Freeport’s Grasberg copper mill reaches 67% after last year’s mudslide

Freeport-McMoRan (NYSE: FCX) averaged nearly two-thirds of normal milling rates at its Grasberg copper-gold complex in Indonesia during the third quarter, a year after a mudslide killed seven workers and shut the operation. The company expects near-full production by the end next year.

The complex in Central Papua, about 3,400 km east of Jakarta, processed about 140,000 tonnes of ore a day, modestly above the 65% rate BMO Capital Markets had expected. Freeport aims to reach 80% of capacity by mid-2027.

“The Grasberg ramp-up is progressing well, and the phased restart timeline was reaffirmed – a positive,” BMO mining analyst Katja Jancic said in a note Friday. She rates Freeport outperform with a $85 (C$121.60) target. The NYSE-listed shares traded up 3.6% at $71.79 apiece on Friday afternoon, after testing $38.54 to $80.24 over the past 12 months.

Grasberg is one of the world’s largest copper and gold deposits and a core source of Freeport’s production. Its closure last year was estimated to remove 278,000 tonnes of copper from 2025 supply, equal to about 1.2% of global mine output, according to Benchmark Mineral Intelligence.

Recovery work

The Grasberg Block Cave mining area supplied about 70,000 tonnes of the complex’s daily mill feed during the quarter. Freeport said upgrades to the mine’s underground material-handling system remain on schedule for completion in early 2027.

The disaster last year followed rain and runoff washing fine material into the bottom of the former open pit before about 800,000 tonnes of wet material plunged through an undetected pathway into the Grasberg Block Cave, spreading across several levels and killing seven workers.

Freeport’s investigation found that faster removal of broken ore from a narrow, clay-rich production block helped create a high-velocity channel connecting the underground mine with the surface mud. The company said its monitoring systems and draw point sampling gave no warning before the event.

The company is also preparing to restart the mine’s Production Block 1S by mid-2027. Freeport expects the work to lift Grasberg to 80% of capacity around the same time and close to full capacity by year-end.

Subsidiary PT Freeport Indonesia’s smelter in East Java restarted in late August after being suspended. Freeport said the ramp-up is meeting expectations.

The smelter and the separately operated PT Smelting facility can together produce as much as 800,000 tonnes of copper cathode a year. The company also operates a refinery capable of processing all of Grasberg’s gold output.

Sales impact

Freeport produced about 830 million lb. of copper and 230,000 oz. of gold during the third quarter ended Sept. 30, both roughly in line with its expectations. It expects copper sales of about 750 million lb., matching its July forecast.

Gold sales are expected to total about 100,000 oz. after Freeport shifted the sale of roughly 60,000 oz. of refined metal into the fourth quarter. The timing change didn’t affect production.

Freeport expects unit net cash costs, excluding idle-facility and restoration expenses tied to Grasberg, to rise to about $2.10 per lb. of copper from its July estimate of $2 per pound. Delayed gold sales reduced the byproduct credits used to offset copper costs.

The company says its realized copper price may exceed $6.50 per pound. BMO’s Jancic said the stronger price should largely offset the deferred gold revenue. The bank estimates third-quarter adjusted earnings of $3.09 billion, compared with a $3-billion analysts’ consensus.

Slightly stronger international production offset lower output from Freeport’s U.S. operations, where localized flooding, power outages and strong winds reduced operating rates. BMO considers those interruptions temporary.