Monday July 09, 2012
by Yiannis Mostrous, editor Passport to ProfitsFreeport McMoRan Copper & Gold (
FCX) has been one of our favorites companies in the commodities sector for a long time; the stock trades at appealing valuations at less than 8 times trailing 12-month earnings, while offering and a yield of nearly 4 percent.
Copper has historically been among the most economically sensitive of metals. With more than 70 percent of company revenue coming from production of the red metal, it's not surprising that Freeport's share price also tracks the latest worries about the global economy.
Current plans call for ramping up annual copper output from a projected 2.6 billion pounds this year to 3.5 billion pounds in 2016.
Meanwhile, production of molybdenum — a key element in making high-pressure steel needed for undersea energy drilling — is on the verge of ramping up to 90 million pounds a year in 2013.
The company expects to make $4.3 billion in capital expenditures in 2012, including steps to increase annual gold output to 1.7 million ounces a year from a projected 1.1 million for this year. Production costs are among the lowest in the world for all three resources.
Bears point out labor strife at the Grasberg mine in Indonesia — and resource nationalism in Indonesia and the Congo — as threats to the company's aggressive plans
We may not see any meaningful rebound in Freeport stock until it becomes clear Chinese growth is ticking up, after dropping for the past year. But this is one mining company with the scale, management acumen and resources — both financial and in the ground — to keep growing despite less-than-optimal market conditions.
Learn more about this financial newsletter at Yiannis Mostrous' Passport to Profits.Related articles:
