Freeport Stock Divides Market After Copper Mine Tragedy. It’s Upgraded and Downgraded.

Freeport McMoRan reported Wednesday that two workers tragically lost their lives in a mud rush reported earlier in September. Five more were still missing. Investors sent shares down 17% in response. (AFP via Getty Images)

Key Points

About This Summary

• Freeport McMoRan’s Grasberg mine experienced a mud rush, killing two workers and leaving five missing.
• Freeport stock plunged 17% on Wednesday, with copper prices rising 0.4% to over $4.80 per pound.
• Disruption at Grasberg, which produces 3% of global copper, could reduce Freeport’s 2026 Ebitda by $3.5 billion.

Consequences of the catastrophe at Freeport McMoRan’s Grasberg mine, located in Indonesia, continued to ripple outward.

On Wednesday, the miner reported that two workers were tragically killed and five remained missing after a mud rush deposited some 800,000 metric tons of mud and debris earlier this month at the mine. Freeport stock plunged 17% on Wednesday, leaving shares down 15% for the month.

“Grasberg produces about 3% of all the world’s copper supply,” wrote Citi analyst Alexander Hacking in a Wednesday report. That’s roughly 770,000 metric tons out of 25 million metric tons. Mine production will be disrupted until 2026, he said, which will be “supportive of copper prices.”

Benchmark copper prices rose 0.4% on Wednesday to above $4.80 per pound, leaving them up about 8% over the past 12 months. Copper prices plunged more than 20% one day in late July after President Donald Trump decided to impose a 50% tariff on copper products such as wire, instead of raw copper.

Copper prices finished down 3 cents to $4.78 a pound on Thursday.

Losing about one-third of the production from Grasberg in 2026 would wipe out an estimated $3.5 billion in earnings before interest, taxes, depreciation, and amortization, or Ebitda, according to Hacking’s math. Wall Street currently projects about $12.5 billion in Ebitda for Freeport in 2026, according to FactSet.

The long-term impact on Freeport’s market value is only about 3%, wrote Hacking. The stock obviously declined more than that, with investors taking a cautious view.

Bernstein analyst Bob Brackett upgraded shares to Buy from Hold, citing the steep stock drop on Wednesday. He trimmed his price target $2 to $48.50.

Along with Bernstein’s upgrade, analysts at Scotiabank and BofA downgraded shares to Hold from Buy after the Wednesday update.

Freeport stock dropped 6.2% on Thursday, closing at $35.24, while the S&P 500 and Dow Jones Industrial Average lost 0.5% and 0.4%, respectively.

Hacking, for his part, rates Freeport shares Hold and has a $48 price target for the stock. Overall, about 60% of analysts covering Freeport shares rate them Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Freeport stock is about $50.

It isn’t the first accident at the Grasberg facility. In May 2013, 28 people were tragically killed and 10 more were injured after a tunnel collapsed at an underground training center.

Write to Al Root at allen.root@dowjones.com