The question for investors, after watching many companies'
share prices recoverand even
go on to be multi-baggers, is whether those shares
warrant continued purchases. Let's try to answer this
question for copper, gold, and molybdenum producer
Freeport-McMoRan (NYSE: FCX), which has
watched its sharesrise from the just under $17 in early
December to touching $30 in February and on to a close above
$70 on yesterday
Freeport is little different from most of the other
minerals and metals companies that fell last year, and then
worked their way back at least partially during the first
half of 2009. That group includes the two big
Anglo-Australian miners,
BHP Billiton (NYSE: BHP) and
Rio Tinto (NYSE: RTP), Brazil's
Vale (NYSE: VALE), along with
U.S. Steel (NYSE: X). All plummeted severely,
only to claw their way back to higher levels.
Indeed, even the aluminum manufacturer likes of
Alcoa (NYSE: AA) and
Kaiser Aluminum (Nasdaq: KALU) have displayed
some buoyancy. As mentioned above, however, Freeport has
risen like Grandma's pound cake, along with the price of
copper, which has about doubled from its sub $1.50 low last
December.
To its further benefit, the company has managed to trim
35% a pound from its consolidated production and delivery
costs. And with production in North and South America, along
with Indonesia, Freeport is in the final start-up stages of
opening its modern Tenke Fungurume copper and cobalt
development project in Africa's Democratic Republic of
Congo.
As a result, its capex is anticipated to slide from $2.7
billion in 2008 to $1.4 billion this year and on to $1.0
billon in 2010. Once the project is running all-out, it
likely will produce 250 million pounds of copper and 18
million pounds of cobalt for the year.
So we return to our original question: Is Freeport a buy,
sell, or hold? From my perspective, it might make sense
to slowly acquirethe company's shares. Freeport is loaded
with geographically diverse, high quality, assets and has
managed to increase production while decreasing costs. Beyond
that, it's the world's largest publicly traded copper
producer, the largest factor in the molybdenum market, and a
significant gold producer. And it continues to search for
added reserves in all three areas.
Finally, the Wall Street Journal reported last week on the
rumor that BHP might be looking to go on a shopping spree. In
an admitted exercise in limb crawling, it wouldn't surprise
me in the slightest if Freeport weren't prominent in BHP's
sights.
Freeport-McMoRan has been rated four out of a possible
five stars by
Motley Fool CAPSplayers.
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This article was originally published as
Should You Still Be Buying Freeport?on
Fool.com
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