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How Freeport-McMoRan Makes Money (Explained Like You’re Seven — and Why It’s Basically Digging Up Inflation)
The Quick Take
Freeport-McMoRan doesn’t sell apps, ads, or insurance.
It sells the stuff everything else is built on.
Copper, gold, and molybdenum — three metals that quietly power phones, cars, power grids, and fighter jets.
It’s the company that literally digs up economic growth — and cashes in every time the world builds, electrifies, or panics.
The Simple Version
Imagine if the world were one giant Lego set.
To build anything — a car, a skyscraper, a smartphone — you need metal bricks.
Freeport’s job is to:
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Find those bricks (metal ore) deep underground.
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Dig them up using enormous machines.
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Refine them into pure copper and gold.
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Sell them to manufacturers and governments that can’t function without them.
The fancier the world gets — EVs, solar panels, data centers — the more Freeport’s phone rings.
The Chemistry of Cash
The secret ingredient is copper.
Every EV uses around four times more copper than a gas car.
Every wind turbine and solar farm eats up miles of copper wire.
When copper prices rise — from, say, $3 to $5 per pound — Freeport doesn’t work any harder. It just gets richer on the same output.
That’s why its stock moves with inflation, infrastructure spending, and global growth. It’s basically an early warning system for the world economy.
How Freeport Actually Makes Money
Freeport’s business model is beautifully simple but brutally physical:
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Mining: Dig ore from giant pits in Arizona, Indonesia, and Peru.
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Processing: Crush and concentrate the ore to extract copper, gold, and molybdenum.
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Sales: Ship metals to industrial buyers — think carmakers, chip fabs, and energy projects.
Revenue = (Metal price × Volume sold) – (Costs to dig, transport, and refine).
The lower its costs and the higher metal prices climb, the fatter Freeport’s profits get.
The Big Mines That Run the Show
Freeport isn’t scattered everywhere — it owns a few world-class monsters:
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Grasberg (Indonesia): One of the largest gold-copper mines on Earth.
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Morenci (Arizona): A copper powerhouse feeding U.S. manufacturing.
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Cerro Verde (Peru): A high-volume, low-cost open pit.
Those three sites are responsible for most of the company’s earnings.
When metal prices boom, these mines turn into printing presses.
The Economics of Dirt
Mining sounds simple, but it’s really a race between costs and prices.
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Operating Costs: Mostly fuel, labor, and equipment.
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Capital Costs: Billions to develop or expand a mine.
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Commodity Prices: The wild card that makes or breaks a year.
Freeport’s job is to keep costs steady while the world loses its mind over inflation or war.
That way, when copper spikes, every extra dollar per pound goes straight to profit.
That leverage is why mining stocks swing so hard — and why they’re catnip for macro investors.
The Gold Bonus
Freeport’s copper mines also produce gold as a byproduct — especially at Grasberg.
So while everyone else worries about inflation, Freeport quietly earns money from the very thing people buy to hedge against inflation.
That’s what makes it a strange hybrid: part industrial engine, part safe-haven asset.
Why It Works
Freeport’s edge comes from:
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Owning Tier-1 Mines: Huge deposits that stay profitable even in downturns.
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Low U.S. Gas and Energy Costs: Keeping production cheap versus global peers.
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Scale: Massive throughput lets it negotiate better deals on equipment and logistics.
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Optionality: If copper jumps, profits explode. If it doesn’t, gold and moly help balance the books.
That combination turns Freeport into a macro hedge fund made of rock.
The Risks (a.k.a. Things That Can Bury the Profit)
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Commodity Swings: If copper falls too far, revenue shrinks fast.
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Environmental Rules: Stricter mining laws or carbon limits can add costs.
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Political Risk: Mines in places like Indonesia and Peru rely on government stability.
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CapEx Burden: New mines cost billions and take a decade to build.
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Geology: Sometimes the rock just isn’t as rich as the model said.
Mining is simple to describe and hard to control. That’s why execution matters as much as metal prices.
The Future of the Model
Freeport’s next chapter is the energy transition.
EVs, data centers, AI hardware, and power-grid expansion all need more copper. The company expects global demand to surge 40% by 2035.
It’s also pushing into “green copper” — using renewable power and carbon-capture to appeal to ESG investors — and experimenting with hydrogen and ammonia-based fuels for its fleet.
Freeport isn’t trying to become techy; it’s just making sure it’s the one selling the shovel in the next industrial revolution.
My Take: The World’s Most Important Hole in the Ground
Freeport-McMoRan doesn’t make products — it makes progress possible.
Every skyscraper, iPhone, and Tesla owes part of its existence to the company quietly hauling ore from the desert or the mountains.
It’s the ultimate “real economy” stock: it wins when humanity builds things, digs deeper, or prints money.
In other words: Freeport isn’t just mining metal. It’s mining the future.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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