After recently surpassing $50, a copper, gold and molybdenum miner Freeport McMoRan’s (FCX 1.27%) The stock has fallen to around $46.60 at the time of writing. Frankly, this seems like a good buying opportunity in a stock with significant long-term upside potential. Here are four reasons why.

Valuation remains attractive

Read no further if you are not optimistic or at least agnostic about the outlook for the price of copper – the most important metal mined in Freeport. The latter applies because, based on the current copper price of around $4.30 per pound, Freeport McMoRan is an attractively priced stock.

Each quarterly results presentation, management presents its projections of earnings before interest, taxes, depreciation and amortization (EBITDA) based on the price of copper. Based on the latest forecast and the current price of approximately $4.30 per pound, Freeport McMoRan will generate approximately $12.2 billion in EBITDA in 2025/2026.

With a current enterprise value (EV) of approximately $71.6 billion (market cap plus net debt), the stock would trade on a slightly lower EV/EBITDA multiple of 5.9 times EBITDA in 2025/ 2026. As you can see below, this is a relatively favorable valuation for the company.

FCX EV to EBITDA data by Y Charts

Demand trends remain favorable

Copper is traditionally considered an economically sensitive metal whose demand fluctuates with economic growth due to its widespread use in various industries. This remains true, and weakness in global automotive and homebuilding end markets in 2024 has negatively impacted demand.

However, increased demand resulting from long-term global megatrends such as the electrification of everything and the transition to clean energy means that investments in electricity infrastructure and AI data centers “have more than compensated for weak traditional demand sectors in residential construction and automobiles” while “Chinese demand for copper continues”. grow despite a weak real estate sector,” according to CEO Kathleen Quirk during the earnings call.

Indeed, the Chinese government’s announcement of recovery measures supported the copper price and Freeport’s share price in September.

Leaching Initiative

A bullish outlook for copper is not based on a positive view of demand; Investors also need to consider supply constraints – lower supply generally means upward pressure on prices. Freeport is well-positioned in this regard as it has the potential to increase supply while other miners may face more difficulty.

Its best near-term potential lies in its leaching initiative to recover copper from existing tailings stocks (waste containing some small amounts of copper). The good news is that he continues to make excellent progress. The 58 million tonnes recovered in the third quarter represent a production of 211 million tonnes over the last 12 months.

Management estimates it will reach an annual rate of 300 to 400 million tons in 2026, then 800 million tons over time. Given that the copper production target is 4.1 billion tonnes in 2024, the leaching initiative provides a significant opportunity to increase production.

Mining expansion projects

During the earnings conference call, management also discussed potential investments in brownfield projects to expand offerings. The company estimates it can increase production at a mine in Baghdad, Arizona, by 200 million to 250 million tons over time, with a potential start-up in 2029.

Meanwhile, Freeport is conducting pre-feasibility studies on an expansion project at Safford, Arizona, which could more than double its current production of 300 million tonnes per year (starting in the next decade) in a resource that, according to Quirk, “could be something that will stay with us for a very long time.” »

Additionally, there is potential to add 750 million pounds of annual production at El Abra, Chile, with a start date around 2033.

Image source: Getty Images.

A stock to buy?

Based on the current copper price, the long-term demand environment and Freeport’s potential to increase production in the near term through its leach initiative and in the long term through its potential copper expansion projects. Brownfields, Freeport is an ideal stock for copper bulls. .

As such, a stock price below $50 looks extremely attractive as an entry point.