{"id":14399,"date":"2019-02-23T11:00:14","date_gmt":"2019-02-23T16:00:14","guid":{"rendered":"https:\/\/capital10x.com\/old\/?p=14399"},"modified":"2019-02-22T20:37:21","modified_gmt":"2019-02-23T01:37:21","slug":"freeport-mcmoran-stock-long-term-fcx","status":"publish","type":"post","link":"https:\/\/capital10x.com\/old\/freeport-mcmoran-stock-long-term-fcx\/","title":{"rendered":"Is Freeport-McMoRan&#8217;s Stock a Long-Term Play?"},"content":{"rendered":"<p>Freeport-McMoRan (NYSE: [stock_market_widget type=&#8221;inline&#8221; template=&#8221;generic&#8221; color=&#8221;default&#8221; assets=&#8221;FCX&#8221; markup=&#8221;{symbol} {currency_symbol}{price} ({change_pct})&#8221; api=&#8221;yf&#8221;]) has started 2019 on the right note. The stock is up 13% as of this writing on the back of a <a href=\"https:\/\/markets.businessinsider.com\/commodities\/copper-price\">rise in copper<\/a> and gold prices, but the question investors would be asking themselves is if this rally is just a short-term bounce or if it can continue for a long time. Let\u2019s find out.<\/p>\n<h2>Copper and Gold Production to Drop in 2019<\/h2>\n<p>In 2018, Freeport <a href=\"https:\/\/investors.fcx.com\/investors\/news-releases\/news-release-details\/2019\/Freeport-McMoRan-Reports-Fourth-Quarter-and-Year-Ended-2018-Results\/default.aspx\">produced and sold<\/a> 3.8 billion pounds of copper. Its average realized price per pound of copper stood at $2.91 per pound as compared to $2.93 per pound in 2017. This had a negative impact on the business as costs rose.<\/p>\n<div class=\"su-pullquote su-pullquote-align-right\">The problem for Freeport this upcoming year is that forecasted\u00a0copper sales will drop to 3.3 billion pounds as it enters the first year of transition.<\/div>\n<p>Freeport incurred site production and delivery costs of $1.76 per pound in 2018 as compared to $1.60 per pound in the previous year. However, unit net cash costs per pound dropped to $1.07 per pound from $1.19 per pound in the prior year, which eased the pressure on Freeport.<\/p>\n<p>The problem for Freeport this upcoming year is that forecasted\u00a0<a href=\"https:\/\/s22.q4cdn.com\/529358580\/files\/doc_presentations\/2019\/FCX_4Q18_Conf_Call_JAN19_FINAL.pdf\">copper sales<\/a> will drop to 3.3 billion pounds as it enters the first year of transition. Additionally, consolidated unit net cash costs will increase to $1.73 per pound in 2019.<\/p>\n<p>On the other hand, Freeport had sold nearly 2.4 million ounces of gold in 2018 at an average realized price of $1,254 per ounce. But this year, Freeport\u2019s gold sales are expected to fall by a third to just 800,000 ounces. So it isn\u2019t surprising to see why the company\u2019s top line is expected to <a href=\"https:\/\/finance.yahoo.com\/quote\/FCX\/analysis?p=FCX\">dive nearly 20%<\/a> in 2019.<\/p>\n<p>But Freeport doesn\u2019t expect the transition pain to last beyond 2019. The drop in copper and gold sales will be on account of a <a href=\"https:\/\/im-mining.com\/2019\/01\/25\/grasberg-full-transition-underground-progressing-despite-major-ownership-changes\/\">transition at Grasberg<\/a> to underground mining from open-pit mining, which will hurt the company\u2019s output. However, things should start improving from next year and get even better in 2021.<\/p>\n<h2>Long-term Outlook Suggests Freeport&#8217;s Stock Price Positioned to Increase<\/h2>\n<p>Freeport expects its copper sales to start increasing in\u00a02020, when it forecasts 3.5 billion pounds in <a href=\"https:\/\/capital10x.com\/old\/bhp-outages-impact-production\/\">sales<\/a> and should increase further in 2021 to 4.2 billion pounds. Similarly, the company anticipates that gold sales will double to 1.6 million pounds in 2021.<\/p>\n<div class=\"su-pullquote su-pullquote-align-left\">Freeport sees copper base production declining around 5.3% over the next decade, but demand increasing at a compound annual growth rate of 1.5%.<\/div>\n<p>Moreover, Freeport expects that the copper market\u2019s economics will be more favourable by the time it gets its production capacity back online. That\u2019s because the company sees copper base production <a href=\"https:\/\/s22.q4cdn.com\/529358580\/files\/doc_presentations\/2019\/FCX_4Q18_Conf_Call_JAN19_FINAL.pdf\">declining around<\/a> 5.3% over the next decade, but at the same time, demand for copper is expected to increase at a compound annual growth rate of 1.5%.<\/p>\n<p>Freeport\u2019s average EBITDA (earnings before interests, taxes, depreciation, and amortization) and average operating cash flow will increase substantially once the transition years of 2019 and 2020 are over. This is evident from the following table provided by the company.<\/p>\n<h4>EBITDA and Cash Flow at Various Copper Prices<\/h4>\n<figure id=\"attachment_14531\" aria-describedby=\"caption-attachment-14531\" style=\"width: 696px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-14531 size-large\" src=\"https:\/\/capital10x.com\/old\/wp-content\/uploads\/2019\/02\/free-port-article-copper-ebitda-e1550148018379-1024x542.png\" alt=\"EBITDA-operating-cash-flow-copper\" width=\"696\" height=\"368\" srcset=\"https:\/\/capital10x.com\/old\/wp-content\/uploads\/2019\/02\/free-port-article-copper-ebitda-e1550148018379-1024x542.png 1024w, https:\/\/capital10x.com\/old\/wp-content\/uploads\/2019\/02\/free-port-article-copper-ebitda-e1550148018379-300x159.png 300w, https:\/\/capital10x.com\/old\/wp-content\/uploads\/2019\/02\/free-port-article-copper-ebitda-e1550148018379-768x407.png 768w, https:\/\/capital10x.com\/old\/wp-content\/uploads\/2019\/02\/free-port-article-copper-ebitda-e1550148018379-696x369.png 696w, https:\/\/capital10x.com\/old\/wp-content\/uploads\/2019\/02\/free-port-article-copper-ebitda-e1550148018379-1068x566.png 1068w, https:\/\/capital10x.com\/old\/wp-content\/uploads\/2019\/02\/free-port-article-copper-ebitda-e1550148018379-793x420.png 793w, https:\/\/capital10x.com\/old\/wp-content\/uploads\/2019\/02\/free-port-article-copper-ebitda-e1550148018379.png 1129w\" sizes=\"auto, (max-width: 696px) 100vw, 696px\" \/><figcaption id=\"caption-attachment-14531\" class=\"wp-caption-text\">Source: <a href=\"https:\/\/s22.q4cdn.com\/529358580\/files\/doc_presentations\/2019\/FCX_4Q18_Conf_Call_JAN19_FINAL.pdf\">Freeport-McMoRan 2018 Q4 Earnings Presentation.<\/a> US$ Billions.<\/figcaption><\/figure>\n<p>As such, Freeport-McMoRan seems to have a bright future once it gets past 2020. An improvement in the company\u2019s production profile and potentially higher <a href=\"https:\/\/capital10x.com\/old\/glencore-stock-price-2019\/\">pricing<\/a> of copper would be tailwinds in the long run. As such, investors shouldn\u2019t be disappointed even if the current rally turns out to be a short one as the company is positioning itself for long-term gains.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Freeport-McMoRan (NYSE: FCX) faces a modest 2019, but positive long-term outlook for copper and gold production and pricing show stock is due for growth.<\/p>\n","protected":false},"author":8,"featured_media":14898,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[208,213,212,211,177,72],"class_list":{"0":"post-14399","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-metals","8":"tag-company-news","9":"tag-copper-price","10":"tag-fcx","11":"tag-freeport-mcmoran","12":"tag-gold-price","13":"tag-mining-stocks"},"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.8 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Is Freeport-McMoRan&#039;s Stock a Long-Term Play? 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