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Feature article May 16, 2024:

 

Stable Investment Exposure to Copper via Long Position in Freeport-McMoRan

    

Freeport-McMoRan Inc.

(NYSE: FCX)

 

 

Share data, Capitalization, & Corporate info

 

 Shares Outstanding: ~1.44 billion

 Recently Traded: ~US$52.00/share (NYSE:FCX)

 52 Week High/Low: ~$54.09/ 32.83

 Current Market Cap.: ~$74.75 billion USD

 Corporate Website: fcx.com

 

   

Valuation Commentary: Freeport-McMoRan Inc. (NYSE: FCX) is the worldís largest publicly traded copper producer. It has operations in the U.S., Latin America, and Indonesia.

 

Copper prices are volatile. They can whipsaw up and down based on the slightest economic news. So, when it comes to investing in copper miners, their cost to mine matters. Freeport happens to be one of the lowest cost copper miners in the world. Last year, it mined copper at an average of $1.61 per pound. It sold that copper for an average of $3.85 per pound.

 

Copper is the hottest commodity today and of the future; see related article on the fundamental case for copper in "The Copper Supply Shortage Is Here" -- copper is an essential material to produce and distribute power in the next-gen AI economy. The drive towards electrification, whether that's electric vehicles and data centers powering artificial intelligence, as well as reshoring manufacturing trends. Copper is currently the subject of a massive Comex short squeeze; In-short...

 

 

 

  • Copper prices on the Comex exchange have experienced a historic short squeeze, driving up prices to record highs and creating a significant premium for New York copper futures above the London Metal Exchange price.

  • The short squeeze was caused by market participants who had placed bets on the Comex contract moving back in line with prices on the LME and in Shanghai being forced to buy back their positions as prices rose, creating a vicious cycle.

  • The surge in copper prices is not solely driven by technical factors but also reflects increased interest from speculators and forecasts that long-term copper mine production will struggle to keep pace with demand. Other factors may be Chinese smelters curbing production, and greater infrastructure spending.

  • The tight supplies in the US copper market have been highlighted by the short squeeze, with inventories tracked by the Comex and LME in the US being relatively low compared to annual US copper demand.

  • Traders and miners in South America, particularly Chilean copper-mining giant Codelco, have been racing to boost their shipments to the US to address the supply shortage caused by the short squeeze. However, shipping schedules are fully booked, posing challenges for further metal delivery to the US.

 

One thingís for certain, every tick higher on the price of copper puts more money in Freeportís pockets. And ultimately, may lead to a higher stock price and higher dividends for shareholders.

 

Freeport's operations produced about 4.1 billion pounds of copper in 2023. Freeportís mines also contain significant deposits of gold as well, producing 1.7 million ounces last year. Freeportís mining activities generated $22.8 billion in revenues last year and earnings per share of $1.54. Compared to 2023 levels, earnings are expected to grow by 40% through the end of next year. However IMO that is a conservative estimate.
 

While the company is projecting modest copper production growth over the next several years, many expect Freeport will reap the rewards of rising copper prices because itís extremely difficult to bring new copper mines online. From discovery to production, it takes new copper mines nearly 17 years to come online. With growing copper demand, the market is projected to be in a supply deficit over the short- and long-term. One report by McKinsey projects copper demand will increase 46% to 36.6 million tonnes by 2031, but supply will fall short by 6.5 million tonnes. Shorter-term, one estimate from Bloomberg expects a shortfall of copper to meet demand at least through 2027.

 

For a full overview of Freeport McMoRan's opperations visit https://www.fcx.com/operations online.

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 Content found herein is not investment advice see Terms of Use, Disclosure & Disclaimer

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Note: Mining MarketWatch has not received remuneration from Freeport-McMoRan, this publication has received remuneration from an investor / investment firm currently long FCX and copper futures, and related option strategies. Valuation content above is courtesy Market Equities Research Group

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*Content found herein is not investment advice see Terms of Use, Disclosure & Disclaimer. This is a journalistic article and the author is not a registered securities advisor, and opinions expressed should not be considered as investment advice to buy or sell securities, but rather journalistic opinion only. Technical mining terms used by the writer may be used/expressed in simplified layman terms and should not be relied upon as appropriate for making investment decisions unless the reader contacts the company directly for independent verification. *Estimates of potential made by the mining analyst and journal(s) are non 43-101 and not from the Company.

 

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