Copper's a Gold Mine

"If you buy the strong copper story, the major way is to buy Freeport," says Doug Groh, senior research analyst at Tocqueville Asset Management in New York.

With a conservative price estimate of $2.80 a pound for copper, Groh estimates Phoenix-based Freeport's full-year income could reach about $11.50 a share, which translates to a target price of $92, assuming a multiple of eight times earnings.

If prices average $3.10 a pound, and Freeport's earnings hit $13.10, the stock should trade over $100, Groh says.

In contrast, the current consensus estimate is calling for $8.26 a share in earnings for 2007.

But the underlying mineral economics are only part of the situation. Freeport represents an entirely different risk profile than it did before it took over Phelps Dodge.

"Freeport's price suffered in the past because it was a one-mine company, and was perceived to be in a politically risky situation," says Tom Winmill, portfolio manager of the (MIDSX Quote)Midas Fund in New York, referring to the premerger situation when the company owned and operated a single mine in Indonesia, the Grasberg pit.

Winmill says the political risk story for Freeport may have been overdone a bit. Instead, he believes in the "political inertia theory," whereby the longer things operate uninterrupted, the more likely they are to stay so.