S&P: Freeport-McMoRan Inc. Outlook Revised to Positive; 'BBB-' Ratings Affirmed

(DALLAS (S&P Global Ratings) July 21, 2026)--S&P Global Ratings today took the rating actions listed above.

The MOU improves visibility on ownership and control of Grasberg. Under the MOU, the Indonesian government will extend the special mining license (IUPK) for Freeport subsidiary PT Freeport Indonesia (PTFI) to cover the life of resource at Grasberg. The extension of operating rights could alleviate some of the risks for Freeport in Indonesia, especially given the history of the government increasing its ownership stake in mining companies.

The MOU reinforces long-term stability and the continuity of large-scale operations, including ongoing investments to expand operations at Grasberg. In June 2026, PTFI submitted its application for the extension of operating rights according to the terms and conditions outlined in the MOU and is working with the government to complete the formal license.

In exchange for the amended license, Freeport will cede an additional 12% of its ownership interest in PTFI to the Indonesian government, which will reduce Freeport’s ownership interest to approximately 37% from the current 48.76%, beginning in 2042. Freeport’s economic interest in PTFI was 81.3% prior to 2023.

Our current proportionate consolidation of the subsidiary’s results, as opposed to Freeport’s full consolidation, adjust our inputs to reduce the relative impact of Grasberg on Freeport’s credit ratios. The proportionate consolidation partly mitigates Freeport’s minority position in a highly profitable, low-cost cornerstone asset in Indonesia and reflects our long-held view that Freeport’s credit strength will primarily rely on the durability of its assets outside Indonesia, especially in Arizona.

Profitability is solid despite operational disruptions at Grasberg. While the restart of the Grasberg Block Cave commenced ahead of schedule, unexpected wet material in production blocks created downstream handling bottlenecks. This required the company to install specialized equipment regulators to manage ore flow, limiting expected production in these blocks to approximately 60,000 tonnes per day in the second half of 2026. As a result, the full ramp-up of these areas has been delayed, tentatively to year-end 2027.

Despite these challenges, Freeport’s S&P Global Ratings-adjusted rolling-12-month revenue increased 12.5% to $22.7 billion in first-quarter 2026, while EBITDA rose 20.3% to $7.2 billion. The company benefited from higher copper prices, which averaged $5.78 per pound (lb), a significant increase from $4.44/lb in first-quarter 2025. This helped offset a 24.6% year over year decline in delivered copper volumes due to Grasberg disruptions.

Furthermore, strong gold prices, averaging $4,889 per ounce (oz) (up from $3,072/oz in first-quarter 2025), provided significant by-product credits, lowering unit costs 8% compared with first-quarter 2025. Meanwhile, in the Americas, operating income increased about 90% year over year. These results demonstrate Freeport’s ability to leverage its diversified asset base and manage costs effectively through volatile periods.

Favorable commodity pricing and long-term initiatives could boost earnings and support leverage below 2x.Commodity prices have strengthened in 2026, with copper spot prices averaging roughly $13,000 per metric ton (mt) and gold prices of $4,700-$4,800/oz. Furthermore, copper supply has continued to lag relative to structural demand from AI data centers, electrification, grid expansion, and energy transition. This, alongside geopolitical tensions, led us revise our copper price assumptions upward to $12,500/mt for the remainder of 2026 and through 2028. We have also assumed gold prices of $4,500/ounce for the remainder of 2026, $4,000 in 2027 and $3,300 in 2028.

We anticipate these favorable prices will largely offset anticipated production constraints at Grasberg. Additionally, Freeport is advancing its innovative leaching initiatives in Arizona, targeting about 300 million pounds of copper in 2026, increasing to about 800 million pounds by 2030. We forecast Freeport’s EBITDA could increase at least 20% in 2027 and a further 10%-15% in 2028, capitalizing on higher prices and a return to full production at Grasberg. These assumptions underpin our forecast that cash flow and credit metrics will remain consistent, with leverage below 2.0x over our forecast period.

The positive outlook reflects our expectation that Freeport’s global suite of mining assets should continue to deliver solid earnings and cash flows, likely offsetting the impact of reduced production and higher costs at Grasberg. Earnings could expand due to increased production and likely lower unit costs within the next 24 months if Grasberg’s production returns to full capacity by end of 2027. We expect consolidated leverage of 1x-2x over our forecast period, after proportionately consolidating PTFI.

We could revise our outlook to stable if Freeport’s S&P Global Ratings-adjusted leverage approaches 3x, with poor prospects of returning below 2x. This could occur due to operational disruptions or large debt-financed projects or acquisitions that are not immediately accretive to earnings. The cushion in its credit metrics remains robust despite disruptions at Grasberg, partly due to favorable copper and gold prices and strong performance of its operations in the Americas. The cushion could erode or decline should such a disruption occur at its Arizona operations.

We could also revise the outlook to stable or lower the rating on Freeport if we downgrade the foreign currency rating on Indonesia (BBB/Stable/--) one notch or two notches, respectively. Such a downgrade could cap the rating on Freeport, assuming its volume and EBITDA exposure to Indonesia remains above 25%.

The MOU between Freeport and the Indonesian government has reduced the uncertainty surrounding PTFI’s mining license and operations beyond 2041, which was a key constraint for a higher rating. With this resolved, we could raise our rating on Freeport within the next 12-24 months if it makes substantial progress on restoring Grasberg to full-scale production while maintaining leverage below 2x. We would also expect a strong pipeline of capital projects to sustain or increase the current production profile.

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