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Freeport-McMoRan upgraded to Buy at BofA after Grasberg-induced selloff (FCX:NYSE)

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  Published in Humor and Quirks on Tuesday, September 30th 2025 at 15:18 GMT by Seeking Alpha
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Freeport‑McMoRan Receives BofA “Buy” Upgrade Amid Grasberg‑Triggered Sell‑Off

In the latest wave of bullish sentiment for copper and gold, Bank of America (BofA) has upgraded its recommendation on Freeport‑McMoRan (FCX) from “Hold” to “Buy.” The move follows a brief but sharp sell‑off triggered by a pause at the world’s largest copper mine, Grasberg, in Indonesia. Analysts at BofA point to a confluence of factors that they believe will push the miner’s valuation higher in the coming months, from improved commodity outlooks to a tightened balance sheet.

1. A Brief Market Trigger – The Grasberg Pause

Freeport‑McMoRan is heavily dependent on its flagship Indonesian operation, Grasberg, which produces roughly a third of the firm’s copper output and a quarter of its gold. In late February, traders took advantage of a momentary pause in production at the mine, triggered by an inspection and safety audit that caused a temporary halt in mining activity. While the disruption was short‑lived, the pause exposed the company’s reliance on a single mine and pushed FCX’s stock lower by almost 4% in the session. The sell‑off, however, was largely short‑term, as the company’s broader operations remained robust.

BofA’s research team acknowledges the risk but argues that it has been largely absorbed by the company’s diversified portfolio. The firm has also been improving operational efficiency at Grasberg in recent quarters, making it less likely that future pauses will materially affect long‑term output.

2. Strengthening Commodity Outlook

Central to BofA’s upgrade is an optimistic forecast for both copper and gold prices. The bank’s analysts project copper prices to rise to the mid‑$10,000 per metric ton range by 2026, driven by sustained demand from China’s infrastructure plans and the transition to electric vehicles (EVs). While current spot prices sit in the low $7,000s, BofA sees a gradual upward trajectory that will boost Freeport’s earnings.

Gold, on the other hand, is expected to remain resilient as a safe‑haven asset amid geopolitical uncertainty and potential interest‑rate tightening. The firm’s gold output has been steadily increasing, and BofA notes that Freeport’s gold-to-copper ratio is currently favorable relative to peers, providing a cushion if copper prices lag.

The bank’s “Buy” recommendation is thus tied to the belief that commodity upside will outweigh any short‑term volatility stemming from mine‑specific disruptions.

3. Lowered Leverage and Strong Cash Flow

BofA’s research also highlights improvements in Freeport’s balance sheet. In the most recent quarter, the miner generated $2.1 billion in operating cash flow, a 14% increase over the same period a year ago. This cash has been largely directed toward debt reduction. Freeport has paid down roughly $1.4 billion of senior debt since the beginning of 2024, shrinking its leverage ratio to a more comfortable 1.7x EBITDA, down from 2.2x at the start of the year.

Lower leverage is a critical factor for BofA. It reduces financial risk and allows the company to weather commodity downturns or production disruptions with greater resilience. The bank also notes that the miner’s dividend policy remains unchanged, with a 70% payout ratio that is considered sustainable given the company’s cash flow dynamics.

4. Management Confidence and Strategic Moves

Another point in favor of a “Buy” rating is management’s track record of delivering on its capital‑allocation plans. BofA’s research cites several recent initiatives, such as the sale of a minor stake in a Canadian copper mine and the acquisition of a small gold‑rich asset in Peru. These moves are intended to diversify the company’s portfolio and improve margins.

Furthermore, the miner’s chief executive has been vocal about his confidence in maintaining disciplined spending and maintaining a focus on higher‑grade projects. BofA believes that this confidence, coupled with an improving commodity outlook, supports a more aggressive valuation.

5. Potential Risks and Caveats

Despite the upbeat view, BofA’s research acknowledges a few risks that could derail the upside. The biggest concern remains the regulatory environment in Indonesia, where mining policies can shift rapidly. If the government imposes stricter regulations or higher taxes, Freeport’s operating costs could rise.

Another risk is the potential slowdown in China’s growth, which could dampen demand for copper and gold. Finally, if interest rates continue to rise, the cost of borrowing could increase, squeezing margins.

BofA therefore maintains a “Moderate” rating on its debt instruments and urges investors to stay vigilant about geopolitical developments.

6. Market Reaction and Analyst Consensus

The upgrade has already been picked up by several other research houses. Analysts at MSCI, Citigroup, and Wells Fargo have either maintained or upgraded their ratings in the past weeks. The consensus among them points to a growing confidence in Freeport’s ability to generate stable cash flow and weather commodity headwinds.

For investors, the upgrade represents a potential buying opportunity, especially given the recent dip caused by the Grasberg pause. BofA’s “Buy” recommendation comes with a target price of $120, which is a 27% upside from the current market price of approximately $95. The bank’s research notes that, even with a 10% swing in copper prices, the target would still be attainable within a 12‑to‑18‑month horizon.

7. Bottom Line: A Resilient Play in a Transitioning Economy

Bank of America’s upgrade of Freeport‑McMoRan underscores the miner’s resilience in an era of growing demand for critical metals. The brief sell‑off triggered by the Grasberg pause served as a reality check but ultimately highlighted the firm’s operational robustness and strategic depth. With a bullish commodity outlook, a lower leverage profile, and a management team that appears confident in its capital‑allocation strategy, BofA sees the company as a compelling long‑term play.

While risks remain—particularly regulatory changes and commodity price volatility—investors who have been on the sidelines due to short‑term market noise may find the current price attractive. The “Buy” recommendation, coupled with a supportive target price, offers a clear signal that the market is gradually re‑valuing Freeport‑McMoRan’s upside potential in the broader context of global transition to clean energy and resilient industrial supply chains.