Freeport-McMoRan Deviates From BHP, Rio Tinto Playbook: CEO Opts To Forgo M&A

While BHP and Rio Tinto hunt for M&A opportunities, Freeport-McMoRan FCX is focused on organic growth.

What Happened: Freeport-McMoRan is ramping up production across three continents to meet the rising need for copper — a cornerstone metal of the ongoing green energy transition.

The company's new CEO, Kathleen Quirk, will attend the LME Week conference in London, one of the major industry gatherings yearly. Ahead of the conference, she reiterated the management's stance toward focusing on internal growth, forgoing the hot M&A trend that has seen bids as high as BHP's failed acquisition of Anglo-American for $49 billion.

Quirk, who has been with the company for over 35 years, succeeded Richard Adkerson at the helm in June and continued the trend of asset consolidation. Despite Adkerson's renown for big deals like the $25.9 billion Phelps Dodge and $20 billion McMoRan Exploration Company acquisitions, he spent a better part of the last decade reorganizing the company into a major producer of copper and the world's largest producer of molybdenum.

Instead of expensive acquisitions, Freeport now plans to produce as much as 800 million pounds of copper annually by 2027. The company intends to use drones for irrigation, extract copper at a third of the cost and avoid the need for smelters. This saves significant sums on capital expenditures.

See Also: Amazon, Apple, Tesla Brace For Supply Chain Disruptions As Potential East Coast Dockworkers Strike Nears

Why It Matters: The capital Freeport saves will come in handy for expanding strategic projects, such as the El Abra copper mine in Chile.

The mine, which produced almost 100,000 metric tons of copper last year, will get a $7.5 billion expansion. A new concentrator plant and a desalination infrastructure to meet water requirements.

Quirk has been pleased with the improving regulatory climate under President Gabriel Boric.

However, Indonesia is proving to be a more complicated jurisdiction. The government imposed a 7.5% export tax on shipments of copper concentrate. This makes it more expensive for unrefined commodities to leave the country.

This strategy echoes the approach that made the country a nickel-producing powerhouse. After Indonesia banned the export of raw, unrefined nickel, China was forced to invest $20 billion in production infrastructure.

Under Adkerson, Freeport signed off a 51% controlling stake in its Grasberg mine to extend mining rights until 2041. Quirk hopes his experience will prove fruitful in signing a new agreement with Indonesia's new president, Prabovo Subianto, who takes office next month.

Read Next: 

• Harris Vows To Push ‘America Forward,’ Stockpile Critical Minerals

Benzinga Mining is the bridge between mining companies and retail investors. Reach out to licensing@benzinga.com to get started!