Buy Freeport Stock After Mining Accident, BofA Says

Freeport-McMoRan stock has dropped sharply in September. (Rebecca Noble/Bloomberg)

Key Points

• Freeport-McMoRan shares rose 5.7%, closing at $39.22, after BofA upgraded the stock to Buy. It maintained a $42 price target.
• Coming into Tuesday trading, the stock had fallen 16% this month following a fatal accident at the Grasberg mine, which accounts for 3% of global copper production.
• BofA’s commodities team expects copper prices will rise to $6.12 a pound in 2027 from abut $4.85 now.

Shares of copper miner Freeport McMoran rose early Tuesday after catching an upgrade. BofA is “sufficiently confident” that risks following September’s fatal mining accident are priced in.

Freeport stock gained 5.7%, closing at $39.22, while the S&P 500 and Dow Jones Industrial Average added 0.4% and 0.2%, respectively.

The move came after BofA analyst Lawson Winder raised his rating to Buy from Hold. His price target stayed at $42 a share.

The price target was able to stay the same with a new rating because the stock plummeted after a mining accident at Freeport’s Grasberg copper mine in Indonesia. Coming into Tuesday trading, shares were down 16% for the month.

Last week, the miner said two workers were killed on Sept. 8 and five remained missing after a mud rush deposited some 800,000 metric tons of mud and debris. Freeport stock plunged 17% last Wednesday.

“We spoke with President and CEO, Kathleen Quirk. While we gained no material new information, we came away increasingly confident that our $42 per share valuation sufficiently prices the key risks around its temporarily halted Grasberg copper/gold mine,” wrote Winder in a Tuesday report.

The mine accounts for an estimated 3% of global copper production. Freeport is targeting 2027 for “pre-incident operating rates.” Lower production can hit Freeport’s earnings, but it can also result in higher copper prices.

“The BofA commodities team is bullish [on] copper, calling a $13,500 per [metric ton], or $6.12 per pound in 2027,” added Winder. Benchmark copper prices are currently about $4.85 per pound.

Winder’s target values Freeport stock at about 21 times his estimated 2026 earnings per share of $2.01. Freeport stock has traded for about 20 times earnings over the past few years.

With the upgrade, 57% of analysts covering Freeport now rate shares 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 shares is about $47.

The average analyst price target has decreased by about $5 since the mining accident.

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