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Morningstar | Freeport's balance sheet has strengthened, but weaker copper prices still loom.

After divesting the majority of the assets acquired from Plains Exploration and McMoRan Exploration, Freeport-McMoRan closed the book on its brief foray into oil and gas. Commodity price pressure, most notably in oil and copper, put heavy stress on the company's financial health, and in 2016, Freeport raised more than $6 billion via asset sales and $1.5 billion in equity to repair its balance sheet.Focus has shifted back to copper. The massive Grasberg deposit in Indonesia anchors Freeport's mining business. A moatworthy mine defined by high concentrations of copper and gold, Grasberg underperformed in recent years because of geological, operational, and labor-related problems. We expect markedly better results as mine sequencing returns Freeport to the enviable grades that typify the deposit, boosting output and reducing unit costs. Expansions at Morenci (United States) and Cerro Verde (Peru) have largely wrapped up. In July 2018, Freeport reached an agreement with the Indonesian government to sell a portion of the company's ownership stake in the Grasberg mine. The government will also acquire Rio Tinto's 40% stake in the mine that go into effect in 2022. We expect the deal to close by the end of 2018. Going forward, Freeport will retain a 49% ownership stake while Indonesian interests will own 51%. However, as a part of the deal, Freeport will retain roughly an 81% economic interest in Grasberg until 2022, down from the current 91%.We see persistently weak copper prices offsetting the bottom-line benefits of buoyant production. Our bearish outlook for Chinese copper demand informs our below-consensus long-term copper price forecast. China plays the dominant role as the world's largest user and driver of all demand growth in the past decade. We expect Chinese copper demand growth to slow markedly during the next several years on lower GDP growth rates and a decidedly less investment-heavy growth mix. We believe Chinese copper demand will see headwinds as real estate activity fades to a level more commensurate with underlying urbanization trends and power spending shifts away from copper-heavy distribution to copper-light transmission.