Copper's a Gold Mine

Shares of mining giant Freeport-McMoRan Copper & Gold(FCX Quote) appear set to get a big boost this spring on the back of continued strength in industrial metal prices and a more benign risk profile, according to analysts.

Freeport, which completed its takeover of copper and molybdenum producer Phelps Dodge earlier this month, has already seen a stock price surge of 25% since the beginning of the year to about $66 recently. If observers are proved right, that advance could be dwarfed by a coming rally.

The key, it seems, is the buoyant outlook for copper prices, a metal that made up 78% of the new Freeport's pro forma 2006 revenue, according to company data.

"Now everything is bullish for copper," says Andy Cole, a base metals analyst at Metal Bulletin Research in London.

Cole sees strong demand coming from China, which should grow up to 10% this year because of increased government stockpiling and industrial consumption. That, he says, will be enough to help maintain the momentum that has seen prices claw their way back from a low of around $2.40 a pound in February to about $3.14 of late.

"We should see a sustained rally continuing into the second quarter, that's traditionally a strong period," he says. Prices could possibly spike to $3.36, he believes.

The weakness in the U.S. housing market, traditionally a key factor driving copper prices, should be more than offset by the strength in China and Europe, says Catherine Virga, a base metals analyst at New York-based specialty consultancy CPM Group.

She also notes that even if homes aren't selling, owners often continue to remodel in areas of high metal use, such as the bathroom or the kitchen.