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Freeport-McMoRan’s price offers promising opportunity

Sun., July 21, 2013

When the stock price of the world’s largest publicly traded copper producer falls by about a third over five years, it’s worth taking a closer look. The company is Freeport-McMoRan Copper & Gold (NYSE: FCX), and part of its problem has been the price of copper, which has dropped from around $3.70 per pound at the start of the year to $3.16 recently. (Gold, too, is down, falling more than 25 percent in the first half of 2013.)

The company is not just focused on copper, gold and other metals, though. Last year it bought McMoRan Exploration and Plains Exploration & Production, adding oil and natural gas assets to its portfolio. Investor opinions are mixed on the move, but it does diversify operations.

Still, it’s much more a copper company than an oil company. On the plus side, lower copper prices are expected to be offset by anticipated improvement in the ore grade coming out of the Grasberg mine in Indonesia this year and next, which should lower the company’s average production cost per pound.

The decline in the share price for this miner is a promising opportunity. Copper is still one of the most highly used metals, and the long-term-demand trend is upward. Consider buying into the company or adding it to your watch list, perhaps while keeping an eye on the integration and performance of the oil business.

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