Grasberg halt hikes copper; Freeport in ‘penalty box’

Copper climbed on Wednesday after Freeport-McMoRan (NYSE: FCX) declared force majeure on contracted supplies from its Grasberg block cave mine in Indonesia, tightening an already firm market.

Three-month copper traded above $10,400 (C$14,461) per tonne on the Chicago Mercantile Exchange, up about 3% on the day. In London, the metal for three-month delivery touched $10,172 a tonne on the LME, a 15-month high. Freeport’s shares fell as much as 10% in New York, while rivals Glencore (LSE: GLEN), Teck Resources (TSX, NYSE: TECK) and Antofagasta (LSE: ANTO) gained.

“This is a negative near-term development that will likely put Freeport in the penalty box,” BMO Capital Markets Metals and Mining analyst Katja Jancic said in a note. A preliminary 35% cut to the company’s 2026 production outlook is an incremental negative and output may not return to pre-incident levels until 2027, according to the analyst.

About 60% of Freeport’s copper comes from North and South America, partly cushioning the blow, BMO said.

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The incident followed a Sept. 8 accident at Grasberg in which two workers died and five remain missing. Freeport said about 800,000 tonnes of mud surged through several underground levels, including a service level, where the missing team had been working. Production at the world’s second-largest copper mine has been halted.

The Grasberg block cave operation represents about half of local unit PT Freeport Indonesia’s proven and probable reserves as of Dec. 31, 2024, and roughly 70% of the company’s previously forecast copper and gold output through 2029. The event occurred in “PB1C,” one of five production blocks, but damaged infrastructure needed to support other areas, the company said.

Freeport on Wednesday also trimmed third-quarter guidance, now expecting consolidated sales to be about 4% lower for copper and 6% lower for gold compared with July estimates.

In a separate disruption, Hudbay Minerals (TSX: HBM; NYSE: HBM) said late Tuesday it shut a mill at its Constancia mine in Peru due to ongoing political protests.