Freeport-McMoRan Inc. Shares
Freeport-McMoRan Inc shares. Freeport-McMoRan Inc is a leading international mining company headquartered in Phoenix, Arizona. It operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold, and molybdenum minerals. It also claims to be one of the world’s largest publicly traded copper producers. Its asset portfolio includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits, as well as significant mining operations in North and South America, including the extensive Morenci minerals district in Arizona and Cerro Verde in Peru.
The company operating under this name was registered on November 10, 1987. Its entire history dates back to as early as 1834 when Phelps, Dodge & Company was established as a metals and trading enterprise; it manufactured tin and copper kettles, buttons, saws, and copper wires.
The first mining right was granted, and the first copper smelting furnace was installed in Arizona in 1870.
In 1881, Phelps Dodge began copper mining by acquiring shares of the Detroit Copper Mining Company in Morenci, Arizona, where copper was discovered in 1866.
In 1969, McMoRan Exploration was founded by Ken McWilliams („Mc”), Jim Bob Moffett („Mo”), and Mack Rankin („Ran”) as an independent oil and gas exploration and production company in South Louisiana. In 1981, it merged with Freeport Minerals.
Map of Mines
The size of Freeport-McMoRan’s income directly depends on the price of copper futures in the metal market. Last year, the prices satisfied the company’s needs very well. The company’s analysts also believe that the prices will remain at a similar level because there is a healthy global demand for copper, and the demand may even double over the next 15 years.
Activities by regions
North America
In North America, the company operates seven open-pit copper mines – Morenci, Bagdad, Safford, Sierrita, and Miami in Arizona, as well as Chino and Tyrone in New Mexico. Additionally, they have two molybdenum mines – Henderson and Climax in Colorado. Four of these copper mines also produce molybdenum, gold, and silver concentrates.
South America
The company’s activities in South America include open-pit mining, concentration of sulfur ore, washing, and solvent extraction/electrolysis operations. The products from these mines are sold as concentrates or cathodes under long-term contracts. Some of the copper concentrate from South American mines is also sent to Atlantic Copper, a fully controlled smelting and refining company in Spain.
There are two copper mines operating in South America – Cerro Verde in Peru and El Abra in Chile. The Cerro Verde mine, in addition to copper, also produces molybdenum concentrate and silver.
Indonesia
Through its subsidiary PT-FI, the company operates one of the world’s largest copper and gold deposits in the Grasberg minerals district, Papua, Indonesia. In addition to copper and gold, PT-FI also extracts silver. The company holds a 48.76% stake in PT-FI and manages its mining operations. PT-FI’s results are included in the financial statements.
Company’s revenues based on raw materials:
Finance
Companies of this type, usually, we are not inclined to analyze. It’s a rather complex topic because sales revenue depends not only on company managers but also on a wide range of market conditions. However, such a company can be interesting for those seeking a larger investment portfolio diversification. But first and foremost, we need to understand how managers operate within the company.
There is no need to expect that the revenue of such a company would grow rapidly. The average annual revenue growth over 10 years is 2.16%, a figure very close to the inflation target of central banks. Due to this pace, the net profitability is slightly affected. The average annual EPS growth over the past 10 years is negative, but over the last 5 years, it has reached 13.84%.
Very good Net Margin, which has been above 12% for the last two years. At the same time, the Gross Margin also remains high and quite stable. The decreasing portion of costs in Gross Profit is also very pleasing. This shows that the company’s managers are delivering on their promise to optimize costs, and they are doing it very well. We evaluated these results positively.
Surprisingly, in 2022, ROAA (Return on Average Assets) reaches 9%, Equity Return reaches an impressive 16.41%, and Return on Retained Profit is 15.87%. We highly appreciate the Working Capital. It is stable and positive.
The company needs a lot of capital investments. And looking at it from a 10-year retrospective, those investments have not yet paid off for the company. One (1) dollar invested in Long-Term Tangible Assets currently generates a loss of -0.15 USD in EPS (Earnings Per Share). Moreover, the investments are made from borrowed funds, which are twice the amount of equity. However, to cover the Long-Term Debts with Net Income, it would only take half a year’s in 2022.
If the owners of Freeport-McMoRan would like to sell shares and invest in 10-year U.S. bonds to achieve the same return as in 2022, then they should sell the shares at $60 each.
Investment scoreboard:
Freeport-McMoRan Inc. shares
The company’s shares are listed on the NYSE stock exchange. The ticker for the shares is FCX. It belongs to the S&P 500 index.
The stock is quite risky. The standard deviation reaches even 14. Therefore, it is better to have relatively few such stocks in the portfolio. With a beta of 2.02, you can achieve significant returns, but during a correction, the portfolio yield will decrease more rapidly.
The dividend is paid irregularly, and over the course of 10 years, the size of the dividends has decreased. At the time of writing, the dividend yield is barely 0.78%. However, they have a Share Buyback Program, which is also dependent on market conditions. In 2022, through dividends and the Share Buyback Program, the company „returned” 68% of its Net Annual Profit to shareholders.
The GRAPES method’s calculated price perspective is 93 USD. The price is very similar to our method’s calculated price perspective. The stock’s PEG is 0.89 – which is a very good indicator.
