Will Freeport-McMoRan (FCX) Stock React Today to $4 Billion in New Copper Smelter Costs?

NEW YORK (TheStreet) -- Shares of Freeport-McMoRan (FCX) are slightly up 0.98% to $22.77 after it was reported that the company needs to build two Indonesian copper smelters at a cost of around $4 billion by 2020, a government official told Reuters, as talks resumed between the miner and Jakarta over the firm's future in the Southeast Asian country, Reuters reports.

The proposal comes five months after Freeport signed a memorandum of understanding with the Indonesian government that ended a six-month tax dispute and allowed the company to resume copper concentrate exports, Reuters said.

The country's largest copper producer agreed to pay a $115 million to develop a $2.3 billion smelter by 2017. The government is now asking Freeport to build a second one by 2020 at a cost of around $1.5 billion, Reuters noted.

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Freeport is working with Newmont Mining Corp. (NEM) on the building of the first smelter, which is expected to annually process 1.6 million tons of copper concentrate into copper cathode.

Separately, TheStreet Ratings team rates FREEPORT-MCMORAN INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate FREEPORT-MCMORAN INC (FCX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has slightly increased to $1,926.00 million or 2.55% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -30.49%.
  • 39.80% is the gross profit margin for FREEPORT-MCMORAN INC which we consider to be strong. Regardless of FCX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.69% trails the industry average.
  • FREEPORT-MCMORAN INC's earnings per share declined by 32.9% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, FREEPORT-MCMORAN INC reported lower earnings of $2.64 versus $3.18 in the prior year. For the next year, the market is expecting a contraction of 19.3% in earnings ($2.13 versus $2.64).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 32.8% when compared to the same quarter one year ago, falling from $821.00 million to $552.00 million.
  • You can view the full analysis from the report here: FCX Ratings Report

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