Executive Officer

Assessment: Exactly the right discipline. Upside from the additive is genuinely outside the guide, which makes it a free option in the forecast. The other side is that the in-forecast 300M lbs already arrives later than July implied.

Why the long-range Grasberg plan keeps edging lower

The question pointed out that longer-dated Grasberg production has come down over the last few plan updates and asked about the drivers and the restart of the incident panels. Management called the five-year plan very similar to July's apart from a small change in 2030, said the incident block is a small share of output (about 3% of copper and 6% of gold by 2030), and volunteered that Kucing Liar development is behind schedule because resources went to the block-cave recovery.

Q: "The longer dated production guidance given in the mine plan has come down a little bit over the last couple of updates. Can you just walk us through the drivers there?"
— Daniel Major, UBS

A: "We also are reviewing the schedule for Kucing Liar. That is expected to start ramping up in the 2029, 2030 timeframe. With the focus that we've had on the GBC, we are somewhat behind on development rates in KL, so we're working on looking at our plans there to figure out what we can make up between now and then."
— Kathleen Quirk, President and Chief Executive Officer

Assessment: Kucing Liar is the deposit that sustains Grasberg at about 750M lbs of copper and 735k oz of gold a year from the 2030s. A schedule "under review" with development behind plan is the kind of slippage that rarely shows in a five-year plan until it does. We add it to the watch list.

How much of the U.S. cost increase reverses

The question asked how much of the rise in U.S. site costs, which the questioner put at about $3.80/lb for the year against $3.65 a quarter earlier, reverses with normal weather and how much is structural. Management said current energy prices are already in its numbers, that acid prices show up in U.S. unit costs, that materials inflation has resumed, and that the main lever is volume rather than input prices.

Q: "how much of the cost increase should reverse with, I guess, normalized U.S. weather or operating rates versus remain embedded from some of the structurally higher cost inputs that you mentioned before in terms of labor or other input cost inflation?"
— Nick Cash, Goldman Sachs

A: "In all of our numbers that Maree was talking about in terms of EBITDA, et cetera, we have baked into our numbers kind of the current energy market environment. Those are baked in. The thing that we can bring down the unit cost for in the U.S., the thing that has the biggest potential is getting copper volumes up."
— Kathleen Quirk, President and Chief Executive Officer

Assessment: The answer does not promise relief on inputs, which is credible. It does make the U.S. cost trajectory depend on the same mining-rate improvement that missed plan this quarter.

Whether Bagdad is in the 2027 capital figure

The closing exchange asked whether the $5.2B 2027 capital estimate includes any Bagdad spending and how often buyback decisions are made. Management said buybacks are reviewed quarterly against the 50% payout policy and confirmed that nothing for the $4.5B project sits in 2027.

Q: "Firstly, just a clarification on the CapEx guidance for 2027. Does that include anything for Bagdad in terms of the $4.5 billion project number that could be approved later this year?"
— Liam Fitzpatrick, Deutsche Bank

A: "You're right. We're going to be generating a lot in the current market environment, and with our growth coming, very significant rise in cash flows. That will, by the policy, mean we have more cash to distribute while at the same time investing in growth. For the $4.5 billion, we do not have anything in 2027 at this point."
— Kathleen Quirk, President and Chief Executive Officer

Assessment: This is the most useful number in the Q&A for modelling. If the board approves Bagdad this quarter, 2027 capital rises from $5.2B by whatever share of $4.5B falls in the first year of a 3.5-year build. On a straight-line spread that is well over $1B a year, which would put total capital above $6B.

What They're NOT Saying

1. No 2027 unit-cost guide, despite a known reclassification of about $1B a year. Management confirmed that the Grasberg idle costs, about $0.25B a quarter, are fixed and move into unit costs from 2027, abandoned the $2.50/lb U.S. target for 2027 in July, and gave no consolidated 2027 cost figure to replace either. The cost line in the EBITDA framework is the least visible part of the outlook.
2. No license timing. In July management targeted completion this year. This quarter, neither the chairman nor the CEO gave a date, and the release says only that the companies are working to complete the formal process. With two months left in 2026, the omission reads as a quiet extension of the timeline.
3. Nothing on the gold export duty. The release discloses a conflict between a 10% Indonesian duty on refined gold exports and PTFI's license terms, at the moment when nearly half the year's gold is due in one quarter. The call did not address how much gold might need to be exported or what the company would do if the duty applied.
4. No mention of Section 232 or the 45X credit. A quarter ago management put the 45X production tax credit at about $500M a year. Neither it nor the pending Section 232 decision on refined copper came up on this call.
5. Silence on what the minority share does to per-share growth. The company's own figures imply fourth-quarter noncontrolling interests of about $0.87B and 2027 net copper growth of about 19% against 23% consolidated. Management presented consolidated EBITDA, cash flow and volume growth throughout and did not address the conversion to FCX shareholders.
6. No quantified bridge on Bagdad. The estimate was held at $4.5B in current dollars, but the operating-model offsets that are supposed to keep the incentive price at $4.00/lb were again described rather than sized, one quarter before the board decision.
7. No new date for Kucing Liar. The schedule is under review and development is behind plan, but no revised start-up or capital profile was offered for the deposit that sustains the district beyond the current block cave.

Market Reaction

• Pre-print setup: FCX closed at $65.16 on October 26, up 28.3% year to date against the S&P 500's 12.1%, up 58.5% over twelve months and down 9.9% over the trailing thirty days. The 52-week closing range entering the print was $38.65 to $79.91, so the stock came in 18.5% below its August 25 high.
• Reaction session (October 27, before-open reporter): Opened at $65.50, up 0.5%, traded a $64.15 to $66.55 range, and closed at $65.95, up 1.2% or $0.79.
• Volume: 11.9M shares against a 10.8M thirty-day average, 1.1 times normal.
• Relative: The S&P 500 rose 0.6% the same session, so FCX outperformed by about 0.6 points. LME copper settled at $6.58/lb the day before the print.
• Next session (October 28): Closed at $66.60, up 1.0% on the day and 2.2% above the pre-print close. The reaction close of $65.95 is 5.1% above the $62.72 close our July note was written against.

Expectations had already reset. For the first time in three prints, the stock did not sell off on a beat. After the first-quarter print it fell 12.6% and after the second it fell 2.3%. This time it traded as much as 1.6% lower during the session and still closed up 1.2%. The difference is the setup rather than the quarter. The stock had round-tripped from its $79.91 August high, lost almost 10% in the month before the print, and entered the release only 0.3 points higher year to date than it had been entering the July print.

A neutral verdict on mixed news. The tape weighed a cleaner earnings composition, an on-plan Grasberg and a raised cash-flow guide against a copper trim, higher 2027 capital and a gold-timing miss, and called it roughly even. Volume barely above average says the same thing: no repositioning, just digestion. A further 1.0% gain the next day, with no new company news, is consistent with the selling having run its course in the month before the print.

What the price is not paying for. At $65.95 the stock sits 17.5% below its August high. The market is no longer paying a premium for the Grasberg recovery narrative, but it is also not discounting a slower license or a larger capital cycle. That leaves the stock fairly balanced against both outcomes, which our valuation work below confirms.

Street Perspective

Debate: Has the Grasberg recovery been earned, or merely priced?

Bull view: The bull case being made on the Street is that two consecutive on-plan quarters, a restarted smelter and an unchanged five-year plan mean the recovery is now a forecast rather than a hope. With 2027 copper sales up more than 20% and gold up more than 50%, and no new capital required for it, earnings power steps up sharply next year and the stock is cheap on 2027-28 numbers.

Bear view: The bear camp contends that the Grasberg recovery is exactly what the stock has spent a year pricing, that the fourth quarter carries an outsized share of the year with gold dependent on refinery timing and a possible export duty, and that the first quarter of 2027 is guided as the weakest of the year. Kucing Liar slipping behind plan threatens continuity further out.

Our take: The bulls are right about the asset and the bears are right about the price. The recovery has been earned operationally, and we treat Grasberg execution risk as contained. But the growth the bulls cite converts to per-share earnings at a worse rate than the consolidated numbers suggest, because noncontrolling interests take a rising share as Indonesia recovers.

Debate: Is "bigger and bolder" capital spending the right answer to tight copper?

Bull view: Some desks argue that an under-invested industry facing a structural deficit should reward the producer that adds brownfield tonnes fastest, that Freeport's projects carry low permitting risk and favourable U.S. fiscal terms, and that the balance sheet, at $1.8B of net debt excluding smelter debt, can fund it while returns still rise.

Bear view: The skeptics note that next-year capital has now risen twice in two quarters, that Bagdad sits outside the $5.2B figure, that El Abra's $7.5B estimate is two years old, and that management has openly declined to rule out higher spending in 2028. A rising capital base absorbs the cash that the payout policy would otherwise return.

Our take: The strategic logic is sound and the disclosure is not yet good enough. A company asking shareholders to fund a larger capital cycle at peak-cycle input costs should show its project returns at mid-cycle copper prices, not only at its own $4.00 incentive price. Until that comes with the Bagdad decision, we side with the skeptics on timing and with the bulls on direction.

Debate: Is the leach additive a breakthrough or a tease?

Bull view: A growing consensus view holds that the leach programme is the most underappreciated option in the sector: more than 40B lbs of copper already mined and sitting in stockpiles, a lab result four times better than the current additive, and almost no capital required. Success would lower U.S. unit costs and could change the design of future projects.

Bear view: The bear camp points out that the lab-to-field gap in mining technology is wide, that the in-forecast target already slipped from a 2026 run rate to 2027 production, and that commercial results will not be known for 6 to 12 months after first deployment in the first half of 2027.

Our take: We would rather own the option than pay for it. The upside is genuine and outside guidance, which is the right way to carry it. We do not include any of the 800M lb ambition in our valuation, and we would not upgrade on lab data alone.

Model Update & Valuation Framework

Valuation impact: Slightly negative on earnings power, offset by a higher copper price. We value FCX on its share of the company's own 2027-28 average EBITDA framework, using $6.50/lb copper, which sits just below the $6.58 LME settlement before the print. The framework gives about $17.6B of consolidated EBITDA at that price. We take FCX's share as about 68%, because minority interests took about 32% of pre-tax income in the first nine months of 2025, when Grasberg ran normally until the September incident. That gives about $12.0B of attributable EBITDA.

On a 7.5x to 9.0x range, the multiple band we think fits a large, growing, politically exposed copper producer, fair value is about $59 to $71 at $6.50 copper. The stock at $65.95 sits just above the midpoint. On a $6.00 deck, fair value falls to about $52 to $63, which is the downside the stock carries if copper falls back to $6.00. These are our estimates, built on the company's framework rather than on a detailed model, and the multiple range assumes the 2041 extension is granted on the MOU terms, which reduces FCX's interest to about 37% from 2042.

Thesis Scorecard Post-Earnings

Grading last quarter's commitments

Overall: Thesis unchanged in balance, with the risks rotating. The bear point we were most worried about a year ago, Grasberg execution, kept improving and is now behind us as a source of surprise. Two others moved the other way: input-cost inflation re-emerged, and growth-capital inflation moved from a possibility into the 2027 numbers. Of ten commitments, one improved, one is on track, one was partly answered, two are pending or starting, four slipped, reset, were missed in part or were not delivered, and one received no update. The license, the single largest value lever, did not move.

Rating triggers: July's list, graded

Action: Hold. At $65.95 the stock trades at about 8.4x our estimate of attributable 2027-28 EBITDA and inside our $59-71 fair-value range, so we are not paid to act in either direction. We keep every July trigger as published. Two of them may fire together in January: a licence slipping into 2027 and a Bagdad approval with a quantified capital bridge. We state the netting now. If both fire and nothing else does, they offset and we stay at Hold. If the licence slips and the Bagdad trigger does not fire, we move to Underperform, as published in July. We add two downgrade triggers this quarter: a Grasberg miss against the 80%-by-mid-2027 milestone, and a further increase in 2027 capital beyond Bagdad. The full list of changes is those two additions, the stricter reading of the guide-down trigger, and the $59 definition of the pullback; no published trigger was removed.