Short-term issues holding the stock back are fading. Long-term fundamentals are very bullish.
The balance sheet has been repaired, as evidenced by Freeport’s bond pricing.
Booming global GDP, electric vehicles, and wind power generation will drive decades of growth.
It’s time once again to load up the truck on Freeport-McMoRan (NYSE:FCX). The reason I say once again is because the obvious, or not so obvious time was when Freeport was trading well down into the single digits two years ago. At that time, the company was under significant stress, with an overextended balance sheet and a bond market pricing in real fears of solvency. Nearly all of those issues are behind the company today and long-term projections are very bullish thanks to continued growing global GDP and the coming exponential growth of electric vehicles and green energy.
Issues In Grasberg Should Finally Be Resolved Next Year
The news was released this week that the Indonesian government is interested in buying Rio Tinto’s (NYSE:RIO) stake in the Grasberg mine, and plans to do so sometime next year. This relieves Freeport from needing to sell such a large stake in the mine. Oddly, the news was not met with a positive reaction. However, this could be partially explained by a sizable decline in the price of copper that same day. Regardless, for myself, and I assume for many other investors, the news is positive as it allows the Indonesian government to acquire their 51% stake in the Grasberg mine while allowing Freeport to retain a more meaningful stake than what investors had feared. At the very least, the fact that this uncertainty is resolving itself after years of hanging over the stock should be viewed as a net positive.
Today’s Balance Sheet Is In Much Better Shape than It Was Two Years Ago
For anyone concerned about Freeport McMoRan’s financial health, they need only take a quick look at some bond prices for the company. Two years ago, the majority of Freeport’s bonds were trading below 50 cents on the dollar. Investors were pricing in the possible failure of the company. Those days are over and, as evidenced by recent pricing, the market today shows zero concern over Freeport McMoRan’s financial health.
