Freeport-McMoRan (FCX, Financial) delivered a robust operating performance in the previous quarter with copper sales adding to 1.08 billion pounds and gold sales making to 525,000 ounces, exceeding the results for the same quarter last year. Gas and oil sales worth 12.5 million barrels of oil equivalents surpassed the recent estimates but recorded lower than last year’s quarter, depicting the sale Eagle Ford shale properties in the mid 2014.
Freeport signed a contract in October to sell its 80% interest in the Ojos and Candelaria copper mining operations and allowing infrastructure to Lundin Mining Corporation for approximately $1.8 billion in cash with the transaction estimated to conclude in the fourth quarter.
Freeport is working brilliantly on its strategies as seen from the significant increase in the mining and sales of gold, copper, oil and gas in the fiscal year coupled with selling the non-strategic assets for generating the much-needed free cash flows.
Freeport concluded the quarter with $658 million of consolidated cash and $19.7 billion of total debt.
After the successful merger of Phelps Dodge with Freeport in 2007, the latter has executed several strategic investments as of now. The Morenci development is believed to reach its peak by this yearend. The ongoing Cerro Verde project expansion is estimated to triple the output at the site with the construction in progress and expected to start in 2016.
Freeport is believed to have more than 100 billion pounds of sure and expected reserves. It has also marked mineral resources linked with its current properties and growing more than 100 billion pounds. Lastly, it is taking strong decisions to capitalize quickly upon these expanding growth opportunities.
Therefore, Freeport is keen on quickly and strategically utilizing these growth opportunities by employing the free cash wisely and by further getting rid of any sort of non-strategic investments.
Freeport is focused on establishing Grasberg as a long-term asset with superior production volumes, lower costs and solid long-term economics by developing the underground resource. Freeport is also about to start mining from the extension of its current DOZ mine, The Deep MLZ mine with significantly higher grades is estimated to commence by 2015 last. After this, Freeport is estimated to start mining at the Grasberg Block Cave fundamental to the pit which is the company’s long-term plan.
Freeport is eyeing some key Brownfield development activities and is investing into the growth projects in Chile at its El Abra mine where it has a strategic partnership with Codelco.
The miner’s major focus on expanding volumes coupled with enhanced cost reduction as well as calculated partnerships is estimated to drive long-term profitability for the company.
Freeport is believed to have enough strategic resources to accelerate growth in Tenke.
Freeport’s Safford mine in Eastern Arizona along with the nearby Lone Star resource is estimated to have approximately five years left on its oxide, present oxide production. Freeport is targeting on supplementing the overall oxide ore deposit with ore from the Lone Star deposit. Also, Freeport has a huge sulfide resource at Safford and at Lone Star essential for dealing with the expanding oxide production.
The discovery of new deposits at Eastern Arizona and Tenke is expected to prove enough long-term input for Freeport and deliver enhanced shareholder returns, going forward.
Freeport is expected to have a huge offshore drilling opportunity in Morocco for drilling some deep structures and major plays, one of them lined to be drilled next year and the second one in 2016.
Freeport is drilling some exploratory wells in Inboard Lower Tertiary encouraged by the evident success of the Highlander.
The expanded drilling activities of Freeport are expected to payoff brilliantly in a long run, however proving slightly heavier on its balance sheet.
Freeport is developing some key projects at Vito, Heidelberg and Lucius. Heidelberg is expected to be launched in the third quarter of ’16 with Lucius forecasted to be launched going forward.
Freeport has identified a key opportunity and Vito between Holstein Green Canyon and Mississippi Canyon area. And it highlights 4.4 billion barrels of resource potential existing in a well balanced region with approximately 0.5 billion to 1 billion barrels per area.
Key Statistics
According to Yahoo Finance, the trailing P/E and forward P/E ratios of 0.00 and 10.45 respectively represent the rising company costs. However, the PEG ratio of 0.28, below 1 indicate significant company growth. The profit margin of 10.19% is good. The revenue per share and diluted EPS of 21.25 and 2.15 respectively depicts significant investor earnings. But, the quarterly revenue growth and quarterly earnings growth of -7.60% and -32.80% respectively is disappointing and signifies continued decline in shareholder earnings.
The current ratio of 1.42 suggests the robustness of the company’s balance sheet. Finally, the investors are advised to invest into Freeport-McMoRan Inc. looking at the solid long-term growth prospects indicated by the CAGR for the next 5 years per annum of 37.76%, much above the industry’s average of 17.07% only and expect promising returns in a long run.
