Scotiabank downgrades Freeport-McMoRan stock rating after Grasberg incident

Investing.com - Scotiabank downgraded Freeport-McMoRan (NYSE:FCX) from Sector Outperform to Sector Perform and lowered its price target to $45.00 from $55.00 following a mud rush incident at the company’s Grasberg Block Cave mine in Indonesia. The mining giant, with a market capitalization of $54 billion and currently trading at $37.67, has seen its stock decline significantly from its 52-week high of $52.61.

The downgrade comes as Freeport-McMoRan shares fell 17% following the incident at the copper-gold mine, with InvestingPro data showing the stock’s RSI now indicates oversold territory. Scotiabank cited significant operational impacts, with its 2025-2026 EBITDA estimates declining by an average of 27% annually and its net asset value per share estimate decreasing by 10% based on preliminary guidance. The company maintains strong fundamentals with an overall "GOOD" Financial Health Score according to InvestingPro analysis.

Scotiabank made no changes to its 2027 outlook despite noting potential downside risks. The firm no longer forecasts a positive free cash flow inflection or a meaningful increase in the company’s share buyback program in 2026. InvestingPro subscribers can access 12 additional key insights about FCX’s financial health and market position, along with detailed analysis in the Pro Research Report.

The research firm anticipates a "significant overhang" on Freeport-McMoRan shares until better clarity emerges on the full impact of the Grasberg incident. Overall, Scotiabank views the development as "very negative" for the mining company’s stock.

The revised $45.00 price target is based on a 50/50 mix of 9.0x Scotiabank’s average 2026-2027 EV/EBITDA estimate and 2.0x its updated 8% net asset value per share estimate.

In other recent news, Freeport-McMoRan has faced significant challenges following a serious incident at its Grasberg mine in Indonesia. The company announced that the mine’s suspension, due to a mud rush incident that resulted in fatalities, will lead to a reduction in third-quarter consolidated sales by approximately 4% for copper and 6% for gold. As a result of these developments, BofA Securities downgraded Freeport-McMoRan’s stock from Buy to Neutral, citing the incident as a key factor. Jefferies also responded by lowering its price target to $46.00 while maintaining a Buy rating, following the company’s revised guidance that led to a 26% reduction in its 2026 EBITDA forecast.

BMO Capital adjusted its price target to $48.00 from $54.00, maintaining an Outperform rating, after assessing the impact of the "unprecedented mud rush incident" at Grasberg. Meanwhile, RBC Capital maintained its Sector Perform rating and $54.00 price target, noting that the production issues at Grasberg are expected to significantly impact operations for the remainder of the year. Analysts at RBC estimate that a full recovery might not occur until 2027. These recent developments highlight the substantial operational and financial hurdles Freeport-McMoRan is currently navigating.

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