Freeport-McMoRan SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

1. New financial policy to improve cash flows and shareholder returns : FCX’s new financial policy will include providing shareholders with a base dividend to be paid out in a wide range of market conditions and a performance-based payment plan. This new policy will enable FCX to improve shareholder relations and increase long-term value of their stock along with strengthening their balance sheet. In February 2021, the Board of Directors decided to implement the new financial policy, setting the base dividend at $0.30 per share raising it from the previous base dividend of $0.2 per share. Under the new policy, 50% of the cash flows remaining after planned capital expenditures will be used to reduce debt and be invested in value enhancing projects. The new payout policy will be put into action once the new debt target of $4 billion is reached.

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Threat

1. Mine closures due to COVID-19: The COVID-19 pandemic affected the mining industry by lowering mining rates. The threat arising from the pandemic led several governments into putting travel restrictions in place that prevented access to mines. Moreover, mining companies themselves took precautions to protect their employees from the pandemic and this too led to lower mining rates. Lockdowns in countries like Peru, Mexico and South Africa led to slower mining operations. FCX’s Carro Verde mine produced molybdenum at a rate of 360,000 metric tonnes per day but it has the capacity to produce 400,000 metric tonnes a day. Copper sales in FCX’s South America mines were $1.0 billion pounds in 2020, lower than the $1.2 billion in 2019. In 2021, the mining industry has the potential to recover and reach pre-pandemic production levels but only subject to lifting of COVID restrictions and faster vaccination drives to protect mine workers from the virus.

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Political

1. President Biden discussed renewable energy in Climate Summit 2021: Newly elected US President Biden recently chaired the Climate Summit 2021 to coincide with Earth Day. Over 40 national leaders were invited, and discussions were held regarding cutting down greenhouse gas emissions to reach UN targets ahead of the COP26 meeting to be held in Glasgow later this year. The summit also showed the world that the US was once again keen to rejoin global efforts to increase sustainability. US committed to cut down its greenhouse gas emissions by 50% by 2030 and UK promised a 78% cut in emissions by 2035 compared to its 1995 levels. Japan and Canada also committed to cut down emissions by 46% and 40-45% respectively. EU promised to cut down emissions by 55% below 1990 levels by 2030. China promised to reduce coal consumption and South Korea agreed to stop the public financing of coal-powered plants. The mining sector, especially copper, stands to benefit from these policies.

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Economic

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Social

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Technological

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Legal

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Environmental

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